Comments on: Property investors got off lightly

By: President of Property

President of Property — Wed, 26 May 2010 10:03:58 +0000

You’re right John, interest free loan – but more like a student – long term interest free loan not short term….and what about any losses carried forward offsetting tax payments on potential unrealized capital gains which would be income even if dividend.

Should depreciation claw back repayments be drip feed back at the rate you claimed them?

I don’t get a free toaster or flybuy points for saying this but I bet they sure are going to get busy at Valuit doing Chattel valuations for those that purchased within the last 12 months.

My rents are due to go up and it sure will be more than 60 days before the 1st of October just to make sure it is in the tenants budget.

By: Richard

Richard — Wed, 26 May 2010 00:26:27 +0000

This loan was very handy when you are struggling to increase your investement portfolio. The payback for those with property has not gone away, you will still have to pay tax on building depreciation that has already been claimed. But if you invested to rent out long term, as a retirement scheme, you will possibly be in a lower tax bracket when you sell (with tax cuts a distinct probability) so you may not have to pay back everything you got, it is also an interest free loan.
One thing no one has mentioned. Some people have never separated out chattels from the property and so never claimed depreciation at the allowed level on things like carpet, stove etc. I understand IRD now have a list of allowed items that can be depreciated. Surely these items must now be allowed to be depreciated separately, there will be some repreive for those who have never had a separete depreciation schedule.

By: stevo

stevo — Sun, 23 May 2010 09:18:11 +0000

These changes add more incentive to make improvements of the non building types that still can be depreciated which attract higher depreciation rates and improve the value of the property to renters and purchasers.

Carpets
Clothesline
Light fittings
Tiles
Heaters
Curtains
Fences
Driveways and Paths

Just get your receipts wriiten up properly if you know what i mean

By: John Cooper

John Cooper — Sat, 22 May 2010 20:39:01 +0000

No one has mentioned the fact that when you sell your house under the old system you have to pay back the money that has been depreciated over the years. With these tax changes it just means that the goverment has stoped giving out short term loans.

By: OC

OC — Sat, 22 May 2010 07:11:42 +0000

I predict economists will look back at these changes and conclude they have caused a significant increase in rents as they will significantly impact the future supply of rental accomodation:

1) As already pointed almost all expenses involved in leasing out a property will rise with the GST, hence lowering net rental income.
2) The removal of the depreciation allowance for tax purposes will substantially reduce after tax returns.
3) The higher level of GST will increase the cost of new housing stock again reducing rental returns.

The interesting thing is that none of these factors will impact other investment classes in NZ. Shares and fixed income do not attract GST when an investor deploys capital, they do not depreciate and have much lower levels of costs associated with receiving income.

As a result I think we’ll see a substantial reduction in both commercial and residential property investment as capital flows to more tax advantaged forms of investment.

By: Anthony

Anthony — Sat, 22 May 2010 01:48:23 +0000

Just wondering how many LAQC landlords have given personal guarantees over their bank loans? For those that haven’t, the LAQC proposals will be worse than many realise.

By: lawrence

lawrence — Fri, 21 May 2010 12:05:31 +0000

All landlords would be for rent up, why do we have to work for government, bank, insurance company….it’s time for us to protect ourselves!

By: peter

peter — Fri, 21 May 2010 05:53:12 +0000

Has any one out there put there rent up even by $10 when they advertise there rental. Sometimes this small increase means potential tenants are put off. If you are to raise yor rent make sure you rental has all the bells and whistles renters are looking for. This involves spending smart money.
I would rather get $10 less on my rental than have it sitting idle for 2 weeks
No I dont think rents will rise (in the short term) as there is too much competition

By: Nancy

Nancy — Fri, 21 May 2010 03:30:52 +0000

Rents will go up because:
1. GST – all rates, insurance, management fee, repairs and maintenance will now be 2.2% dearer because of the increase in GST from 12.5 to 15%. This would be passed on no different from any business that pass on the GST increase on the goods & services they provide. this wont be a large increase and $5 pw will more than cover this.

2.Loss of Deprecaistion allowance – has a higher impact would translate to about $35 pw average increase. How much of this gets pass on will depend on the area, the amount landlord can absorb after weighing this against any income tax saving they might get. Even if they can’t or don’t pass on the full amount, some will flow through to tenants.

By: John

John — Thu, 20 May 2010 22:14:01 +0000

I agree with the heading of your article. I think property investors did get away lightly, and I believe this is perfectly just. Provision of housing to those that wish to rent is a very valuable service.

I think dropping the top tax rate from 38 to 33 percent will have a bigger impact than the depreciation. Thats 5% less you can claim back. I will be raising my rents to cover some of the drop in tax that can be claimed back. Tennants should count themselves lucky – imagine if the Govt had made them pay GST on their rent in the interests of fairness?