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How are costs for meeting the Healthy Homes Standards for residential rental properties claimed in my tax return?

Paul Martin • Jan 20, 2021

Most residential rental property owners should be well aware of the Healthy Homes Standards which became law on 1 July 2019.

The healthy homes standards introduce specific and minimum standards for heating, insulation, ventilation, moisture and drainage, and draught stopping in rental properties.  

Costs incurred in meeting these standards can be claimed in your tax return, as described below.

Costs of a revenue nature are generally deductible in the income year they are incurred, and these may include the costs of:

  • Repairing items that would otherwise meet the standards if operational or in a reasonable condition
  • Minor additions or alterations that do not change the character of the building, such as:
  • some costs of meeting the draught-stopping standards
  • making mechanical ventilation systems compliant
  • installing battery-powered smoke alarms
  • some costs of meeting the insulation standard and
  • some costs of meeting the moisture ingress and drainage standard.
  • Replacing items where they have previously been treated as part of the building; and
  • Recordkeeping and providing information in tenancy agreements.

Capital costs will generally result in a deduction for a depreciation loss unless they are for something that is part of the residential rental building.

The cost of items that are part of the building are added to the building's cost and depreciated at the same rate as the building. Generally, this is zero percent. Items that are likely to be part of the building include:

  • Wired-in or battery-powered smoke alarms
  • Insulation
  • Ducted or multi-unit heat pumps
  • Flued fires (wood or gas)
  • New or replacement openable windows
  • New exterior doors
  • Most extractor fans or rangehoods
  • Ground moisture barriers
  • Stormwater drainage, gutters and downpipes
  • Underfloor vents.

Capital costs for some items acquired that are not part of the building will be either:

  • Depreciated over multiple income years using a rate set out in Depreciation Determination DEPS0 for assets of that type; or
  • Depreciated at a rate of 1000/o in the income year the expenditure is incurred if the item is a "low-value asset" (generally, where the cost is $500 or less).

Items able to be depreciated include:

  • Electric panel heaters
  • Some heat pumps
  • Through-window extractor fans, window stays, door openers and stops, external door draught excluders and devices for blocking fireplaces or chimneys

For more information and advice on how costs for Healthy Homes compliance are claimed, please contact us.

Source: IRD

How the new Government and coalition agreements might affect owners of residential rental properties

By Paul Martin • 04 Dec, 2023
There were some key takeouts of interest to many of our clients from the recently signed coalition agreements between National, ACT and New Zealand First and the formation of the new Government. In particular there are a number of policies which will likely benefit landlord clients who own residential rentals. I have summarised some of these below. 1. Return of Interest deductibility for residential rental properties Interest deductibility for residential rental property owners will return. It will be phased back in over three tax years: • 2023/24 tax year: 60% of interest cost will be deductible. • 2024/25 tax year: 80% of interest cost will be deductible. • 2025/26 tax year: 100% of interest cost will be deductible. 2. Reduction in bright-line period National signalled in their pre-election campaign that the bright-line period for residential rental property sales would reduce from 10-years to 2-years. While the exact implementation of this policy is not yet known, it is good news on the horizon for residential property investors. 3. Reinstatement of 90-day no-cause termination notices The new government will reinstate 90-day no-cause tenancy termination notices. This will avoid many unnecessary disputes in the Tenancy Tribunal and gives landlords more confidence in letting to possibly “marginal tenants". Many landlords have avoided what they considered to be risky tenants because eviction for anti-social behaviour was so difficult. With this reinstatement, landlords might be more inclined to give a marginal tenant a chance because they know that if the tenant misbehaves, they won’t be stuck with them. If you would like more information on how these changes might affect your personal circumstances, please feel free to contact us to discuss further.

How does provisional tax work, especially in an economic downturn?

By Paul Martin • 18 Jul, 2023
If you had to pay tax of more than $5,000 in your last income tax return, you may have to pay provisional tax for the following year. Provisional tax is like making progress payments on next year's income tax.

How to handle inflation as a sole trader

By Paul Martin • 18 Jul, 2023
Sole traders have had an especially difficult few years as inflation surges. We have got three tips to help lighten the load for your sole trader business. 
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