May 20th 2010: 5:30pm
REINZ National President Peter McDonald has come out to say that overall the Real Estate Institute of New Zealand are in support of the announced changes, however cautiously noted they “are not expected to have a significant long term effect on house prices or rents.”
He went on to say;
‘REINZ supports the government’s moves to make the taxation system fairer and close the loopholes that enabled some people and businesses in all sectors to rort the system,’
Bearing out the fact that suspicions have been high for some time now, and reinforcing anecdotal evidence already out in the New Zealand Real Estate market place, he commented;
‘Because the Government clearly signaled its intentions we have already seen property investors particularly concerned about the loss of the tax breaks exiting the market yet median residential dwelling price have continued to rise.”
In explaining why this is so, Peter says;
“What people can afford to pay for their accommodation determines the market value of rental properties, not artificial tax deductions which could only be exploited by some investors because of their particular personal circumstances.”
Considering what the Global Economic Crisis over the last 2 years has done to investors confidence, and signaling what many in the industry already know, he said;
‘A more significant reason why people invest in residential rental property is the security compared with other investments, so while tax considerations are part of the equation, like it is with all investments, it is not normally a deal breaker,’
Nothing like it.....
Like always there’s nothing like bricks & mortar.
Or as is also the current case, there’s really no equivalent to real gold.
20 May 2010
Bill English & Peter Dunne have released this years budget.
Bill English says
“These changes will make the tax system fairer by ensuring the treatment of property is consistent with other forms of investment. This will reduce the incentive for people to buy property purely for tax reasons and will help tilt the economy towards saving, productive investment and exports.”
Here’s the rest of the stuff from the press release;
Budget 2010 property tax measures include:
- Denying depreciation deductions for buildings, such as rental housing and office buildings, with an estimated useful life of 50 years or more. This takes effect for all such buildings from the start of the 2011/12 income year.
- Changes to the tax rules for qualifying companies (QCs) and loss attributing qualifying companies (LAQCs), taking effect from income years starting on or after 1 April 2011.
- Preventing property investors from using rental losses to inflate Working for Families eligibility and payments, from 1 April 2011.
- Funding over the next four years for Inland Revenue to target property speculators who have been avoiding paying tax on their trading gains.
- Cutting the top personal tax rate from 38 per cent to 33 per cent, reducing the value of losses higher-income earners can claim on property investments.
“Closing loopholes that allow well-off families to use investment losses to inflate their eligibility for Working for Families payments will remove another incentive to invest in property.
Mr Dunne says the new rules will enhance consistency across the tax system.
“Ending depreciation tax breaks on buildings makes sense. On average, New Zealand buildings actually increase, rather than decrease, in value over time.
“Changes to LAQCs and QCs to make them flow-through entities for tax purposes will reduce the opportunities for tax structuring.
“An extra $26.6 million funding over four years will enable Inland Revenue to continue its successful programme of increased property transaction audits and compliance activity. This will ensure people who trade in property comply with the law and pay tax on their trading gains,” Mr Dunne says.
For more information, see Budget 2010 fact sheets on building depreciation, LAQC and QC rules, Working for Families changes and tax integrity.
SOURCE – http://www.taxguide.govt.nz