23 Mar Tax Changes Announced Today
The tax changes announced today are a major disappointment.
As a business, we are apolitical. For some time now, housing has been a political football in NZ. Every party now in Parliament has contributed to the mess the housing “market” is now in – they all share a portion of the blame. And we say “market”, because it is not a market that is fair, reasonable, or allows supply to function. For some time, the only levers that have been pulled are on the demand side.
It is the stuff of fantasy to think that somehow tax policy will result in the building of more houses. The present state of homelessness has occurred in less than a generation and should be a source of national embarrassment. It is regrettable that the former government did precious little to address this, and that the best that the present government can do is change taxes.
Government agencies from the Ministry of Social Development to Statistics NZ have pointed to the supply shortage of housing. This is backed up by data from the likes of Infometrics. In many ways, our plucky little country punches above its weight – but a comprehensive and cohesive plan on housing is one area where we are clearly deficient.
Now that we’ve made our position clear; if you own a rental property, getting the correct structure of ownership is more critical than ever.
There might be opportunities to restructure debt, so it is tax efficient.
Here are the details:
- The Brightline test on the sale of residential property extended to 10 years, except for new builds which stay at 5 years
- Changes to the main home exemption (these aren’t all bad)
- Starting 1 October of this year, interest deductions to be phased out over 4 years
We will be reviewing the legislation over the coming weeks and will then be better informed as to how best to handle these changes. In the meantime, if you want to discuss your circumstances, get in contact.
As a side note, housing has crowded out other forms of investments. Having a goal, an idea, an ambition, is a first step to an investment idea.
