Restoring Interest Deductibility on Residential Rentals 

Effective from EOFY 2021, the Government carried out a phased reduction of interest deductibility on residential rentals. For EOFY 31 March 2024, no interest deduction was permitted for post-2021 lending to acquire residential property, with a limit of 50% deductibility on pre-2021 lending (with some limited exceptions).

The policy will shift again with the phased restoration of full interest deductibility. For the fiscal year ending on 31 March 2025, landlords can deduct 80% of the interest paid on residential rentals, applicable to both loans taken before and after 27 March 2021. Properties that qualified for 100% deductibility under the old rules, such as newly built homes, will retain full deductibility for the same period under the revised regulations.

Interest deduction will be reinstated by the fiscal year ending 31 March 2026.

Additionally, for those affected by deferred interest deductions under the previous rules—for instance, properties that would fall under the bright-line test where interest deductions become available upon sale—the updated regulations still allow them to utilise these deductions.