Changes needed to Taxation Bill: Property Council

The Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill is designed to standardise taxation treatment across the industry, create a level playing field between individuals and collective investment vehicles, and to encourage savings and investment in New Zealand.

Property investment vehicles are included in the proposed Portfolio Investment Entity (PIE) regime. However Anthony Beverley, chair of the Investments Policy Committee of the Property Council, said if the Bill was passed without amendment, it would knock out the majority of property trusts from being able to elect into the proposed PIE regime.

The proposed PIE regime is effectively a tax pass-through regime. It would allow investors to be taxed at a marginal tax rate, potentially delivering them an improved financial dividend in line with the government’s objective of encouraging savings. However, the investment vehicle first has to elect into the PIE regime.

“The barriers that prevent property trusts from electing into the PIE regime are not insurmountable. If minor changes are made to the bill, the barriers to entry will be removed and property trust investors will be able to enjoy the benefits of tax reform along with everyone else,” Beverley said.

Over 200,000 New Zealanders (the majority of whom are small ‘mum and dad’ investors) invest in property investment vehicles. These vehicles take the form of unit trusts, investment syndicates and listed property vehicles.

The Property Council is seeking amendments to the Bill to enable property investment vehicles to elect into the PIE regime. It will detail specific proposed changes in its submission on the Bill.

The property entities that have had direct input into the Property Council’s submission on the Taxation (Annual Rates, Savings Investment and Miscellaneous Provisions) Bill include: AMP Capital Investors; Dominion Funds; ING Property Trust; Kiwi Income Property Trust; and Macquarie Goodman.