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  1. #71
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    Quote Originally Posted by fungus pudding View Post
    No there isn't. Income tax should be reserved for income from profit. There may be an argument for the bright line test, and I happen to think there is as our tax policy to tax gains based on intention has proven completley unworkable - to the point the IRD seems to have abandoned trying to collect tax from all but the most blatant habitual traders, but there is no such reason to apply income tax to an outgoing. It will throw the rental market way out of balance, ultimately resulting in rising rents. Labour should study their moves in the housing market right through the party's history to learn every move they have ever made to control rents has ended in disaster.
    I have already agreed denying interest deductibility on a specific investment is inconsistent and unfair, but if you are allowed to claim interest on a new build and the bright line test gets cut back to 5years instead of 10yrs for a new build, this is using policy to address the main issue in your view which is a lack of supply.

    Is that a good idea or is it just a matter of govt staying out of it and giving Mr market and the invisible hand, time to work it all out to everyones benefit.

  2. #72
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    Quote Originally Posted by dibble View Post
    Yes, and profit for ResProp is predominantly the capital gain. To believe otherwise requires inserting one's head in the sand. Therefore if you arent taxed on all the profit you shouldnt be entitled to all the deductions. The execution is very debatable though e.g. rates is deductible and interest now isnt, some gains are taxed others arent (bright line) etc.

    Your other point is merely speculation. The key determinant that throws rent out is the powers of supply and demand. Landlords cant just raise rent 'cos they are in a bad mood about tax, but they can if a shortage means the market is willing (however reluctantly) to pay more.
    Of course they can't buck the market - but the supply side of rental will obviously be affected with this crazy policy - that's what will increase rents. Your point about capital gain being the major profit from property is irrelevant - unless we also apply it to every assett; jewellery, shares etc and especially other real estate including the family home, batch etc. After all if property prices were stable - why bother owning? I'm sure the main reason people want to 'get on the ladder' to use that dopey cliche is simply the fear of missing out. I know in my own circle of relatives and contacts most of the younger ones buy something less than they aspire to to get themselves started; 'a foot on the ladder' so to speak. So obviously tax should apply to them as well when they sell the starter home if we are to be consistent. They were equally motivated by the potential profit.
    Last edited by fungus pudding; 31-03-2021 at 10:41 AM.

  3. #73
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    Quote Originally Posted by fungus pudding View Post
    Of course they can't buck the market - but the supply side of rental will obviously be affected with this crazy policy - that's what will increase rents. Your point about capital gain being the major profit from property is irrelevant - unless we also apply it to every assett; jewellery, shares etc and especially other real estate including the family home, batch etc. After all if property prices were stable - why bother owning? I'm sure the main reason people want to 'get on the ladder' to use that dopey cliche is simply the fear of missing out. I know in my own circle of relatives and contacts most of the younger ones buy something less than they aspire to to get themselves started; 'a foot on the ladder' so to speak. So obviously tax should apply to them as well when they sell the starter home if we are to be consistent. They were equally motivated by the potential profit.
    I keep bringing this up in the past. So to put it in layman terms, why is it in other OECD countries (and I use Canada as that's where i'm most famliar), have some form of taxation on the capital gain on houses? Why are they wrong and NZ is right that the game plan dibble has described for every residential investor in NZ is to get that tax free capital gain? Therefore, disallowing the mortgage interest as an expense deduction seems fair to me.

    The treatment in new house construction where 5 year brightline test still applies? You guys don't know how good you have it. In Canada, the person that builds new houses thinking of only paying capital gains tax is still under risk of paying more taxes. Like Australia, Canada's CGT is only HALF of the gain is taxable income. But the CRA in Canada can easily go after any person and deem the full capital gain as taxable income - IF you go and claim interest mortgage expense off the building of the new house. Yep - just like any venture when there's intention to profit by capital gain in Canada, there's always the risk that you will lose that status and be deemed all 100% of the gain as taxable income. Anotherwords, CGT in Canada is only mean for non-intentional means of making a profit. Such as buying stocks in a retirement portfolio - when you try to claim expenses on the gains of the share market gains... then those gains would be risked at paying full income tax rates and not at CGT rates.

    The limited supply of houses in NZ with high immigration is not the sole problem. Plenty of NEW houses are being built at record levels. In the past i'm seeing far too much $ that has gone into residential properties and into nothing else. Hence, the rich in NZ get rich off the rising house prices.... a horse of a different colour to the rich I see in N. America earning their wealth through share investments in their retirement portfolios.

  4. #74
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    We should not ignore the influence of the property management industry on market rents. Owners expect to get the best return and least hassle possible for their investment in exchange for the fairly big bucks they pay for the PMs.

    If owners think they are not getting what they pay for they will walk. So the professionals will do their best to engage good tenants at the best rent they can achieve.

    Property management fees are around the 10% of rent mark taking into account GST and margins and extras. So there's a big influence on market rents for starters, add in rent increases due to costs and demand and its a vicious or virtuous cycle, depending on POV.

    2017 - MBIE reported to Ministers that 53% of rentals were managed by the professionals. Probably more now due to increasing rules, compliance, fines, complexities and risks. They are a very significant and usually overlooked influence on rent levels.

  5. #75
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    Quote Originally Posted by SBQ View Post
    I keep bringing this up in the past. So to put it in layman terms, why is it in other OECD countries (and I use Canada as that's where i'm most famliar), have some form of taxation on the capital gain on houses?
    NZ almost had the right idea with the intention rules - designed to tax speculators, traders, flip-over merchants, but allow genuine investors to eventually sell up, or die, tax free. After a lengthy holding period tax really becomes no more than a tax on inflation (which is never the investors fault) Unfortunately this has proven impossible to enforce. Any half-baked excuse was accepted by the IRD, and as far as I can see they have given up even chasing tax on small or occasional traders. Hence the bright line test seems fair and reasonable; i.e. to tax speculators while genuine investors - those who are acting for rental profit can dispose of their assets and retain the full value. Habitual traders, developers, builders and associated trades etc, were not exempt.
    None of this justifies imposing income tax on outgoings as has now been introduced. That is so illogical it's laughable. The real downside will be interference in rental supply. Like it or not, we are short of residential landlords, relying almost entirely on individual 'mum and dad' investors with just the occasional charity or small commercial organistion to meet the demand. This nonsense of taxing more than their annual profit will certainly not help that.

  6. #76
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    Hey FP you never answered my question. Always interested to hear your view.

    I have already agreed denying interest deductibility on a specific investment is inconsistent and unfair, but if you are allowed to claim interest on a new build and the bright line test gets cut back to 5years instead of 10yrs for a new build, this is using policy to address the main issue which in your view is a lack of supply. Isn't this a good idea to encourage building new houses?

  7. #77
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    Quote Originally Posted by SBQ View Post
    I keep bringing this up in the past. So to put it in layman terms, why is it in other OECD countries (and I use Canada as that's where i'm most famliar), have some form of taxation on the capital gain on houses? Why are they wrong and NZ is right that the game plan dibble has described for every residential investor in NZ is to get that tax free capital gain? Therefore, disallowing the mortgage interest as an expense deduction seems fair to me. ....
    Yep NZ's warped investment environment favouring residential housing has been generations in the making. The investment environment was warped long before Covid. The absence of stamp duties and CGT on leveraged real estate investment, coupled with lack of a tax-efficient pension scheme meant those with high enough incomes leveraged themselves to the max to invest in real estate! Investment real estate was the best tax-efficient vehicle for amassing a pension fund. Our share market is consequently very small for our economy.

    However, Labour have imposed what amounts to a tax on revenue - so a new tax which they had explicitly ruled out before the recent election. They had ruled out a general capital gains tax. The extension of the bright line (which had been ruled out too) ls now becoming a de facto CGT applied to investment property. In a healthy democracy, They should have presented to the electorate a general CGT and stamp duty regime with relief for pension schemes. Why didn't they?
    Last edited by Bjauck; 31-03-2021 at 04:05 PM.

  8. #78
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    Quote Originally Posted by Bjauck View Post
    Yep NZ's warped investment environment favouring residential housing has been generations in the making. The investment environment was warped long before Covid. The absence of stamp duties and CGT on leveraged real estate investment, coupled with lack of a tax-efficient pension scheme meant those with high enough incomes leveraged themselves to the max to invest in real estate! Investment real estate was the best tax-efficient vehicle for amassing a pension fund. Our share market is consequently very small for our economy.

    However, Labour have imposed what amounts to a tax on revenue - so a new tax which they had explicitly ruled out before the recent election. They had ruled out a general capital gains tax. The extension of the bright line (which had been ruled out too) ls now becoming a de facto CGT applied to investment property. In a healthy democracy, They should have presented to the electorate a general CGT and stamp duty regime with relief for pension schemes. Why didn't they?
    Are you suggesting the return of free title searches, which used to be funded by the stamp duties? Things are far better now with user pay searches - no more standing in queues for ages to get a dam title search.
    Last edited by fungus pudding; 31-03-2021 at 06:12 PM.

  9. #79
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    Quote Originally Posted by fungus pudding View Post
    Are you suggesting the return of free title searches, which used to be funded by the stamp duties? Things are far better now with user pay searches - no more standing in queues for ages to get a damn title search.
    In Australia and UK I think stamp duty is set at about 5% of value. Australian title search is an additional charge.

  10. #80
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    Quote Originally Posted by Bjauck View Post
    In Australia and UK I think stamp duty is set at about 5% of value. Australian title search is an additional charge.
    What is the stamp duty for then? It's expensive enough for people buying a home without a 'just because they can' tax?

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