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Bach owners could be hit with levy, says Dunne
By MARTIN KAY Last updated 05:00 22/01/2010
Bach owners could face annual levies on their weekend getaways under a proposal to tax second properties.
Revenue Minister Peter Dunne said it was possible holiday homes could be subjected to a recommended tax on non-family-home properties, but stressed the Government had yet to decide whether to introduce any such tax in the first place.
It was also possible bachs and holiday homes could be exempted unless they were available for rent. "It's an area, obviously, where we'd need to have some discussion on the detail of it, but my understanding originally was it would apply to them as a second property, but then it depends on what the use of it is, I suppose."
A tax on second properties was recommended by the tax working group, but member John Shewan, a tax expert with PricewaterhouseCoopers, said it was accepted "lifestyle" properties would likely be exempted. "We say that in principle [the tax] could be applied to residential houses and bachs, but we would not be recommending that because it was clearly, politically, not going to be acceptable and also those kind of properties ... are lifestyle assets rather than investment assets."
However, he said it would be appropriate for bachs to be subject to the tax if they were available for rent. "To the extent that people are renting out holiday homes, then one of the questions would be whether that becomes a rental property or not."
The group has recommended a flat tax on second properties based on the owner's equity as one way to broaden the tax base, allowing income tax cuts to ease the burden on workers. The tax, known as a risk-free rate of return method, assumes a set return on the equity in a property, which is then taxed at the top income tax rate applicable to the owner. A land tax payable by all property owners has also been advocated.
Property Investors' Federation vice-president Andrew King branded the proposals an orchestrated attack on landlords which would drive many out of the market and affect 1.4 million tenants.
By MARTIN KAY Last updated 05:00 22/01/2010
Bach owners could face annual levies on their weekend getaways under a proposal to tax second properties.
Revenue Minister Peter Dunne said it was possible holiday homes could be subjected to a recommended tax on non-family-home properties, but stressed the Government had yet to decide whether to introduce any such tax in the first place.
It was also possible bachs and holiday homes could be exempted unless they were available for rent. "It's an area, obviously, where we'd need to have some discussion on the detail of it, but my understanding originally was it would apply to them as a second property, but then it depends on what the use of it is, I suppose."
A tax on second properties was recommended by the tax working group, but member John Shewan, a tax expert with PricewaterhouseCoopers, said it was accepted "lifestyle" properties would likely be exempted. "We say that in principle [the tax] could be applied to residential houses and bachs, but we would not be recommending that because it was clearly, politically, not going to be acceptable and also those kind of properties ... are lifestyle assets rather than investment assets."
However, he said it would be appropriate for bachs to be subject to the tax if they were available for rent. "To the extent that people are renting out holiday homes, then one of the questions would be whether that becomes a rental property or not."
The group has recommended a flat tax on second properties based on the owner's equity as one way to broaden the tax base, allowing income tax cuts to ease the burden on workers. The tax, known as a risk-free rate of return method, assumes a set return on the equity in a property, which is then taxed at the top income tax rate applicable to the owner. A land tax payable by all property owners has also been advocated.
Property Investors' Federation vice-president Andrew King branded the proposals an orchestrated attack on landlords which would drive many out of the market and affect 1.4 million tenants.
Yes, you'd save on land tax but I doubt that would make up for the lost rent, so overall I don't see the land tax or the proposed exemption changing peoples behaviour.
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