Tax Advantages for Property Investors

[drelly]

It used to be Bernard Hickey that kept banging on about this but he got his message across poorly. Of course, there are no tax advantages for investors over any other business.

However, we do have a tax advantage over a home owner. We can claim expenses that the home owner can't. We are direct competition for first home buyers. Our ability to make mortgage payments is enhanced by the deductibility of interest and other expenses such as insurance, rates, repairs and maintenance that a home owner also has but cannot claim. So, clearly, an investor has a tax advantage over a home owner. I think it's disingenuous to suggest we don't.

We will probably always need investors to provide some rental accommodation but I do think that we need to decide how much free rein investors are given. The rebuttal of "but the free market.." is bollocks because firstly, there is no such thing as a free market. Secondly, the market is not and end in itself but a means to an end. That end is the kind of society that we wish to live in.

[Don't believe the Hype]

The first home buyer (or any owner occupier) gets a benefit the investor doesn't, they get to enjoy the right to occupy the property.

I have a number of properties that I would like to occupy but to secure the 'tax advantage' you speak of I can't

the idea that there is an advantage is bollocks as you put it. There are different pro's and cons for being an owner occupier vs. investor but we all play by the same rules and an individual can decide what works best for them in their personal circumstances.

[drelly]

The first home buyer (or any owner occupier) gets a benefit the investor doesn't, they get to enjoy the right to occupy the property.

I have a number of properties that I would like to occupy but to secure the 'tax advantage' you speak of I can't

the idea that there is an advantage is bollocks as you put it. There are different pro's and cons for being an owner occupier vs. investor but we all play by the same rules and an individual can decide what works best for them in their personal circumstances.

I think you've missed the point! Property investors do have a tax advantage over a home owner. None of the other points you made are relevant.

[Don't believe the Hype]

not relevant because they don't suit your argument?

[drelly]

not relevant because they don't suit your argument?

No, because they have nothing to do with tax advantages.

[Nick G]

Well it is a monetary advantage if not exactly a tax one, however maybe that gets offset by our being able to claim things as business costs.

The one that stands out to me as completely obvious is CGT and I don't know why we don't just implement an inflation adjusted tax and get it over with. Well I do know why, most kiwis have all their wealth tied up in their home and there's a large number of baby boomers heading into retirement.

It would certainly help deflect some of the negative criticism around property investment. No grandfathering people in or complete exemptions for homeowners, that would just encourage folks to to not sell their properties or look for workarounds where you live in it when you buy it and when you sell it. You could do what some countries do and adjust the % by how long you've held the property if you want, so 15% for more than 20 years, 20% for more than 10 years, 30% otherwise. Maybe tweak the rate if you're selling a PPOR to buy something else to live in. You would need to apply that tax when inheriting a property also.

[Don't believe the Hype]

No, because they have nothing to do with tax advantages.

tax is just one consideration... I've tried to balance that out with other considerations... Which clearly doesn't suit your argument so you try to exclude...

The best way to open up a debate on a forum is to exclude anything that doesn't suit your argument.

[Bobsyouruncle]

Exactly hype. There are no benefits, lots of additional burdens and responsibilities but that doesn't suit hickey or drelly it would seem.

[sidinz]

Drelly, apply the same logic to other basic needs.

Nobody talks about the tax advantage that a market gardener enjoys over a home gardener. The market gardener can claim seeds, tools, labour, rent, fertilisers etc., etc. that the home vege grower cannot. Unfair!
A clothing manufacturer can claim fabric, electricity, machinery costs, labour costs etc., etc. that I, as a home sewer, cannot. Unfair!

It is no different for entities that are in the business of providing accommodation, rather than food, clothing, transport, power, water or whatever. Where would you have us draw the line?
What about temporary accommodation providers such as hotels and backpackers'?

[Judge]

It used to be Bernard Hickey that kept banging on about this but he got his message across poorly. Of course, there are no tax advantages for investors over any other business.

However, we do have a tax advantage over a home owner. We can claim expenses that the home owner can't. We are direct competition for first home buyers. Our ability to make mortgage payments is enhanced by the deductibility of interest and other expenses such as insurance, rates, repairs and maintenance that a home owner also has but cannot claim. So, clearly, an investor has a tax advantage over a home owner. I think it's disingenuous to suggest we don't.

We will probably always need investors to provide some rental accommodation but I do think that we need to decide how much free rein investors are given. The rebuttal of "but the free market.." is bollocks because firstly, there is no such thing as a free market. Secondly, the market is not and end in itself but a means to an end. That end is the kind of society that we wish to live in.

Drelly, you are comparing apples with oranges. Property investors are business people and play by business rules including carrying extra risk associated with tenanting properties etc. Home owners are in a different category. What you are doing is similar to comparing countdown's purchasing power to that of a consumer. Countdown will always get apples at a cheaper price than consumer , partly because it can claim deduction for its costs. So what? Is this unfair?

[drelly]

tax is just one consideration... I've tried to balance that out with other considerations... Which clearly doesn't suit your argument so you try to exclude...

The best way to open up a debate on a forum is to exclude anything that doesn't suit your argument.

The topic is the financial advantage that tax claims give investors over home buyers. I'm not disputing that there are other benefits to home ownership but they are irrelevant to whether or not there is a tax advantage.

Exactly hype. There are no benefits, lots of additional burdens and responsibilities but that doesn't suit hickey or drelly it would seem.

That is completely irrational coming from someone who invests in property by choice for the purpose of financial gain. If you really wanted to prove your point, you should stop claiming interest and still tell me there are no benefits to claiming it! I'm not saying the same thing as Bernard by the way. At least if this is what he meant, he never clarified it properly.

Drelly, apply the same logic to other basic needs.

Nobody talks about the tax advantage that a market gardener enjoys over a home gardener. The market gardener can claim seeds, tools, labour, rent, fertilisers etc., etc. that the home vege grower cannot. Unfair!
A clothing manufacturer can claim fabric, electricity, machinery costs, labour costs etc., etc. that I, as a home sewer, cannot. Unfair!

It is no different for entities that are in the business of providing accommodation, rather than food, clothing, transport, power, water or whatever. Where would you have us draw the line?
What about temporary accommodation providers such as hotels and backpackers'?

No, they don't talk about those things because the financial barrier to entry for clothing and veges is minimal.

I don't think this is about whether or not there is a difference between running a business of another kind compared to rental investments but to what degree we want property investors to compete with home buyers. There is NO social value in allowing investors to buy up properties if home buyers are being priced out of the market by people who are able to make repayments with the assistance of expense claims. When I was buying, I was buying properties that no one else seemed to want but it doesn't look that way now. I think property investors should be the creators or "cleaner-uppers" (vultures?) of the property market, not the apex predators.

The comparison with temporary accommodation providers has never made sense either because first home buyers are not in that market. The same goes for all the other things in different ways. Yes, we might run our property portfolios as a business but that does not mean that the business of residential property investment should be encouraged.

I'm sure that most of us have a predominantly capitalist mentality but I've come to believe that capitalism will ultimately betray us. Capitalism is great for growth of technology, allocation of resources etc but eventually, what we end up with are fewer providers, charging higher prices because smaller players get absorbed into larger companies and capitalism doesn't care about people. Our building supplies and supermarket industries are good examples. Not saying that I want to have masses of state house either but some regulation is essential.

[drelly]

Drelly, you are comparing apples with oranges. Property investors are business people and play by business rules including carrying extra risk associated with tenanting properties etc. Home owners are in a different category. What you are doing is similar to comparing countdown's purchasing power to that of a consumer. Countdown will always get apples at a cheaper price than consumer , partly because it can claim deduction for its costs. So what? Is this unfair?

I am not saying they are the same. I was really just pointing out that any claims that there are no tax advantages over first home buyers is completely false. I do think that we need to look at better ways to prevent the kind of property "gold rushes" we've been seeing.

[Don't believe the Hype]

outside of Auckland there is no gold rush... we have seen 7 years of close to ZERO growth (2008 - 2015) - 30% up in 2016 resulting in around 30% growth over past 7 - 8 years... if someone told you the growth was 35% in 8 years you'd be far from impressed...

[Bobsyouruncle]

Your facts are still erroneous D. We don't get working for families, community services cards and plenty of other things that low wage earners get. There is simply no relationship between home ownership and mythical tax benefits. It is identical to any other self employment exercise.

[drelly]

outside of Auckland there is no gold rush... we have seen 7 years of close to ZERO growth (2008 - 2015) - 30% up in 2016 resulting in around 30% growth over past 7 - 8 years... if someone told you the growth was 35% in 8 years you'd be far from impressed...

The number of Aucklander investors buying in Whangarei say otherwise. The average growth is not important to someone who has to try and compete with investors now.

Your facts are still erroneous D. We don't get working for families, community services cards and plenty of other things that low wage earners get. There is simply no relationship between home ownership and mythical tax benefits. It is identical to any other self employment exercise.

Benefits subsidise rent but that isn't what I started this topic about. What fact is erroneous? I already said that whether or not property investment is comparable with how other businesses are run or taxed isn't the point. What other industry competes with a wage earning individual for a $500k lump sum investment?