Friday, July 4, 2014
Mike Butler: Property investors pay $500m in tax
Sick and tired of being the scapegoat that doesn’t fight back, the New Zealand Property Investors’ Federation put in an Official Information Act request to confirm that rental property owners paid nearly half a billion dollars in tax on their rental income in the year ended March 2013.
The new information that became available this week discredits a widely held perception promoted by the Tax Working Group in 2009 that rental property owners have a tax advantage and don't pay tax.
New Zealand Property Investors’ Federation executive officer Andrew King said: "Based on the Tax Working Group’s claims, Government withdrew the ability of rental property owners to claim depreciation, a benefit available to other investments. This has increased the cost of providing rental homes to tenants by $700-million a year, or $33.65 per week, per rental property".
“The newly acquired Inland Revenue data shows than over the last 33 years, there have only been two years when rental property owners did not pay tax on rental income. This was in 2007 and 2008 when mortgage interest rates were high”, Mr King said.
Besides removal of the ability to claim depreciation on buildings, over the term of the National-led government property investors have had more tax squeezed out of them by the scrapping of the loss attributing qualifying company regime, the new look-through company regime, the new mixed-use asset rules, and the compulsory zero rating of land transactions.
Currently under consideration is a rental property warrant of fitness regime that could add an immediate up-front cost of $12,600 per dwelling to achieve for the government highly debatable health savings.
For the record, the rental property sector is a $6-billion industry, which is equivalent to the gross domestic product of the entire Hawke’s Bay region, and comprises three percent of national GDP. New Zealand has 1.7-million occupied dwellings, of which 480,000 are rental properties with 69,000 owned or leased by Housing New Zealand and 411,000 owned privately. .
Mr King warned: "Rental prices need to rise now if they are to have any chance of even partially offsetting the current round of interest rate rises".
Mike Butler is a property investor and manager
at 10:47 AM