Impact of rental property tax change could be huge
The impact of a law-change to ring-fence rental property tax losses could be huge and sudden because owners absorbing loss with no prospect of gain will sell, Tenancies War spokesman Mike Butler said today.
The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill that introduces ring-fencing of tax losses for rental properties passed its first reading today.
Based on comments from Inland Revenue reported yesterday, there could be around 104,000 private rental property owners who lose money every week expecting that loss to reduce their tax liability while hoping to sell in the future and make a capital gain, he said.
If rental property tax losses are ring-fenced from April 1 next year, and if capital gains are to be taxed, as the Government is pondering, the rational option for negatively-geared owners is to sell now, Mr Butler said.
If each of these owners have two properties, and if each sell to owner-occupiers, that could take 208,000 properties away from renters looking for a home, he said.
Of course, this is speculation, but the problem is that neither Revenue Minister Stuart Nash nor Housing Minister Phil Twyford know how many owners are negatively geared so they do not know the impact of this change, Mr Butler said.
Owners won’t necessarily protest about this rule-change. They will look at their financials and either absorb the loss, increase the rent, or sell, he said.
The prospect of a capital gains tax makes selling now the preferred option, he said.
The Ministers should provide evidence of both the benefits and the costs of this proposed law change, Mr Butler said.
Any failure to do so would show that we have a government running on religious zeal instead of sound evidence, he said.
The known figures are that there is a total of 588,700 rental properties in New Zealand of which 64,500 are state or social housing, leaving 524,200 private rental properties.
The number of private rental property owners could be 262,100 assuming each have two properties.
The number who are negatively geared may be deduced from a statement from IRD that 40 percent of owners had rental losses in any one year (See below).
The group Stop the War on Tenancies aims to empower both owners and tenants in the face of ongoing government ineptitude with housing.
See: Officials warn tenants could take impact of end of tax breaks for landlords. https://i.stuff.co.nz/business/109254032/officials-warn-tenants-could-take-impact-of-end-of-tax-breaks-for-landlords?fbclid=IwAR0jJ6T4Dxs5y54EIMkIF7TOtmxU8wLkoHNyuCJ3_eg1IgfK4dr7mtKh0sg