The interest limitation rules and short-stay accommodation

This Interpretation statement considers how the interest limitation rules apply to interest incurred for property used to provide short-stay accommodation. It also explains what other income tax rules may be relevant to any interest that is deductible, depending on your circumstances. This Interpretation statement explains how the rules apply to natural persons and trustees only.

Tax Information Bulletin - Vol 35 No 6, July 2023

Note:

This interpretation statement explains the application of the interest limitation rules in Subpart DH that were in effect on 2 June 2023 when IS 23/04 was published. In 2024, the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 amended Subpart DH and phased back the deductibility of interest payments for residential investment properties. As a result, from 1 April 2024 the percentage of interest permitted as a deduction under the interest limitation rules increased to 80% and from 1 April 2025 interest became fully deductible, subject to the other provisions in the Income Tax Act 2007. Subpart DH was repealed on 1 April 2025.