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CAP 137
Category: Property & investment
Business Goal: BG-003 — Intelligent financial assistant; BG-009 — Automate everything
System Domain: SD06 — Snowflake Analytics & Risk Platform
Satisfying Module: MOD-094 Property attribution engine (module in design) + MOD-095 Ring-fencing logic engine (module in design)

Description

Rental properties are treated as virtual business units within the bank — each property has its own income and expense ledger, P&L by period, and tax position. The system automatically detects rental income (regular inbound payments), attributes property-related expenses, applies NZ ring-fencing rules, and produces a tax-ready rental schedule.

The customer sets up each property once (address, use type, owner). Attribution thereafter is automatic and learned. This replaces spreadsheets and the property-income section of Xero for most residential and small commercial landlords.

Core features

Property-level P&L

Per property, per period: - Rental income received - Deductible operating expenses (rates, insurance, maintenance, management fees) - Financing costs (mortgage interest — fully deductible NZ from 1 April 2025) - Capital expenditure (flagged separately, not immediately deductible) - Net result: profit or ring-fenced loss

NZ ring-fencing (residential property)

Under ss EE 1–8 of the Income Tax Act 2007, residential rental losses cannot offset other income. The system: 1. Calculates property-level net income each period 2. If a loss, marks it as ring-fenced and carries it forward 3. Applies carried-forward ring-fenced losses against future rental profits (portfolio-level offset supported) 4. Tracks the ring-fenced loss balance across financial years

Note: Ring-fencing rules apply to residential property. Commercial rental losses are not ring-fenced. The tax profile on each property operating context records the applicable treatment.

Interest deductibility (NZ, as at 2026)

From 1 April 2025, mortgage interest on NZ residential rental properties is 100% deductible. The system records the applicable deductibility rate by period to correctly handle historical claims: - Pre-October 2021 acquisition: 100% throughout - Phased restoration: 50% (2023/24), 80% (2024/25), 100% from 2025/26

Mixed-use / holiday home

Properties with both rental and personal use are apportioned: - Rental days vs personal days vs vacant days - Deductible expense % = rental days / (total days − vacant days) - Calendar integration optional; manual day-count input supported

AU negative gearing

In Australia, rental losses can offset other income (negative gearing — no ring-fencing). The system applies NZ or AU rules based on the property's jurisdiction and the owner's tax residency.

Detection and attribution

  • Rent inflows: detected by pattern (regular amount, consistent reference) → confirmed by user once → auto-attributed thereafter
  • Property expenses: attributed by merchant type (council rates, insurance, plumbing/electrical) + geo-proximity to property address + user confirmation
  • Mortgage payments: linked to property on setup; split into principal and interest components using amortisation schedule

Outputs

  • Property P&L by period (monthly, quarterly, annual)
  • Ring-fenced loss register with carry-forward balance
  • IR3R / rental income schedule ready for filing
  • Xero integration: push with property tracking categories