Key kicks for touch on property tax

Being in the real estate industry I fell a higher tax on the sale of the property,would still assist cash flows while holding the property but could be allowed for on sale.

I think the government might look at ring-fencing losses

Welcome news that some sense has prevailed but we are far from out of the woods. We are still in the cross hairs to be penalised. Most likely will be via depreciation. This will cause huge impact still. Also unclear is how widely this would apply. Just to residential or to commercial and farming. Any change needs to be fair and apply to all otherwise imbalances appear yet again and unfair. Ring fencing could still be an option on the table too. Again rin-fencing needs to apply to all not just residential. By kicking for touch in his speech it might be aimed to diffuse some of the heat from investors but we can't be complacent. Change is coming!

This is quite scary having a threat hanging over us and not knowing. We went in to property investment to provide for retirement because we have been earbashed that the Government may not be able to provide such a good pension when its time for me to retire. If they adjust the LAQC rules or depreciation rules we will have to sell. THere must be thousands of Mum and Dad investors like us who operate strictly by the book including using IRD approved/accredited Accountants so that we are legit. We are part of a large population who provide 30% of NZ"s rental accommodation. If a large proportion of us have to bail, who is going to provide the housing. Bill English has already acknowledged that the government cannot. Think about the flow on efffects. It may create a glut of houses on the market because an oversupply means cheaper but fewer houses for rent means higher rents can be asked. A huge impact on the middle and lower income people. This has to be short sighted madness.

Gary, you took the words out of my mouth. We too chose property as our retirement investment, coming into it later in life because of other commitments in earlier days. Getting very cynical and thinking maybe should do, or have done, what thousands others appear to do - leave it to welfare to provide for us. Just can't win it seems. Will be a fretful time till May I'm thinking, to find out exactly what is in store for us.

Not being able to claim depreciation will cost a significant amount. It is a non cash item at present,a credit against tax due, meaning without the credit I will pay quite bit more cash to the taxman.

Most in the industry, especially in sales are aware of the groups that buy and sell property in effect as a source of income, without paying tax. You see them at most open homes and auctions in certain areas.

Perhaps if those people and groups paid into the tax base we would all benifit?

I too have bought a couple of houses looking to retirement. The only thing thats making me happy about this situation is the fact that at least I didnt vote for it :o)

The "fat cats" will dodge the top tax and always have.

Hard to imagine that they would want to kill off their voters like this. There are better loop-holes to close, like those who net off LAQC tax losses with their income for higher family support payments. And 15% gst will only lead to more/higher payments of welfare and family support - again why not spend wiser instead, such as paying rent direct to landlords, and food credits at the store, rather than allowing the possibility that it be misspent on drugs, tobacco and alcohol, leading to other social expenses the government foot the bill for.
The extra houses on the market will still struggle to find new home buyers if no-one can save a deposit, and the banks insist on 20%, which of course will not be good news to the poor old baby boomers who have done nothing wrong except try to prepare for their future.
Lets hope that sense prevales, and once investigated further these nutty ideas of a general shut-down of the existing property investing system are drop-kicked just as the ones today were.

It was also hinted at that all the tax rates are going to be adjusted downward and that there is likely to be an adjustment upward of consumption tax (ie GST). If they get the balance right then those who are relying on their depreciation claim to be in the rental market would be able to claw back the value of that credit by having a lower total tax bill in the first place. Also playing devils advocate what if they did remove the depreciation claim but gave you the ability to get a GST rebate (especially if it goes up) on any improvements made to your properties, particularily energy or health effecient upgrades? This would provide good incentive for the housing stock to be improved for all income levels of tenant and landlord.

There is currently a capital gains tax on property traders and developers... perhaps IRD would get the best results by investigating this side of property business more thoroughly. I am a property developer and have no issue paying a fair amount of tax on profit, it is also ring fenced to the development company - seperated from my rental company. No problems here.

I am also in the property investment market but have a different attitude to other writers. Any property I have purchased has been purchased on the merits of the property rather than on the tax advantages. This is because I have always felt that the rules will at some time change regarding tax. I have always claimed depreciation because it is a requirement that I submit an honest tax return even though I have feft guilty about accepting a tax refund from the government while at the same time increasing my wealth from capital gains

Common sense tells me that ring fencing losses will not occur. The upheaval that this would cause in the market would be enormous. So far I can only find opinion not facts on changes coming if any. There have been recommendations on tax reform for years and most of it is never implemented so what has changed now. Surely it makes sense to wait for the budget and make rational decisions on the facts then.

Stopping depreciation claims will only cause rent to go up and house prices to drop from mass selling by investors. This, in turn, will decrease the wealth of the average New Zealanders whose main asset is their home. The government is already getting depreciation claw back when the property is sold; the only difference is that they are trying to get this earlier. Australia has to reverse similar policy (in the 80s, I think)when the Mum & Dad investors (who provided a significant proportion of accommodation) exited the rental property market and the governemt couldn't cope with the pressure on state housing and other flow-on effects. Very short-sighted.

I read very good comments here.
I to operate a LAQC and if they touch the depreciation rules i am out of here. There seems to be a gang of lobbiests trying hit LAQCs and a slanted view seems to be getting across.
I bought into the LAQC thing because it is a wealth building -retirement tool that was sold to thousands of kiwi families and we were encouraged to do so.
All the people putting comments on this web site should contact MP's - you can do it online at the government website.

stop your whingeing!
it was property investors en masse who drove the prices up to be unaffordable to the everyday young kiwis...rents won't go up because the flush of houses you investors dump on the market will be bought by current renters as they find they can NOW afford a house at the lower end of the scale.
that'll even out the rent equation.
if you're investing for tax reasons then it's your own fault if the rules change.
whats' wrong with buying an invest p/ty, getting a tenant to pay the mortgage over the years?
you'll still get inevitable cap.gain.
i'm holding my investment props!

You all need to submit revenue gathering alternatives if you're going to stay in property investment! Let's talk about collecting the millions dollars in outstanding court fines. Let's address ACC - how about sports clubs and hobbiests paying their own insurance levies...the word "accident" may need redefining to do this but it can be done...and then there are the welfare cheats - it may need a whole department to follow this one up,
but I'm sure we would all like to see better monitoring of our benefit system - it's all about fairness to those who really do need it! How about offering major government funding for industry ideas (medical, labwork, engineering, software solutions etc) then we may not need to dig up our national parks for coal and other minerals - we need to be an ideas based economy. And if ever there was an instant tax collection that needs to be applied, it's alcohol -
New Zealands biggest drug problem - therefore it needs to be heavily taxed to the extent that it pays for the incredible number of crimes/accidents/violence it perpetrates...perhaps we could have a few hospital beds back in the hands of real patients - many patient have surgery rescheduled because so many beds are occupied by the victims of alcohol induced "accidents" or violence.
Anyway, let's have as many ideas as you can submit - NZ has alot of very bright deep thinkers - we can show the politicians a few things to better our future in this lovely country!

Keep in mind that the present depreciation deduction for rental houses does not result in tax saved permanently - it merely defers the tax until the property is sold or owner-occupied, at which time there is a clawback of the accumulated tax reduced via depreciation. So if the deductibility of depreciation is removed, it is only the timing of tax payments which is altered unfavourably.

My experience with depreciation is that it is only deferred taxation, something helpful for cash flow but eventually to be given back when the property is eventually sold. Tax coming out of the capital gains on sale does no harm and should be paid. Problem is that we property investors like to have our cake and eat it too.

I had a conversation with my local national MP. She confirmed that the Gov't is looking at ring fencing losses. Expect a very quiet winter in the residential house mkt, a short to medium term drop in house prices as landlords who own negatively geared properties get out, rents will eventually rise, and the Gov't will have to take on a bigger share of the country's rental stock.
Check out my real estate blog at
http://unconditional.co.nz/northwellington

question has to be asked again,
the government is borrowing $250m a week, the property investors didn't pay tax of $250m for the year - so how can they pick on property investors - wake up - we are not the problem - its government spending and bank interest charges - if we all paid less in interest - the government would get back more in taxes - its so simple from where i'm sitting, no GST increase, highest tax rate of 30cents regardless, lower interest rates. stop government spending..... KISS

I thoroughly agree with Russell!
In addition to our tax-collection options how about:
1) Axing Prison expenses? - inmates sit on their bums while getting 24/7 housing and 3 SQUARE MEALS with many creature comforts, upgraded under the previous govt to standards that LOW-INCOME, NO-INCOME, the NEW POOR & the ever-growing HOMELESS can only dream of (... ham & turkey x'mas dinner and figgy pud ...!! )? paid for with TAX PAID BY HARDWORKING TAX-PAYERS ALREADY SQUEEZED BY THE SHEER AMOUNT OF TAX (45%+) IN GOD-ZONE - AFTER HAVING THEIR NET-WORTH SAVAGED BY ONE OF THE WORST GLOBAL RECESSION/DEPRESSION which btw is NOT OVER YET!!) Then they've got the cheek to tax upright, community-minded, law-abiding citizens & boomers whose only crime is to provide for retirement that the GOVT CANNOT PROVIDE? And wasn't it the govt's myopic stupidity that derailed compulsory superannuation schemes once started decades ago that would have put us on par with Australia's cash-rich boomers (several 100k per superfund!!)? 2) Govt hasn't even got the brains nor the wallet to provide housing (let alone cheap housing!) to renters yet they target that segment that is doing THEIR JOB SO EFFICIENTLY - all that talk about efficiency of free markets - haven't they learnt that tampering with free markets, specifically targetting one group such as Property Investors can only result in HIGH INEFFICIENCY? Tax collection will NOT be equitable, Resource allocation will NOT be efficient, certain segments will be PENALISED UNFAIRLY MORE THAN OTHERS eg. boomers - the group that has contributed the most in building the ECONOMIC-BACKBONE OF NZ for the last 60 years - and the lower-income/lower socio-economic groups.
3) How about axing /reducing the vulgar pay increases of politicians? Isn't it hypocritical to expect little or no pay-increases for the public in general as well as singling out certain groups to shoulder your tax-shortfall (caused by excess and wasteful spending of public funds!! - isn't excess and greed the reason for the global financial catastrophe?!!) all the while pocketing massive pay-increases, not to mention all the UNBRIDLED "PERKS" (rental claims, free overseas trips for spouses/girlfriends, etc)?
This is only the tip of the ice-berg - I am sure if the private sector was allowed to, we could help the Govt to prepare a list where we could TRIM off UNNECESSARY WASTE AND EXCESS that would be far more SUCCESSFUL in REDUCING THE TAX SHORTFALL!