You mean a "loss"?
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You dont write off losses, as such. You write off value of an asset when required. You incur expenses, and if they are greater than income then you have a loss. The loss isn't written off, it just is. No one likes a loss.
Its not hard. Salary plus rent (Income) less expences (rates / insurance/ interest etc) = profit or loss. As mentioned earlier you pay tax on profit. With an accountants help you can carry that loss through to future years so really isn't written off. It keeps living until finally accounted for.
(Best we get Beagle sniffing around here - he can be more precise on accounting treatment.)
Simply I do not accept that a loss incurred on an investment in property should be deducted from a salary to give you a tax refund.
You may not accept it. But I think you are confusing "expense" with "Loss"
Surely a person is entitled to do whatever they can to earn an income. If they have skills and time they can sell those to someone for a wage or salary. If they are prepared to take a risk to house some people in return for rent then surely good on them. Can you accept that sometimes expenses are incurred in generating an income? Why would you want people who earn less (income less expenses incurred in generating that income) to pay more tax than those who actually earn more.
Given the apparent housing crisis shouldn't we be doing all we can to encourage people into property that can be rented to people?
Rumours. What rumours? https://www.stuff.co.nz/national/pol...jacinda-ardern
A loss is when expenses exceed revenue. I am not stupid.
If you buy a rental property and it makes a loss of $10,000 per year simply because the rent you get could not cover your expenses. That $10,000 loss if added to your salary gives you a tax refund of $3300 assuming your marginal rate is 33c/$. Five years down the road you decide to sell as you find that the rent will never exceed expenses, which you knew anyway because of the big mortgage you took out when you bought. You walk away with some sort of capital gain which hopefully will cover what your losses were but the tax you didn't pay, $16,500, is a gift to you at the expense of all other tax payers. That is not acceptable.
Capital Gains tax should not be confused with Negative Gearing Tax. Two very different conversations. But if Jacina wants to bring in a new tax when she said she wouldn't, so be it.
Edit. Is it acceptable for a person to keep the capital gain if they pay their Negative Gearing tax?
The big players already have systems set up to apply sales tax, charge the buyer and remit to IRD. Australia's requirement starts in a couple of months so NZ will be a doddle next year.
This government is beginning to add hassle, compliance and cost to vast swathes of the population. Most are small bites but after the first few people will be taking notice, even if the impact on their back pockets is not huge. Death by 10 or 12 cuts? Or should that be shower heads and light bulbs.
What about a sole trader's investment in a start up business alongside other income? Need not be salary, could just as well be dividends. The investment could be any sort of capital expenditure including commercial property. Should that be treated differently to someone with a residential rental? If so, why?
It won't be under the ring fencing proposal. It only applies to residential rental properties. Probable consequences -
- owners will sell up before ring fencing comes in
- the rental pool will shrink, maybe a lot, rents will go up, excellent tenants will be fine, others will swell the waiting list for emergency / state housing
- the much discussed first home buyers will be no more able to buy than they are now, even if prices drop a bit
- owners that stay in the market and run at a loss for the time being will minimise expenses, including deferring maintenance where they can
- owners carrying a tax loss will not sell until they have used up the tax losses
- the current government will get a windfall, future governments the liability.
What did I miss?