Ring Fencing Matters

[Rosco]

Royal assent was given 26/6/19

A little summary

Ring Fencing - Obtained Royal Assent 26/6/19



Section 51C contains Ring Fencing, and comes into force 1/4/19.

• Only residential properties
• Can apply on a property by property basis, or portfolio basis
• Losses that are ring fenced carry forward to future years
• Excludes
  • Person’s main home
  • revenue account properties. i.e not trading properties, specs or developments
  • Mixed use assets, as losses already limited under those rules
  • Property provided as employee accommodation
  
  
• Specific section to catch interest used to borrow to buy shares in property companies
• Can use ring fenced losses to offset Brightline profits.

This is a quick update and we will send clients further information now that this rule has been finalised.

Ross

[Bob Kane]

Who would have thought that would happen?

https://www.stuff.co.nz/business/113843874/trade-me-reports-uncommon-rent-rise#comments

Every region in New Zealand had higher rental asking prices in May than they did a year before, Trade Me's latest data shows.

A year later and we are seeing the consequences of the Labour/Greens attack on property investors.
And the stupid people who keep saying "you can't increase the rent if the tenant can't afford to pay it" have been proved wrong.
Also proven wrong are those people/politicians who think an investor selling up won't effect renters.
One less rental means one tenant homeless - 3.5 tenants per rental, 2.5 residents per home.

Upper Hutt landlords will be smiling:

"Tenants in the capital are a bit better off but we expect to see prices in the capital continue upwards later this year, there simply aren't enough rental properties in Wellington compared to the demand," Jeffries said.

"Taking a closer look at the region, Upper Hutt saw the largest annual increase of 31 per cent or $125 to a record $520 per week. South Wairarapa rose 21 per cent to $450, Masterton was up 20 per cent to $395 while Wellington city rose 9.6 per cent to $570 per week."

[McDuck]

https://www.stuff.co.nz/business/113...-rise#comments



A year later and we are seeing the consequences of the Labour/Greens attack on property investors.
And the stupid people who keep saying "you can't increase the rent if the tenant can't afford to pay it" have been proved wrong.
Also proven wrong are those people/politicians who think an investor selling up won't effect renters.
One less rental means one tenant homeless - 3.5 tenants per rental, 2.5 residents per home.

Upper Hutt landlords will be smiling:

I don't know Bob.
I'd hate to think any organization would target any investor group aggressively.
Possibly nudge the public away from certain choices, yes.
But directly target, no.
If I was the Government, and I wanted to wipe out property investors, you'd know about it.

In simplistic economic terms, it's correct to think of money as a zero sum game.
If the average wage is flat, the average spending is fixed.
One assumes some essential spending and some luxury spending of course.
But if you take away a person's sense of progressing, you take away their buy in into the system.
Then you have big trouble, in a motivational sense.
Good innovative community depends upon enthusiastic cooperation.

Bob, ? Bob? any of this ringing any bells, from when you were a schoolboy in shorts , back in economics class?

PS.
In fact, if I was the Government, and I wanted to get more people owning houses, I'd look at a way of rewarding anyone who helped me reach my goal.
It's so much easier to get a population to move in a general direction under their own power.

I'd probably need to understand the basic mind set difference between a renter and a landlord, and let both do what they did naturally.
But create a framework so that both of those skill sets and ways of viewing the world were well rewarded and co-existed economically.
The goal being mutual benefit to the Landlord, the Tenant and the General social structure they both operated within.

Tripple target.

Or three flaming hoops for your Jack-Russel to jump through, as I like to visualize it.

There, no more hints.
you primates really need to sort yourselves out.

[Bob Kane]

There, no more hints.
you primates really need to sort yourselves out.

Thank you for your contribution.
We can handle it ourselves now.

[McDuck]

Lol.
You're welcome.

Please remember share the bananas.

Watch out for the cheetahs.

I'll be back to check on you all in a decade or so.

Over and out.

[Bob Kane]

Safe journey.
Do send us the occasional postcard.

[Rosco]

https://www.stuff.co.nz/business/113...-rise#comments



A year later and we are seeing the consequences of the Labour/Greens attack on property investors.
And the stupid people who keep saying "you can't increase the rent if the tenant can't afford to pay it" have been proved wrong.
Also proven wrong are those people/politicians who think an investor selling up won't effect renters.
One less rental means one tenant homeless - 3.5 tenants per rental, 2.5 residents per home.

Upper Hutt landlords will be smiling:

A little of this could be consequences, but a lot is just supply and demand!

[Perry]

Loss ring-fencing ups war on renters and owners

The largely unreported end of the ability of rental property owners to claim losses against other income shows that the Government is unaware of the scale of the problem it is creating with accommodation, Tenancies War spokesman Mike Butler said today.

The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration and Remedial Matters) Bill quietly became law while we were distracted with a Cabinet reshuffle that demoted Housing Minister Phil Twyford.

Under the vague sub heading “Allocation of deductions for excess residential land expenditure”, the omnibus tax Act:

(a) limits a person’s deductions for expenditure incurred in relation to residential land to income derived from the land;

(b) suspends deductions for the excess expenditure for the income year in which the expenditure is incurred;

(c) provides that the excess amounts are carried forward to later income years in which the person derives residential income; and

(d) releases the excess amounts on fully-taxed disposals of land.

Inland Revenue said in various statements that 116,000 owners declared an average loss of $7138 ($137 a week) on earnings in the 2016/17 tax year, bringing an average tax benefit of $2000 a year to each, creating a total cost of $232-million to them.

“The Minister responsible for this, Revenue Minister Stuart Nash, is probably unaware that losses accrue at the first stages of a property investing career, and that as debt is reduced and income increases, investors become taxpayers, with some paying tens of thousands of dollars in tax each year,” Mr Butler said.

“Rental property owners who are losing money now face a choice -- raise the rent to cover the loss, absorb the loss to apply it in the future to any profit, or sell,” he said.

“With rents at historic highs it is unlikely owners could add an average extra $137 every week to rents,” Mr Butler said. “This means owners must choose between hanging on or selling,” he said.

“The short answer is to sell, with stand-alone dwellings going to first home buyers.”

“With loss-making owners selling and the prospect of an extended and more fraught period of trading at a loss creating a barrier to new investors, the Minister has just sped up the reduction of the supply of rental property,” Mr Butler said.

“As a result, rents will continue to rise and homelessness will increase,” he said.

The problem for everyone is that the Government is in denial that the policies it is enacting to solve a housing crisis are making the crisis exponentially worse, Mr Butler said.

Labour, New Zealand First, and the Green Party voted in favour on the third reading of the bill on June 20, while National and Jamie Lee Ross voted against it. Hansard has no record of a vote by the ACT Party.

---

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy.

Contact:
Mike Butler 27-277 7295
[email protected]

[Wayne]

Seems the winner, according to Mike, will be first home buyers. Not a bad group to have as winners.

[Perry]

But only if they can afford the deposit, payments, etc.

[Wayne]

But only if they can afford the deposit, payments, etc.

If they can't then someone else will buy it - or it won't sell.
I'm only responding to what Mike said - he could be wrong and other investors (more cashed up) will buy it.
Maybe his crystal ball is better than mine.

[Perry]

It is crystal ball territory, indeed, but the more-people-in-each-rental-house versus less-people-in-each-owner-occupied-house is still a nasty spectre that the reds seem unable to comprehend.

[Bob Kane]

Seems the winner, according to Mike, will be first home buyers. Not a bad group to have as winners.

Can't have the tenants winning, aye?

[sidinz]

The thing is, this will mostly affect the high-entry markets like Auckland, Queenstown, Tauranga etc., where a lot of would-be FHB are priced out. In those markets, where yields are so poor, the only really viable strategy for PIs buying in recent times has been the 'prop up and wait' game.

Now that the 'propping up' part has become somewhere from more painful to totally unsustainable (depending on individual circumstances) many currently subsidising their tenants will now be unwilling/unable to 'wait.'

What this will do to markets that already suffer from a chronic shortage of affordable rental properties, is to be seen. But I doubt it will be pretty.

[BlueSky]

RF may also be a saviour for many , forcing to rethink strategy by not buying highly leveraged properties, blessing in disguise should another GFC type crises hits.

But many will still buy these because of the attractiveness of CG, if your properties increase by 50% in say 5 years, you are a lot ahead then buying a cash neutral property somewhere in a small town.