The Government has produced a 143-page discussion document to try and sort out the complications arising from disallowing an interest deduction on residential rental property.
A typical complication is where the residential property is owned by a company and only forms a small part of the company income. Funding for the company can be constantly changing, so how do you know how much to allocate to the residential rental property?
Another one is the person who takes in a boarder or lets out part of their main home as an Air B&B. In these cases, the proposal is to allow a proportionate interest deduction.
For those who owned property before the law change, the deduction is to be scaled down over four years. The first reduction occurs at October 1 this year. The claim for interest is calculated on the basis of it being incurred. This means if you paid interest to, we will say September 25, you would also be able to claim the interest through to the end of September, even though you will not be paying it until after October 1.
