Ring-Fencing of Losses

[TheLiberalLeft]

If this new bill gets passed, and your holiday home earns <2% of it's value, then you cannot claim any expenses against other income. It's ring-fenced and will be claimable against future profits on said asset.

Presumably that also means against the captial gain (when that comes into play).

Note that "expenses" doesn't mean all expenses. It's calc'd as Income Days / Income Days+Personal Use Days. So if I rent for 60 days and use for 20 days, I can claim 75% of p.a. expenses.

Thin end of the wedge.

How long before ring-fencing applies to regular rentals?

[drelly]

I don't think that's unreasonable for holiday homes... do you? 2% is a bloody low return!

[TheLiberalLeft]

You've missed my main point, which was "thin end of the wedge".

Holiday homes today. What next?

And 2% is entirely unreasonable. Why cap it at all? The claim is still there? And with your line of reasoning, if it's such a puny amount, why not offset this small loss against other income?

[drelly]

And 2% is entirely unreasonable. Why cap it at all? The claim is still there? And with your line of reasoning, if it's such a puny amount, why not offset this small loss against other income?

I agree, don't cap it, deny it. Capping is a deterent to purchase based on tax benefits though.

[Rosco]

The problem was that a few people were taking advantage of the system. They had what were really private holiday homes and were trying to claim all the costs.

Unfortunately the minority have ruined it for majority who were being more realistic.

Generally if the homes are really rentals, then investors will have no issues with the new laws.

Ross

[TheLiberalLeft]

TODAY, Ross, yes. But if they ring-fence one asset class (and it's not always so easy to define "holiday home"), they can ring-fence another.

It wouldn't be difficult to apply the same calculation to vacant (between tenancies) property.

[GenY]

Hi LL
Yep ring fencing will be introduced in the not to distant future on NZ residential property.....
There was an article about this in the NZ property mag in this or last month's.....
David Whitburn in his book last year said he expect ring fencing or some kind of capping on losses to be introduced as well
Such a policy would certainly get rid of speculators in the market as well increase the govt tax take a bit

[drelly]

Just pray that John Key's popularity doesn't dip too much more before the next election or we could see a Labour Government in with years of pent up aggression toward "rich" people!

[PC]

Look out tenants - your rents are going up even more!