Every silver lining has a cloud

The good news is landlords’ have little need to worry about new tax changes – the bad news is that for many, the impact of the last round has yet to be felt.

Friday, September 30th 2011, 12:00AM 1 Comment

by The Landlord

"We've met with National ministers and their basic thinking is that the depreciation and the LAQC changes were really all that needs to happen," said NZ Property Investors Federation president Andrew King.

"They want to stimulate the rental property market, they don't want to have people withdrawing their investment because they don't want to have a drop off in supply. I think they're saying that's all that needs to be done really."

King said he thought ministers had realised the effects of the depreciation changes had been "larger than they thought" and that the change was set to have an even larger impact next year.

"A lot of people actually won't really realise what it's going to cost them until they put their tax return in next year."

The fact that many investors won't have felt the financial impact of the changes was echoed by the Auckland Property Investors Association (APIA) president David Whitburn.

"I don't think most people have felt it yet," he said.

"A lot of people have extension of time for their tax returns and the building structure change only took effect on April 1, so a lot of people won't have actually felt the cash impact, they'll have to wait for the end of the year."

King said investors needed to do their sums now and look at the possibility of increasing their rents.

"Work it out now and get your rents up so that you're compensated, by the time you work it out next year it's too late," he said.

"Have a look at what the market rents are doing, they are increasing and a lot of people aren't keeping up with those market rents. What they'll find is that next year they'll have lost $15 a week and they won't be able to get that back, that's gone."

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Comments from our readers

On 3 October 2011 at 9:59 am Viv said:

I cannot see why rents should increase due to the depreciation changes. This is only bringing forward annually what would occur when a building was sold and the depreciation was recovered due to the continual increase in property prices anyway. Depreciation on buildings has been a false claim for many years. Don't forget that owners are able to write off maintenance completed anyway. At least they do not have any claw back of interest claimed over the life of the ownership of the property that used to occur.