Ring Fencing update
Ring Fencing Update
Yesterday (5th December) The Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration and Remedial Matters) Bill was introduced in Parliament. http://taxpolicy.ird.govt.nz/news/20...ill-introduced
The bill contains other measures including Ring-fencing loses on residential rental properties! Obviously this is very important to property investors, and not just “other” measures.
At this stage the legislation is just draft, but it does give a little more information that we can start working with.
Key points are;
Important things to consider
1/4/19 is going to come up very fast!
If you make a profit from rentals – no issue!
We will also be keeping you updated!
Kind regards Ross
Ring Fencing Update
Yesterday (5th December) The Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration and Remedial Matters) Bill was introduced in Parliament. http://taxpolicy.ird.govt.nz/news/20...ill-introduced
The bill contains other measures including Ring-fencing loses on residential rental properties! Obviously this is very important to property investors, and not just “other” measures.
At this stage the legislation is just draft, but it does give a little more information that we can start working with.
Key points are;
- For the 31/3/2020 tax year, or from 1/4/19 for most rental property owners. This is quicker than some initial indications and will not be phased in over a number of years.
- Apply to “residential land”, which includes bare land which could have a residential dwelling built on it – Basically residential rental properties.
- Does not include
- Farms
- Commercial property
- Main home
- Holiday homes with mixed use
- Trading properties
- Losses would carry forward and could be offset against future rental profits (could be from a sale)
- Specific rules to make it harder to structure around (interest ring fenced where borrowed in parent entity)
Important things to consider
- Maintenance coming up. It might be beneficial to complete before 31/3/19. Especially for bigger items like painting, new bathroom vanity, toilet, shower, kitchen cupboards
- Portfolio or property-by-property basis – We will put more information out about this over the next few months and when the election is required.
- Basics – how do you turn your rentals from negative to positive cashflow? Some possibilities
- Review rent
- Break mortgages to get lower rates
- Add value
- Subdivision?
- Minor dwelling?
- Renovations to get more rent?
- Garage into sleepout?
- Extra bedroom?
- As above do preventative maintenance early, before ringfencing comes in, rather than later once it is in.
- Review your tax structure
1/4/19 is going to come up very fast!
If you make a profit from rentals – no issue!
We will also be keeping you updated!
Kind regards Ross
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