Government leaves Christchurch Earthquake Victims out of Pocket The Kiwi Party

Press Release July 17, 2011 Gordon Copeland, Finance Spokesperson for the Kiwi Party, believes that the Government’s offer to Christchurch’s ‘red zone’ home owners, will leave those forced to rebuild out of pocket because it does not take into account the GST increase from 12.5% to 15%.

“The Government has agreed to ensure that affected residents of Christchurch, who are insured, will receive payments equal to the 2007 valuation of their home”, said Copeland. “However, to the extent it is reflected in that valuation, the GST will be captured only at the 2007 rate of 12.5%. Those needing to build new homes though, will need to pay the new 15% rate and will therefore be left out of pocket. This will also apply to those who need to relocate and buy a new section. In their case the new 15% GST rate will need to be paid on both the new house and new section”, continued Copeland

“The amounts involved are significant. If the 2007 valuation of a house that has to be replaced is $270,000, then its replacement will cost $276,000 or more, just to cover the increase in GST from 12.5% to 15%, leaving the home owner $6,000 out of pocket. The situation is even worse if it is also necessary to buy a section. If the value of their present section is $150,000, then its replacement will cost $153,332; an increase of $3,332.
Therefore, in this example, the affected householders have to find an additional $9,333 simply to replace their present home on a ‘like for like’ basis, because of the increase in GST from 12.5% to 15%. This is simply not good enough.

“It is Kiwi Party’s policy to refund 50% of the GST paid on a new house and section up to a cap of $300,000 (GST inclusive). The 15% GST in that figure amounts to $39,130 and the refund would therefore be $19,565. This more covers the extra costs resulting form the GST increase in the above examples and we urge the Government to address this issue.

“Surely the people of Christchurch have been through more than enough without being forced to borrow and cough up more GST through no fault of their own.”

Mr Copeland added that the Kiwi Party’s policy to refund 50% of the GST paid by couples on a new house and section (up to the $300,000 cap), is on a ‘once in a lifetime’ basis, to encourage new home construction and assist first home buyers. “But is would be especially timely for affected Christchurch residents who could then plan to rebuild without being forced to borrow the extra to meet their GST obligations”, concluded Copeland.

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