Mixed-use asset rules

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The mixed-use asset rules are New Zealand tax rules governing how deductions are apportioned for an asset used both privately and to earn income, where the asset is also unused for a substantial part of the year.

When they apply

Generally where, during the income year, a property is:

• used privately, and
• used to earn income, and
• unused for 62 days or more

That third limb is what distinguishes a mixed-use asset from an ordinary rental. A property rented full time isn't caught; a bach or a part-time short-stay property typically is.

Why they exist

To stop full deduction of costs on a property that is substantially a private asset generating some income on the side.

How deductions work

Expenses fall into categories — some fully deductible, some fully private, and some apportioned by a formula based on income-earning days relative to total days used. The apportionment is prescriptive and is not simply "percentage of the year rented".

Common misunderstanding

Short-stay letting is where most people get caught. Listing a bach, a spare room or a second property on a short-stay platform for part of the year very often brings it inside these rules, and the tax treatment is materially different from a standard rental.

GST may also be in play. Short-stay accommodation is a taxable activity for GST, unlike long-term residential rent which is exempt. If turnover crosses the registration threshold, GST registration can be required — and registering brings the property into the GST net, with consequences on sale.

This is genuinely complex. More so than most tax topics in this glossary. Get advice specific to your situation before assuming a treatment.

Related terms

Sources

• IRD — Mixed-use assets: ird.govt.nz

Last reviewed: 1 August 2026 · General information only, not tax advice.

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