If National wins ...

[dobby41]

A never ending argument. It's easy to show with those companies that their aim was to profit from trading. Set up any enterprise with no chance of ever making a profit, and expenses are not tax deductible. You must intend a profit.
Those who invest in property just for cap. gain will get clobbered by Mr. Taxman.

I believe that the rule now is that you must 'intend' to make a profit.
I would agree that some of the 'investing' in the Auckland (particularly) property market should be more correctly classed as 'speculation' and be taxed.
I suspect if IRD wanted to take a test case or 2 they would win.

My own property portfolio is finally in profit after 10 years and a few million capital gain. Would have been much faster though if inflation was high, I wasn't to know that inflation would tank.

[artemis]

A never ending argument. It's easy to show with those companies that their aim was to profit from trading. Set up any enterprise with no chance of ever making a profit, and expenses are not tax deductible. You must intend a profit.
Those who invest in property just for cap. gain will get clobbered by Mr. Taxman.

True but it is a somewhat grey area which relies on demonstrating intention (apart from the property brightline test). I recall reading a few years back about IRD requiring tax to be paid on profit relating to a property purchased 20 years before. Because intention.

No doubt IRD have guidelines to determine intention but they won't be telling!

[Bjauck]

A few fish hooks off the top of my head.

Tax losses are already carried forward in most ownership structures such as companies and trusts. Those most affected by ringfencing will be the folk with one or two rentals. That is about 80% of owners (not necessarily properties), most of whom will be grumpy if they have not already reached the break even point. Some will sell up.

I think tax losses being carried forward within company and trust structures is a separate issue. That is not used to reduce taxable income from other sources.

I think reform of negative gearing applies to losses being deducted immediately against income from other sources. I am suggesting that this continues for investment in building new housing.

If owners have to keep topping up from their own pocket they will look to trim expenses and increase income. Maintenance and upgrades may be deferred, upgrades will be to the minimum only, rents will be increased to as much as the market will bear, property managers will have contracts terminated.

Any changes may not apply to existing investments. As with insulation, maybe other schemes could be introduced to encourage properties be maintained to rentable standards. For future investments, perhaps investors would contemplate paying less for a property instead so that the % rent return was greater in the first place, against which expenses could be deducted.

[Bjauck]

...
Tax losses are already carried forward in most ownership structures such as companies and trusts. Those most affected by ringfencing will be the folk with one or two rentals. That is about 80% of owners (not necessarily properties), most of whom will be grumpy if they have not already reached the break even point. Some will sell up.....

Any change to negative gearing rules may not end up applying to existing rentals.

If Mum and Dad investors decide that investing in residential housing is not as prefereable to financial investments such as fixed interest and shares, is that a bad thing? Currently NZ has such a small proportion of household wealth in financial assets. Relatively cheaper housing may mean that first home buyer can start to get back on the ladder and not so much of NZ's investable capital is tied up in expensive residential land.

[Bjauck]

....
My own property portfolio is finally in profit after 10 years and a few million capital gain. Would have been much faster though if inflation was high, I wasn't to know that inflation would tank.

But...If inflation had been high, interest rates would have been higher than they've been and the amount of credit pumped into residntial land would have been lower...as mortgages would have be based on fewer multiples of incomes.

[dobby41]

But...If inflation had been high, interest rates would have been higher than they've been and the amount of credit pumped into residntial land would have been lower...as mortgages would have be based on fewer multiples of incomes.

But rent would have gone up much faster than they have.
So property price would, probably, have gone up less, rents would have gone up more and I would have less capital gain (sad) but been cash flow positive faster.
What I was saying was that, when I started, I had an expectation of making a profit sooner than it did. Ended up making more money but taking longer to be in profit - so if IRD come calling that's my story, it was a valid business senario and I wasn't speculating.

[Bjauck]

But rent would have gone up much faster than they have.
So property price would, probably, have gone up less, rents would have gone up more and I would have less capital gain (sad) but been cash flow positive faster.
What I was saying was that, when I started, I had an expectation of making a profit sooner than it did. Ended up making more money but taking longer to be in profit - so if IRD come calling that's my story, it was a valid business senario and I wasn't speculating.

Ok I understand - when you made your investment decision it was in a more inflationary environment in which you were expecting your annual (taxable) income from your investment to increase more each year. As opposed to the environment that eventuated which resulted in less taxable income but much more capital gain.

[BlackPeter]

https://www.stuff.co.nz/timaru-heral...itizenship-row

I find the story actually quite funny - our Australian siblings seem to think that Kiwis are unfit to join their parliament (even if it is just the second citizenship and unwillingly acquired) and therefore exclude them from high office ... but than they complain if NZ Labour helps them to find out which of their MP's are unfit to rule Australia.

Just wondering whether Ms Bishop is really as stupid as she sounds ... or are all Australians such hypocrites?

I guess either she should thank NZ Labour for identifying the "Kiwi traitor" in her government ... or she should change a very stupid Australian law ... but this would probably require more brain than the remaining (not due to dual citizenship excluded) Australian Parliamentarians can muster - they shouldn't have excluded the Kiwis from their parliament ...

Anyway - back to the subject of this thread ... well done NZ Labour (and Chris Hipkins) ... helping our West Island neighbours to enforce their brain dead laws must be just good neighbourly Kiwi help ... I love it!

[jonu]

That would be"WEST Island " BP

[BlackPeter]

Of course, you are right ... this whole upside down thingie is after more than 2 decades still sometimes confusing . Fixed it now ...