The government has announced they will legislate to prevent residential landlords from claiming mortgage interest as a business expense for tax purposes, against the advice of IRD and Treasury.

Mortgage interest is an expense incurred in the course of providing rental accommodation and removing its deductibility goes against basic principles of business and taxation. Tax should be paid on profit only (as has always been the case), but under this new move tax will be paid on revenue that isn't profit. It makes no sense.

It is unfair that residential investors have been targeted when all other businesses can still claim interest as an expense. The fact that it applies to properties that have already been purchased is particularly worrisome, as investors who took on big mortgages recently wouldn't have factored it into their decision making.

This could also have adverse effects on renters, as landlords will most likely try and pass this cost on through increased rents.

We ask that this decision be reversed.