Why IR is focusing more closely on rental income

Inland Revenue (IR) is paying closer attention to rental income from long-term rentals to short-stay arrangements like Airbnb to ensure taxpayers comply with reporting and deduction rules. Whether you are a landlord renting out your spare room or managing multiple properties, understanding what the IR expects is key to staying in the clear.

First up, reporting requirements. All rental income must be declared, whether it is from long-term tenants or short-term guests. Short-stay earnings count as rental income and could even require GST registration if your total turnover exceeds a set amount.

Then there is the matter of deductions. Residential rental expenses can only be claimed up to the amount of rental income earned, with any excess deductions carried forward to future years. Additionally, from 1 April 2025, landlords can fully claim interest on loans for rental properties again but only if funds were borrowed solely for that purpose.

IR frequently detects errors in rental income claims. Improper GST treatment, misuse of deductions, or incomplete record-keeping are common. Keeping accurate and accessible records for at least seven years is essential.

If you are contacted by the IR, it may be for clarification, review, or audit. This is where Audit Shield can help by covering your accountant’s fees so you they can respond effectively on your behalf.

Want to feel prepared when IR comes calling? Talk to your accountant about how Audit Shield can support you.