Are property management fees tax deductible in New Zealand?

15 April 2024

Tax Finance

The short answer is yes. Property management fees are tax deductible in New Zealand. The IRD categorises property management as an operating expense for property owners and investors, acknowledging its role in the management and upkeep of rental properties. Landlords are able to deduct such expenses from their taxable income.

The fees associated with property management expenses encompass a range of services essential to the day-to-day operations of a rental property, such as tenant acquisition, rent collection, and maintenance oversight. By recognising these costs as deductible operating expenses, the IRD facilitates smoother operational workflows for property owners with a stronger financial advantage.

Understanding tax deductions for property management fees.

Expenses directly related to the earning of rental income can be deducted from a property owner's income before tax is calculated.

To claim these deductions, property owners must keep detailed records, including invoices and receipts for property management services. These records serve as evidence should the IRD request documentation in an audit.

Under our previous Labour-led government, interest deductibility on rental properties was in the process of being phased out with few exemptions. As part of their election campaign, the recently formed National coalition promised to implement amendments to tax deductibility rules to ensure a more balanced housing market. 

National's new phased approach aims to restore mortgage deductibility for rental properties, implementing a 60 per cent deduction in the 2023/24 financial year, 80 per cent during 2024/25, and 100 per cent in 2025/26. 

Nicola Willis, the Minister of Finance, announced the final details of the upcoming tax changes in March 2024: 

● For the 2023/24 Financial Year: Landlords can claim a 60 per cent deduction on interest expenses.

● From April 1, 2024: This deduction increases to 80 per cent. 

● From April 1, 2025: Landlords are entitled to claim the full 100 per cent of interest expenses as a tax deduction.

For comprehensive guidance, the IRD's website offers resources and information on property income and expenses, including what can and cannot be claimed as a deductible expense. Visit the IRD's property section for detailed information.

What this means for property owners and investors. 

Tax deductibility on rental properties means that the cost of hiring a property manager effectively reduces the amount of income tax you pay, making property management services a more attractive option. Property owners and investors can benefit from professional management services, knowing that these expenses will not detract from their overall financial performance.

Best practices.

1. Keep detailed records: Maintain thorough documentation of all property management fees and other property-related expenses. This practice is important not only for tax purposes but also to help you keep track of your financial performance.

2. Understand what's deductible: Besides property management fees, many other expenses associated with rental properties are tax deductible. Familiarise yourself with these to maximise your tax efficiency.

3. Consult a professional: Tax laws can be complex and subject to change. Consulting with a tax professional or accountant who is familiar with New Zealand's property tax laws can provide you with personalised advice and ensure you're making the most of your tax deductions.

-

Gina Colcord

Business Manager

Gina Colcord is an experienced Business Manager in property management with over 15 years of experience. She has worked across various property types and has been recognised for her achievements, including being a finalist for the REINZ Business Development Manager Award in 2020 and previously winning the LJ Hooker National Award for Best Property Investment Management in NZ.

You can contact Gina on 027 266 8367 or emailing gina@hammondandco.nz