tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, November 1st, 10:39AM

News

rss
Latest Headlines

Ring-fencing 'may be just the beginning'

Government moves to ring-fence holiday home rental losses should send a chill down the spine of residential property investors, says property tax specialist Mark Withers.

Friday, June 29th 2012, 12:00AM 4 Comments

by Susan Edmunds

Revenue Minister Peter Dunne has announced Government plans to ring-fence losses on holiday homes offered for rent if the gross income from the property is less than 2% of its land value.

This comes on top of the changes announced in the Budget, reducing the amount of tax deduction that can be claimed on baches, bringing it in line with the number of nights they are available for rent.

Mark Withers, of Withers Tsang and Co, consulted with the Inland Revenue Department on the proposed changes. 

He said this could be the thin end of the wedge and lead to ring-fencing losses on all property investments.

While property investors had not been very concerned by the changes relating to holiday homes, the ring-fencing proposition could be the start of a whole host of major changes across the industry, he said.

“Property investors have thought, ‘I haven’t got a bach, it doesn’t apply to me’. But if they ring-fence losses on baches, it could so easily be extended to property investment losses in general.”

He said this was the first time the Government had suggested limiting deductions in relation to the value of a property.

He said it would be a major concern for investors who had properties with, for example, a 4% yield funded by borrowing at 6%.

“It could so easily be applied to the wider investment market and if you’re sitting on a high-debt, low-yielding property relative to value, you’ll be absolutely stuck.”

Withers said once the precedent had been set, it would be easy for the Government to widen its sights.

“Once this law is on the books all they have to say is let’s widen it, the principle is already there. These are genuine losses, they shouldn’t be ring-fenced.”

Martin Evans, of the Independent Property Managers Association, agreed. “Everything the Government does is open to expansion.”

He said once the proposal was law, it would be much harder for anyone to make their objections heard. “They’ll negotiate on the first thing then they’ll just add to it. There’s not much you can do about it.”

The legislation is expected to be before the house in August or September. 

Withers said: “If people start to think about it they might think that this is not such a welcome change.”

« Kiwibank best for first-timers: ReportFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

Special Offers

Comments from our readers

On 29 June 2012 at 1:08 pm Lee Kammerer said:
I don't care about holiday homes but if we ever have the misfortune to have Labour/Green government then ring fencing loses on all investment properties will be one of the very first items on the agenda.
On 29 June 2012 at 1:12 pm Tim said:
In theory, yes, they could extend this to residential properties, but seriously, they won't. To destabilise the rental sector beyond stealing a few nickels and dimes would only be viable if the government was proposing to step into the sector. The current government, and the next few governments for that matter, have no spare cash available to instigate a takeover of the rental sector.
On 29 June 2012 at 5:20 pm Christopher Landigen said:
You don't have to be very bright to glean that the Government, instead of imposing a capital gains tax (which wouldn't work) is hellbent on imposing other ways of emptying our wallets. The writing is on the wall. You make your own arrangements. Living in Christchurch we have learned to make the hard decisions, and one of them is to realise that sometimes it's prudent to sell and reduce your exposure.
On 30 June 2012 at 6:03 am Ian said:
Because NZers are becoming less able to purchase their own home the ratio of rentals is bound to increase. However someone has to own the rental. The Government has proved their incompetence in this. So government will need investor support to hose NZers. If the Govt shoots holes in their feet by stuffing up the playing field then they will have to fix it. Rental housing is a real business!

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com