John Key & Tax Reform
There’s no doubt that the market has been eagerly awaiting guidance from John Key as to where the Government is heading with Tax Reform.
Whether Tuesday’s announcements has provided any clear direction remains to be seen, but it appears that the following is on the horizon:
- Tax breaks for higher income earners with the 38 cents in the dollar rate tipped to fall to as low as 30 cents.
- A rise in benefits, superannuation and Working for Families payments, in part to compensate for;
- An increase in GST, from 12.5% to 15%.
- And, a review of Company Tax rates.
It does however appear that the Government has stopped short of introducing a land tax and a comprehensive Capital Gains Tax.
Investors have been left slightly up in the air by the failure to clarify whether the Government intends to wipe depreciation on buildings, quarantine rental losses from being offset against other income sources or restricting tax losses to a finite amount.
The gamble going forward is to work out whether to get out of investment properties now (to avoid potential future losses) or to wait until the Budget is announced on May 20th.
It is advisable for owners of rental properties to run “what if” scenarios to determine whether to hold or sell.
Those scenarios should include different tax change options as well as a situation where by the market is flooded with ex-rental properties for sell.
Many of the sellers I deal work with are property investors in Grey Lynn, Waterview and Mt Albert and therefore I will be very interested in the actual implications of the tax reform.
February 11 2010 | Uncategorized | No Comments »
