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DH 10: Limited denial of deductibility: simplified calculation of interest affected
or “Calculating how much interest you can't deduct for residential property loans”
You could also call this:

“How previously denied costs are handled when you sell a disallowed residential property”

If you own a disallowed residential property and you’re not allowed to claim some costs as a deduction, here’s what happens when you sell it:

If you sell the property within two years and make money from the sale, the costs you weren’t allowed to deduct before can now be treated as part of the property’s cost. This happens in the same year you sell the property.

If you rent out the property and then sell it, making money from the sale in a way that’s not covered by the two-year rule, you can claim those previously disallowed costs as a deduction in the year you sell. However, there are special rules about how much of these costs you can claim each year.

Remember, these rules only apply to costs that weren’t allowed as deductions before, and only when you sell the property.

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Next up: DH 12: Valuation

or “How to value land and other property for tax purposes”
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Part D Deductions
Interest incurred in relation to certain land

DH 11Denied amounts: treatment upon disposal of disallowed residential property

  1. An amount that relates to disallowed residential property and is denied under section DH 8 as a deduction that would have otherwise been allowed for a person is treated under section DB 23 (Cost of revenue account property) as a cost for the person of the disallowed residential property in the income year of the disposal of the disallowed residential property if the amount derived from the disposal is income under section CB 6A (Disposal within 2 years: bright-line test for residential land).

  2. An amount that relates to disallowed residential property and is denied under section DH 8 as a deduction that would have otherwise been allowed for a person is allowed under this section as a deduction in the income year of the disposal of the disallowed residential property, and is subject to allocation under subpart EL (Allocation of deductions for excess residential land expenditure), if the disallowed residential property is or was residential rental property for purposes of subpart EL and the amount derived from the disposal of the disallowed residential property—

  3. is income under a section other than section CB 6A; and
    1. is not income under section CB 6A.

      Notes
      • Section DH 11: inserted (with effect on 27 March 2021), on , by section 75 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
      • Section DH 11(1) heading: amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section DH 11(1): amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section DH 11(2) heading: amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section DH 11(2)(a): amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section DH 11(2)(b): amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).