Stewart & Co Blog

November 2021 Newsletter

We hope you are all doing well and enjoying a little more 'freedom'.  We have a bit of a lengthy newsletter this time, however, there have been a lot of changes announced recently to run through.



Stewart & Co Office

Under the current level rules, we are still required to work from home where we can.  However, we know that there are some of you that would like to drop off records and so on.  Therefore, from Monday, 22nd November we will have team members in the office until 3pm each day. 

Unfortunately, this must still be contactless at this stage so we will have a basket outside our door for you to drop records into and this will be cleared regularly.  All the team are available for virtual meetings via zoom or teams.  

If you would like to collect records, please call the main line and arrange a time with Sophie and we will ensure your records are left for you just before your collection time.

We are currently working through the risk assessment information required by the Government for working under the new COVID framework and will update you on this in due course.

We do thank you for your support over this difficult time.  While we are all working from home, getting information from the office to team members does sometimes take a little longer than we would like.

Interest Limitation Rules Update

The Government has now released the draft legislative proposal for the rules regarding limiting interest deductibility on residential rental properties.  These new rules were originally announced in March 2021 and have now been included in a Supplementary Order Paper to be considered by the Finance and Expenditure Select Committee for inclusion in the current taxation bill. 

The rules are designed to lower the attractiveness of investing in residential rental properties, level the playing field for first home buyers and stimulate new house builds.  The proposed rules are much in line with the announcement made in late March 2021 with the main update being around the main home exemption. 

Recap of the proposed rule change

The main focus of the prosed changes is interest deductibility on borrowings related to residential rental property investment.  The proposal is that interest on borrowings drawn on or after 27 March 2021 related to residential rental properties will no longer be deductible.  This includes borrowings to both purchase a residential rental property and new borrowings used to pay for expenses related to a residential rental property, such as for renovations. 

Interest on borrowings made prior to 27 March 2021 for an existing residential property acquired before this date, will be phased out between 1 October 2021 and 31 March 2025 as follows.

Date Interest Incurred

Percentage of interest which can be claimed

1 April 2021 to 30 September 2021


1 October 2021 to 31 March 2022


1 April 2022 to 31 March 2023


1 April 2023 to 31 March 2024


1 April 2024 to 31 March 2025


1 April 2025 onwards



These rules take effect from 27 March 2021.


The draft legislative proposal clarified what would be classified as a new build under the interest limitation rules.  New builds will have an exemption from the rules for the first 20 years after a code compliance certificate (CCC) is issued, starting from 27 March 2021.  This exemption will transfer with the property when it is sold so that new owners will also be entitled to claim an interest deduction if the property continues to be used as a rental property.  New builds include:

  • A new self-contained residence added to the land
  • A self-contained residence purchased off the plans
  • Modular and relocated homes
  • The conversion of an existing dwelling into new multiple dwellings.
  • Converting a commercial property into residential dwellings. 

The proposed rules also include a number of other exemptions and exclusions.  These include but are not the full list:

  • The main family home, including where the owner occupies with flatmates or boarders
  • Farmland
  • Commercial accommodation such as hotels, motels and hostels (but not short-stay accommodation provided in a residential property)
  • Employee accommodation
  • Student accommodation
  • Land outside New Zealand



Bright-Line Update

The draft legislative proposal also includes an amendment to the Bright-Line rules for property sales.  From 27 March 2021 the bright-line rules for property sales will differ depending on whether the property was a new build or not a new build. 

New Build Bright-Line Rules

A 5 year bright-line property rule will apply to any new build properties purchased on or after 27 March 2021.  To be classified as new build for these rules, the property must meet the following criteria:

  • A new build is a self-contained residence added to land
  • The CCC confirming the above was issued on or after 27 March 2020
  • You must acquire the new build no later than 12 months after it receives its code compliance certificate
  • The new build must have its CCC by the time you sell it

Non-New Build Properties

For properties other than new builds, the bright-line rules are for a 10 year period. 

Main Home Exemption

Your main home is exempt from the bright-line rules.  However there are situations where the land may include two dwellings, one the main home and the second a rental property.  The Government has proposed a change for situations where the main home portion of the land is smaller than the residential property.  Previously in these cases, the gain on sale was fully taxable and no allowance was made for the main home portion of the land.  The new proposal is that any gain on sale will now be apportioned between the main home and the rental property and only the rental property portion will be taxable.  

Technical Changes to Ownership

A further proposal has been included to allow roll-over relief where the legal ownership of a property changes but the effective ownership has remained the same.  In prescribed situations, the original owner would not be taxed on the gain on sale and the new owner would be treated as having acquired the property on the date it was acquired by the original owner. 

Roll-over relief will be provided for some transfers to family trusts or to or from look-through companies and partnerships.  The amount received on transfer must be equal to or less than the original owners acquisition cost and the rules will apply for disposals on or after 1 April 2022. 



FBT Rate Changes

The increase in the top tax rate for income over $180,000 also resulted in the fringe benefit tax rate increasing on all taxable benefits provided to employees (including shareholder employees) from 49.25% up to 63.93%. 

An amendment to the legislation has been proposed that would allow the following:


  • Pay FBT at a rate of 63.93% on the taxable value of all fringe benefits provided to employees; or
  • Pay FBT:
    • Using a 63.93% rate for all employees whose all-inclusive pay (see below) is $129,681 or more, on the value of the taxable fringe benefits applied to that employee; and
    • Using a rate of 49.25% for all other employees on the value of their taxable fringe benefits.

All-inclusive pay is calculated as:

Cash pay – tax on cash pay + taxable value of fringe benefits



Commercial Property Rental Relief Due To Covid-19 Lockdowns

Justice Minister Kris Faafoi announced on 28 September 2021 a proposed law change to insert a clause into the Property Law Act which would require that a "fair portion" of rent would be payable on commercial properties were a tenant was unable to fully conduct their business from their premises due to lockdown restrictions. 

The landlord and the tenant would need to agree on what a fair rental would be during these times and if an agreement was unable to be reached then mediation or arbitration would be required. 

The clause would not apply to leases which did not already provide for rent adjustments during epidemic emergencies. 

No guidance has been provided on what a "fair portion" of rent would mean. 


Resurgence Support Payment Round 2


The Finance Minister, Grant Robertson, announced on 10 September 2021 that a second round of the Resurgence Support Payment (RSP) will be made available to businesses impacted by the current alert level increase, with potentially a further 2 payments being available if the current situation is ongoing. 


Eligible businesses will need to show that they have had a minimum of a 30% drop in revenue for a 7-day period from 8 September 2021 compared to a typical 7-day period in the 6 weeks prior to 17 August 2021. 


Applications will open on 17 September 2021 on the IRD's website.  Businesses will be able to apply for this round of the RSP even if they received the previous payment and applications will remain open until 1 month after the whole of New Zealand returns to Alert level 1. 


The payment is made up of $1,500 plus $400 per full-time equivalent employees including shareholder employees to a maximum of $21,500, or four times the actual revenue decline experienced by the business, whichever is lower. 


If you would like further information or would like us to apply for the RSP on your behalf, please do not hesitate to be in touch with the team.

Covid-19 Wage Subsidy Round 2

Applications for the second round of the Covid-19 wage subsidy are now open.  If you applied for the first round of the wage subsidy, you will need to wait until two weeks after you applied for the first subsidy before making your application for the second round. 


The second round of the wage subsidy is the same as the first.  To be eligible your business will need to show it has had or expects to have a drop in revenue of at least 40% due over a period of 14 consecutive days between 31 August 2021 and 13 September 2021 inclusive (this is the revenue test period), compared to a typical 14 consecutive days of revenue in the six weeks immediately before to the move to Alert Level 4 on 17 August 2021. 

Payments will cover a two week period at the rate of $600 a week per full-time employee or $359 a week per part-time employee.  The payments will be made as a lump sum into your nominated bank account. 


Resurgence Support Payment

If you have not already applied for the resurgence support payment applications are still open.  This payment is a one-off support payment available when the Government raises the alert level from level 1 for more than a 7 day period, at the Governments discretion.  For more information, see our previous newsletter here.


If you would like more information on the above or would like assistance with your application, please be in touch with the team at Stewart & Co. 

Click here to login
To register please click here.
Copyright Stewart & Co Ltd © | Disclaimer | Site Map | Websites for accountants by Wolters Kluwer