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Commercial property investors will foot the bill of proposed land tax

Commercial property owners and investors will be left to “foot the bill” of a proposed land tax, according to the Property Council of New Zealand.

Thursday, December 31st 2009, 12:00AM 1 Comment

by Paul McBeth

Chief executive Connal Townsend said the Victoria University-led Tax Working Group's proposal to impose a tax on land and to remove depreciation rates on commercial property will have a significantly adverse effect on property owners and investors by imposing costs and limiting future investment.

"It will be harder to attract long-term tenants and the number of run down commercial properties will rise, resulting in more unattractive, unwanted buildings," he said in a statement.

A land tax was earmarked as a likely winner over a proposed capital gains tax as the working group investigates ways to broaden the country's tax base. The group has no government mandate, but is collaborating with officials from The Treasury and Inland Revenue Department.

In a document released in October, the group found the $200 billion rental property market not only pays no tax when it could be contributing between $500 million and $900 million a year to the government coffers, but is actually receiving refunds.

The New Zealand Property Investors' Federation favours a capital gains tax, with President Martin Evans saying it would at least give investors time to prepare for it. Evans is scathing of a proposal to ring-fence property for taxation purposes which would tax each property as its own entity.

Townsend said a land tax was "completely inefficient" as it would merely pass the additional costs on to tenants, and would also discourage investment in "green buildings."

"All of the positive work that has been done in New Zealand in terms of green building would be undone," he said.

 

Paul is a staff writer for Good Returns based in Wellington.

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Comments from our readers

On 28 September 2010 at 11:35 am Doug said:
Commercial Tenants would be wise to lobby this issue as it is them that would likely bare the brunt of any increase in Lanldords overheads by way of increased operating cost/outgoings charges or at the very least an ultimate increase in rents to generate the same rate of return on the Landlords higher costs. I would think that if forced into a choice between Capital Gains or a Land Tax, Tenants should lobby for the Capital Gains option as it will be much more difficult for Landlords to pass this cost on to the Tenant, vs. a Land Tax that would most certainly appear on the next Outgoings invoice to the Tenant. Once again, Landlords and Tenants on the opposite side of the issue.
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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.49 7.35
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 6.89 6.75
ASB Bank 8.64 7.39 6.89 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - ▼7.29 ▼6.85 ▼6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 ▼7.89 ▼7.45 ▼7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.15 - -
Co-operative Bank - Owner Occ 8.40 7.35 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.85 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 6.89 6.75
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.39 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.55 7.55
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.77

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