But one commentator is predicting next Thursday’s Budget might include further tightening of property investment rules.
Changes made last year that made it impossible to claim depreciation costs on buildings with an expected life of more than 50 years are expected to generate $685 million in Government revenue in the 2011/2012 year, increasing to $690 million the following year.
The change came into effect on April 1. But David Patterson, of Chapman Tripp, said the Government might not have gone far enough and could still be looking to get more tax revenue out of property investors.
“People are still free to fully equity-fund their own home and fully debt-fund their rental property and generate tax deductions that exceed rental income and offset that loss against personal income tax liability.”
He said the Government could look at removing that ability if it wanted to raise more revenue. It might do that by quarantining rental property losses, so they could only be claimed against rental income.
But King said he thought the Government went far enough last year. “I don’t think after the depreciation change they will want to add anything to the Budget this year, it had such a dramatic effect.”
He said the move had pushed rents up and created a rental shortage, as had been predicted. Geof Nightingale, of PriceWaterhouseCoopers, said he had not heard anything to back up Patterson’s suggestion.
Prime Minister John Key had said any Budget changes would be well-signalled beforehand. “I am not aware of any relating to property investment that have been well-signalled.”
He said he was not expecting the Budget to contain any property tax changes. “And if there were [changes], they would go through a consultation process that could take a year.”
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