NZ 1st homebuyers are ScReWeD...

[artemis]

Sure - but these people bought the property and said they did not have the intent to become landlords. They were not accidental owners of the property.

How do you know that?

[fungus pudding]

Isn’t Intent important with investments for tax purposes? And net profit is taxable? Whether or not a profit on an investment property is taxable affects investor demand for houses.

They seemed to want to use the whole of their profit to renovate the home they lived in.

Yes. Intent is the deciding factor as far as tax goes. Maybe they had lived in this home prior to living in their current home. Or maybe one of them did before shacking up as a couple. From time to time the market can be quite flat leaving owners who have bought elsewhere facing big bridging finance costs - so it can make sense to pop a tenant in waiting for the market to pick up. Looking at the figures in that article, and knowing the Dunedin market over the last few years, it looks to me like that is what happened. Anyway - good luck to them.

[Bjauck]

Plenty of accidental landlords out there. Like inheritance, or buying a new owner occupied home and renting out the old one. Who knows.

They had mortgages on both their properties. Obtaining a mortgage is not accidental. If you buy a second house live in, then retaining the other one is not an accidental decision. What is the purpose of retaining the other one if the intent is not to become a landlord?

What we do know is that in the last 4 years the costs and rules around rental properties have changed dramatically. Regardless of how and why rentals started out no surprise if owners make decisions based on the current rules.

Maybe some of those decisions will be to sell, maybe repurpose. There does seem to be a shortage of rentals in many locations, and as borders reopen what is available will be under more and more pressure. There is always the social housing waiting list. For the extremely patient.

Sure. Which still beggars the question why was a property originally purchased - or retained if inherited or became surplus to requirements. These Dunedin owners said they had made a $300k "profit". So even if their ownership was "accidental" they may have held on to for some time, even in today's market, to make such a "profit". Plus going to the trouble of becoming accidental landlords indicates a more than short term period of ownership. What was the intent behind owning it, if there was no intent on becoming landlords?

[fungus pudding]

They had mortgages on both their properties. Obtaining a mortgage is not accidental. If you buy a second house live in, then retaining the other one is not an accidental decision. What is the purpose of retaining the other one if the intent is not to become a landlord?

Sure. Which still beggars the question why was a property originally purchased - or retained if inherited or became surplus to requirements. These Dunedin owners said they had made a $300k "profit". So even if their ownership was "accidental" they may have held on to for some time, even in today's market, to make such a "profit". Plus going to the trouble of becoming accidental landlords indicates a more than short term period of ownership. What was the intent behind owning it, if there was no intent on becoming landlords?

To make you turn green with envy.

[Bjauck]

To make you turn green with envy.

Just trying to understand the tax rules behind NZ households’ biggest investment class. So if the intent on buying or keeping an “accidental” surplus house is not to become landlords in a tenancy situation, then presumably the intent is not to earn taxable rent from it. How is the gain from the owners’ equity on sale treated for tax purposes in such circumstances?

[artemis]

They had mortgages on both their properties. Obtaining a mortgage is not accidental. If you buy a second house live in, then retaining the other one is not an accidental decision. What is the purpose of retaining the other one if the intent is not to become a landlord? ......

Fact is we don't know from the article what their actions mean and what their intentions were. You have made assumptions, fair enough but they are just assumptions.

Many property owners have seen values rise by multiple hundreds of thousands in the last year or two. Smart owners seeing values rise might well hold on to a property for a while.

[fungus pudding]

Just trying to understand the tax rules behind NZ households’ biggest investment class. So if the intent on buying or keeping an “accidental” surplus house is not to become landlords in a tenancy situation, then presumably the intent is not to earn taxable rent from it. How is the gain from the owners’ equity on sale treated for tax purposes in such circumstances?

The vast majority of home purchasers buy instead of renting because of fomo. So let's apply the same rules to all property owners, then it''s fair

[Bjauck]

The vast majority of home purchasers buy instead of renting because of fomo. So let's apply the same rules to all property owners, then it''s fair

I agree with you. I also think there should be imputed rent from owner occupied housing along with a living expenses tax-free threshold. However I was trying to get a handle on how the current actual rules may apply.

[fungus pudding]

I agree with you. I also think there should be imputed rent from owner occupied housing along with a living expenses tax-free threshold.

And a flat tax over and above that threshold.

[Bjauck]

And a flat tax over and above that threshold.

Only if capital gains (yes a more general CGT including owner occupied housing) are taxable. Otherwise I don't think it would be good for the country to make the tax system even more regressive than it already is.