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  1. #1
    Join Date
    May 2004
    Posts
    2,595

    Default Labour to end tax deductions for LLs and PIs

    Wonder if they have extrapolated the fiscal impact as rentals reach break even with a massive tax credit. Or how trust and company ownership structures will avoid the ringfencing by tax effective distributions. Or what the impact will be on rents when landlords have to reach even further into their own pockets every week.

    Little unveiled the latest plank in Labour's housing policy at the party's election year Congress in Wellington today.

    He said Labour will:

    Ring-fence losses on rental properties so they can no longer be used for tax breaks on other income. It will mean losses can only be applied to income from housing.

    Use the estimated $150 million in increased taxes for $2000 grants toward insulation and heating.

    Negative gearing will be phased out over five years.


    http://www.nzherald.co.nz/politics/n...ectid=11855870

  2. #2
    Join Date
    Sep 2008
    Posts
    7,332

    Default

    • Ring-fence losses on rental properties so they can no longer be used for tax breaks on other income.
    It will mean losses can only be applied to income from housing.

    He said both the International Monetary Fund and the Reserve Bank had recommended removing the tax breaks.


    so don't be surprised if it looks to become a major election issue

    and national promise to do same
    Last edited by eri; 14-05-2017 at 05:17 PM.
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  3. #3
    Join Date
    Dec 2014
    Posts
    131

    Default

    Would make regional property a lot more attractive was Auckland

  4. #4

    Default

    This could do a number of things:

    1 - drive rent increases over the 5 year phase out period to negate the tax impact - as this tax impact will impact almost all investors in the market (I.e yields in any given suburb are similar) landlords will be able to lift rents with the confidence of knowing their 'competitors' i.e. Other landlords will be wanting to do the same thing. If CGT benefit is greatest at the top tax rate and the target of these reforms then the impact of removal could be around 30% increase in rents over 5 years. This increase will. It just happen in areas where houses are negatively geared... any positive geared property will then be able to hike rents too making them even more profitable from cashflow Point of View OR drive prices of these properties up as point 2 below happens

    2 - encourage investors to balance portfolios between negative and positive cashflow properties by balancing out their central city negative geared property with cash flow properties. This could drive demand for high yield properties driving up prices and down yields.

    3 - Drive some investors out of the market reducing the supply of rental properties which would put further upward pressure on rents.
    Last edited by Don't believe the Hype; 14-05-2017 at 10:00 PM.

  5. #5
    Join Date
    Sep 2008
    Location
    Tauranga
    Posts
    1,517

    Default

    Ok so what does a property investor do when that's all they do.i.e. no other income except perhaps super?
    Will we go back to collecting cash rents?

    The man's a greedy slimy fool.

    And as my son found out to his cost. Not to be trusted.

  6. #6
    Join Date
    Oct 2013
    Posts
    1,587

    Default

    Quote Originally Posted by Viking View Post
    Ok so what does a property investor do when that's all they do.i.e. no other income except perhaps super?
    Will we go back to collecting cash rents?

    The man's a greedy slimy fool.

    And as my son found out to his cost. Not to be trusted.

    An investor with no other income (or just super) shouldn't be negatively geared at all, let alone significantly - that'd be awful dangerous!

    Fact is with 60% LVRs it's hard enough to be negatively geared these days anyway. (EDIT: Though I guess that might change with some increasing interest rates in the next few years...)
    Last edited by Anthonyacat; 14-05-2017 at 10:22 PM.
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  7. #7

    Default

    Are there any countries in the 'Western' world that have eliminated 'ring fencing' tax losses and if there are... what are their residential rental property markets like?

  8. #8
    Join Date
    May 2008
    Posts
    3,314

    Default

    Can a wise person explain what would happen if ring-fencing of negative gear properties was introduced?
    I can't see it increasing the supply of new houses.
    Would it cause house prices to drop? I have some doubts about that.
    Would it push rents up? This seems more likely.
    Is it aimed at discouraging long term investors or the quick-flick developers?
    I'm hoping Tony Alexander will give his thoughts in his next newsletter.

  9. #9
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    14,284

    Default

    It's just "vote buying" by a desperate shadow of a party, destitute of any realistic and/or practical ideas.

    Look at the language. Why is offsetting income from one part of a taxable enterprise a tax "break?"

    As for rents going up - it's been said before. "The market" decides, not the costs of the business.

    When the scarlet party threw their lot in with the watermelon crowd, they probably put the last nail in their coffin.

    Problem is: what's the alternative?
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  10. #10
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,065

    Default

    Gosh, got to punish us greedy landlords living off the backs of the honest, hard working tenants.

    But of course it will backfire.

    Who will intentionally build apartments or houses for rent now? Will there be less people keen on buying houses/apartments to rent out?

    But I guess Labour is going to build 100,000 houses right? This is the socialist mindset, the private sector can't do it, so we will. We can do it better and cheaper than the private sector...

    Which is of course total BS.

    BUT National have sat on their hands and watched this whole thing happen. So they have no one else to blame. They have watched foreigners come in and play in our housing market totally unfettered, they have watched the immigration soar to new levels and done nothing about it. They have also totally failed to reign in councils who have been stifling development in every way they can. Changes slowly coming in this area, but far too little too late.

    And the public have had enough.
    Last edited by Perry; 15-05-2017 at 07:50 PM. Reason: fixed typo
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