Remove Tax From KiwiSaver For Renters Priced Out Of The Housing Market: TOP
Remove Kiwisaver tax for renters to grant same privileges as homeowners with tax-free property
Renters locked out of an unaffordable housing market would have income tax removed from their KiwiSaver earnings by The Opportunities Party (TOP).
Homeowners have a tax-free investment in their property, and renters who are being priced out of a skyrocketing housing market should at least have income tax removed from their Kiwisaver earnings.
TOP party leader, and former Treasury economist, Geoff Simmons says that it’s a symptom of an unfair system that those with the privilege of owning a home aren’t paying tax on property investments, yet renters and prospective first home-buyers are having their Kiwisaver investments taxed, especially as often these investments are going towards their deposit for their first home.
“Isn’t it just insanity that the wealth holders in New Zealand, property owners, are being granted a tax-free investment in their property, yet renters and those saving for a deposit on their first house are having that deposit taxed?” says Simmons. “We need to give renters the same tax-free investment that homeowners have and stop taxing renter and non-homeowner KiwiSaver investments.”
KiwiSaver investment schemes invest member contributions, aiming to generate returns on the investment. The money that the investment earns is then taxed by Inland Revenue, at a prescribed investor rate of between 10.5 percent and 28 percent. The 2018 Census showed that over 1 in 3 households are renting.
The latest data from Stats NZ showed that New Zealand’s GDP had officially contracted by 12.2 percent in the June 2020 quarter. During the same period, house prices rose by 3.1 percent, according to the data from the Real Estate Institute of New Zealand (REINZ).
“That increase in house value is tax-free income for homeowners, especially those with multiple properties, which ultimately renters are paying for when landlords put their rents up,” says Simmons. “Homeowners also get the benefit of living in their home tax free, while renters have to pay rent out of their post-tax income.”
“Currently, there is no tax-free investment on offer for renters who are having their home-buying deposits taxed, while also paying off someone else’s tax-free property investment,” continues Simmons. “Given that an entire generation has little hope of ever owning their own home, it is only fair that they should have a tax-free investment option.”
The median house price in New Zealand increased by 16.4 percent in August to $675,000, up from $580,000 in August 2019, which Simmons says shows the ever-expanding wealth gap between homeowners and the generation behind them.
“The median house price has risen by 16 percent during the period of worst GDP contraction on record, doesn’t that say it all?” says Simmons. “We’re officially in a recession, and the homeowning generations are continuing to increase their tax-free wealth, yet there’s nothing of the sort being offered to renters and prospective first-home buyers who have been priced out of the market.”
Hospitality businesses, retail stores, and the tourism industry have been especially hard hit throughout the pandemic, with Infometrics data showing that retail businesses saw a loss of 50,600 jobs. Tourism businesses have seen a drop of 46,000 jobs out of 229,600 total jobs in the industry.
Homeownership is lowest in the 20 to 29-year-old demographic group and more than 40 percent of café, restaurant and bar sector workers are under the age of 25, meaning the groups who have been hardest hit by job losses due to Covid-19 are also among those who are least likely to own a home.
“We’ve seen hospitality and tourism businesses have to lay off huge numbers of their mostly young employees, and often these young employees are usually those who aren’t homeowners, and these same young employees also continue to be priced out of the market by an unfair tax system,” says Simmons. “Not only is this group the most likely to have borne the brunt of the Covid-19 job crisis, but they’re also bearing the brunt of the housing crisis too.”
“The least we can do is remove the tax on their KiwiSaver earnings,” says Simmons. “Especially if the government is just going to continue to ignore the housing crisis that keeps homeownership out of their reach anyway.”