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Top tips for riding out the tax change storm

Property accountancy company GRA has come up with a number of suggestions for landlords affected by the Government’s new tax rules.

Tuesday, May 18th 2021, 1:05PM

Matthew Gilligan

The latest MBIE stats show 98% of landlords own four or fewer rentals.

That means six from seven rental properties are provided by private landlords and non-government organisations (NGOs).

GRA managing director Matthew Gilligan says the majority of landlords are hardly “rich listers”, but they are being treated like “economic terrorists” and “scapegoated” for successive governments not solving the housing supply.

“Property investors are suffering the most sustained attack by the Government, with loss ring-fencing, the Healthy Homes legislation, ridiculous tenancy rules, 60% loan-to-value ratios (LVRs), and now the new tax rule and extension of the bright-line test to 10 years,” says Gilligan.

“Soon to be added, if we read between the lines, are rent controls and removal of interest-only loans. The latter is serious.”

GRA partner Salesh Chand says landlords are looking at passing the additional costs they incur on to tenants.

“The majority of landlords are caring people, and they are saddened that such cost has been added to the running costs of their property, and that it now needs to be on-charged to their tenants.”

He says if investors are forced to sell they are genuinely worried about where their tenants will go, as there will be fewer rental properties available. And many of these tenants don’t have the ability, or the desire, to become homeowners.

Chand’s recommendations

•  If you are tight for cashflow, refinance all your properties and extract your equity. This will help ensure you have sufficient working capital.
•  Get overdraft facilities in place so you have access to working capital. It appears it will be harder to get overdrafts in future.
•  Get your pre-approvals in place to ensure you are ready to buy the right property.
•  If you are in a position to reduce your debt level, you should. Start paying off your investment debt aggressively. 
•  If you are on a high fixed interest rate, consider breaking it prior to October 1, 2021 (when the new interest deduction rule kicks in). By doing this, you will be able to claim the break fee as an expense, which you won’t be able to do after October 1. Additionally, with a lower interest rate, your interest costs will be much lower, which will improve your cashflow. I suggest you discuss this with your accountant and financial adviser/mortgage broker.
•  Most importantly, don’t panic. Whatever move or decision you make needs to be calculated strategically. Help from a property accountant and financial adviser is crucial here.
•  Always remember, property investing is long term – if you can hang on to ride out the storm, the capital growth over time should compensate for the reduced cashflow now (all things being equal and property continuing to increase in value as it has done for decades).

Tags: Bright-line test GRA housing shortage landlords

« Concerns about new tax ‘dismissed out of hand’More money to police property rental laws »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▼2.19 2.59 ▲2.99
ANZ 4.44 2.79 3.19 3.59
ANZ Special - 2.19 2.59 2.99
ASB Back My Build 1.79 - - -
ASB Bank 4.45 ▼2.19 2.59 ▲2.99
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - ▼2.19 2.55 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼2.79 3.15 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 3.80 3.90 -
HSBC Premier 4.49 2.19 2.45 2.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.04 3.40 3.84
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.19 2.55 2.99
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - ▼1.99 - -
The Co-operative Bank - Owner Occ 4.40 ▼2.19 2.59 ▲2.99
The Co-operative Bank - Standard 4.40 ▼2.69 3.09 ▲3.49
TSB Bank 5.34 2.99 3.35 ▲3.79
TSB Special 4.54 2.19 2.55 ▲2.99
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 ▼2.79 3.19 3.59
Lender Flt 1yr 2yr 3yr
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.19 2.59 2.99
Median 4.55 2.68 2.99 2.99

Last updated: 18 June 2021 9:03am

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