NZPIF backs IRD on rental business

The woman had five rental properties, and used the losses generated by them to claim Working for Families credits.

The Taxation Review Authority ruled that she was not able to do so because she was running her rental operation in the manner of a business.

NZPIF president Andrew King said it was landlords such as this who gave other investors a bad name.

“[They] end up causing bad legislation to be passed that may adversely affect all industry participants.”

He said the NZPIF did not support her actions in trying to claim tax credits for her rental properties.

“This person appears to want her cake and eat it too. I think she has also clearly indicated that she has purchased the properties for capital gain so if the properties are ever sold I imagine she would be liable for tax on any capital gain made.”

The TRA agreed with the IRD because of the structure of the rental operation, seeking capital profits, the period over which she acquired the properties and the scale of operation and volume of transactions. The incentive of higher Working for Families payments was a key motivator, she admitted.

The TRA also looked at the results for the taxpayer: assessable rental income was derived, rental losses were used to increase Working for Families entitlements, and there was potential for long-term capital or equity gains. Each of these indicated an increase in the taxpayer’s wealth by profit in money’s worth.