Property investors easy target: APIA

He has written an opinion column, saying that landlords are at a tax disadvantage compared to other sectors since their ability to claim depreciation was removed.

The Financial Services Council has launched a campaign, asking for tax reductions on long-term savings. It has said that rental property owners are unfairly tax advantaged compared to people saving in term deposits or KiwiSaver.

"In 2007 the then Deputy Commissioner of Inland Revenue Department, Robin Oliver was asked by a Government Select Committee if there were tax advantages for investments in rental housing. Mr Oliver's response was '...the short answer is there is none. Rules about expenses for deducting costs such as interest, upkeep and maintenance, as well as paying tax on income were the same for investments in shares or anything else. In fact under the housing case, the capital gains boundary is brought back a bit'. Since then in the May 2010 budget the Government withdrew depreciation on buildings as a deductible expense."

He said today his column was not a direct response to the FSC, but to the general perception among the public that property investors were not paying their fair share of tax. “I don’t think people understand the difference between an investor, a speculator and a developer.”

He pointed out that anyone who bought with the intention of selling for profit was required to pay tax. "If tax isn't paid when the intention is to buy and sell for a capital gain then it is tax evasion i.e. illegal. It is like a person going into a bike shop and stealing a bike. While you can correctly say the person who stole the bike obtained it for free, it is against the law.”

Bruce said while some landlords might be negatively geared for the first few years of their investment, the aim was to achieve positive cashflow, which is then taxed. “This is very similar to many start-up companies as it's not always possible to generate a profit from day one.”

Removing the ability to claim depreciation had made a big difference to buy-and-hold investors, he said. “Just because you remove depreciation, it doesn’t mean repairs and maintenance stop needing to be done.”

Comments from our readers

On 5 August 2014 at 9:33 am Mark Scott said:

Landlords are also scorned for claiming rental losses. Many miss the fact that Housing NZ (with about 1/6th of the rental stock in NZ) have a big impact on the market rent that other landlords can earn. Or putting it another way, those landlords are unwittingly forced to give the renting public a rent-subsidy and, instead of getting bouquets for giving $100 worth of subsidy, they get brickbats for claiming $33 worth of tax relief. It seems landlords will forever be "evil".

On 5 August 2014 at 9:51 am Lewis said:

Negatively geared for years, then no way to offset that lossy investment on your first profitable year - sure that's fair!

People pick on investors because they are frustrated with their own financial situation and see landlords as evil rich people who should share the loot.

In reality, they are just everyday people (yes, with jobs like everyone else!) who choose to invest their retirement in housing rather than shares, banks or mortgage companies.

On 7 August 2014 at 4:52 pm Arty said:

Recently I received a mail from an investor and property manager, he stated landlords expect a return of 1 to 2%, because they are investing primarily for tax free capital gain.

This was in response to a rental increase proposed for a property I own. The tenant had engaged this chap to advise on the rental increase. The property had increased in value to 800k in 12 years, from the purchase price of 296, but the rent return on it present value after rates, insurance, maintenance and tax was poor.

Why am I investing - Guess

Property investors easy target: APIA

Landlords are an easy target for people who incorrectly claim they aren’t paying their fair share of tax, Auckland Property Investors Association president Andrew Bruce says.

Monday, August 4th 2014, 12:00AM 3 Comments

Comments from our readers

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