Misleading talk will lead to bad tax decisions

I don't believe residential property investment is part the 'productive sector'.

Many residential investors, your 'mums and dads' own a residential investment property on the belief it will provide capital gains in the long term, and in the short term they reduce their payable personal income tax with their residential investment property losses. In this scenario it is not contributing to the tax system, and it is not productive. The property would still exist regardless of whether it was owned by an investor or not. Banks, local councils, tradespeople, professionals, hardware stores, insurance companies and so forth would still be supported because it is not the property investment that supports these businesses, but rather the property itself, regardless of how it is owned. Property is a physical asset and needs to be maintained, insured, and financed.

Paper profits through capital gains should not be encouraged at the cost of investment in businesses which contribute in real terms to the economy, providing goods and services.

Every taxpayer has the right to tax minimisation by arranging their financial affairs in the most tax efficient way allowed by legislation. This concept should not be confused with tax avoidance, which is illegal.
Every investor, whether in residential property, or as a business owner-oeprator or shareholder requires a return on their capital. Without a Return on Capital Employed, there would be no incentive to invest.
Most "family owned" investor capital has been generated in the first instance through accumulating a lifetimes tax paid income. So proposals to apply "wealth" taxes to income on which tax has already been paid are plainly unjust and inequitable.
Some investors aim to increase their retun on capital by leveraged borrowing...the extent to which leverage is taken on is determined by the investors capacity for risk.
Investment rental propeties are not all highly leveraged and not all alternative investments are profitable.
Ask those who invested in 2006 "for the long term" in the so called diversified risk local & global share funds or directly in equities the loss they have sustained. Most property owners have faced declining values in recent years over the term of their investment, as have owners of shares, many financial bonds, and thousands of small business owners whose business have lost value and are unable to sell.
Bottom line, taxation of capital gain is already a reality of property (& share) traders. We don't see anywhere in the debate, taxation relief proposals for loss of investment capital do we? Ability to claim relevant expenses against income isn't uniqie to rental property investment. Every business incurs expenses to some degree in generating income and these are legitimately deductible. Proposals to legislate against claiming depreciation & income related expenses on rental property income is plainly inequitable as rental property is a business like any other and business generally accesses these allowable expenses. Whether as a sole trader or company, rental property owners are in the business of applying capital to providing medium to long term housing & accommodation to customers (tenants). The implication in the tax reform proposals and popular media that rental property operators have a less than worthy enterprise that must be selectively taxed is abhorrent. All business exists to make a profit and the marketplace determines it's success or failure. There is nothing unproductive about property investment relative to other business classes. People want to be housed, the sector meets a segment of this need, the market, location, specification & condition of the property sets the rental and return. Same as any other product or service in the marketplace. The sector generates significant work for trades & professional services & goods.

There is no justification for selective taxation of rental property investment.

It seems if there weren't so many baby boomer investors sharking in the same pool as first home owners and driving up prices for the last 10 years or more, more first home buyers would have bought for occupation rather than being forced to rent. On a return on capital measure alone, RP investment is completely unproductive. I've read here $5BN pa in activity derived from rental housing (though I suspect much of that figure is in fact attributable to owner-occupied housing) from an asset valued at $200BN. Hmm. 2.5% break out the champaign...

Anyway, anything else invested in with as highly leveraged as the average neg-geared property investor is, would still produce the same or better return, and maybe provide some jobs and real wealth.

Everybody understands when money is put into a savings account at the bank it will or should return an income. Yes it may be not so much but it will. Most of this saving is used by the bank to generate even more income essentially showing up on a quarterly expense report as a profit. If individual property investors would not exist it would result in major players like insurances, banks doing exactly what the individual investor is doing at the present on the property market. Its naive to think that property investors are greedy canning tax evaders. The investor is like any other individual looking to run a business with his/her financial advisers who know what needs to be done to comply with tax laws. Investors pay for this, because they would and cannot be proficient in all these skills. If an accountant and tax expert is advising the investor within the legal boundaries to achieve better financial liabilities then the investor has done nothing but due diligence, just like any other individual would do when they are prudent with their financial household. What many outsiders do not understand that also their are risks involved for property investors and quite often if due diligence is not done properly it will affect not only his valet but many other connected industries. People who may had employment and a salary out of that investors business. Economy is a bio organic system which relies on cross related systems and its too simplistic to say that property investors are not contributing to the economy. It would be like saying the OCE depends only on the consumer index from NZ, but as we all know most or our money is off shore borrowed capital and has to work its way through the NZ economy and has to produce a profit, otherwise nothing would work.

I think one point that has been overlooked is the distinction between an investor and a speculator. An investor invests in assets to make money at a fair rate of return from those assets taking into account the cost of funds and the cost of the asset, a speculator invests in assets because they think someone will pay them more for that asset at a later time.
IRD already has rules in place for these situations. but for some reason is reluctant to enforce them.
The only way I can truly assist productivity is to speculate, by trying to pick a future star and invest in it (eg. Trade Me).
If the government wants the average kiwi to speculate, then the tax laws need to change to allow write offs etc of capital.
Investors such as landlords and commercial property owners operate on an identical basis, and should be treated identically for tax.
I think it speaks volumes when the IRD is only now looking at speculators who were operating in the inflationary period of the property market. One of the first rules of property investing is DON'T SELL, yet somehow the speculators have thrown a smokescreen and want to be treated as investors.
What was the primary reason for the asset purchase - every property I bought over the last 10 years was for income purposes, the fact I sold them for significantly more than purchase price in the short term only indicates I had a change of mind ----Yeah, Right!!!

First - Why the assumption that everyone would rather buy than rent? I rented for 20 years with no intention to buy. It was easy and I was mobile. I only bought when I experienced a bad landlord.
I now provide quality rentals and am an excellent landlord - very productive I hope!
Second - So much is stated about first time buyers. Show me a first time buyer who is serious about buying to the extent of compromising their lifestyle and the location they will accept and I'll show you someone well on the way to buying and paying off their first property.