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We’re finding income and losses from rental property have not been treated correctly in some non-individual income tax returns.

Commercial rental property

In some cases, income and losses from commercial rental property have been included in the 'Residential rental income’ section of income tax returns.

This income should be added to the ‘Net profit or loss from business or other rental activities’ box.

Residential rental property deductions

Some non-individual customers with residential properties are claiming deductions greater than the amount of rental income received.

The residential property deduction rules (also known as the ring-fencing rules) apply from the 2020 tax year. This means your clients can only claim deductions up to the amount of rental income earned in a year, including income from the taxable sale of a residential property.

The excess deductions are carried forward to offset against any income from residential rental property returned in future years.

Read more about ring-fencing in the following web pages.

Residential rental property deductions
Tax Information Bulletin - Vol 31, No 8 - September 2019 (page 53) - Tax Technical website

More information

Here’s more information on how to complete the residential rental income section of non-individual income tax returns. ·

Company tax return guide 2023 - IR4GU
Estate or trust return guide 2023 - IR6G
Māori authorities tax return guide 2023 - IR8G
Clubs or societies return guide 2023 - IR9G

Last updated: 20 Mar 2024
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