News

Property investors easy target: APIA

Monday 4th of August 2014

He has written an opinion column, saying that landlords are at a tax disadvantage compared to other sectors since their ability to claim depreciation was removed.

The Financial Services Council has launched a campaign, asking for tax reductions on long-term savings. It has said that rental property owners are unfairly tax advantaged compared to people saving in term deposits or KiwiSaver.

APIA president Andrew Bruce said that was not true.

"In 2007 the then Deputy Commissioner of Inland Revenue Department, Robin Oliver was asked by a Government Select Committee if there were tax advantages for investments in rental housing. Mr Oliver's response was '...the short answer is there is none. Rules about expenses for deducting costs such as interest, upkeep and maintenance, as well as paying tax on income were the same for investments in shares or anything else. In fact under the housing case, the capital gains boundary is brought back a bit'. Since then in the May 2010 budget the Government withdrew depreciation on buildings as a deductible expense."

He said today his column was not a direct response to the FSC, but to the general perception among the public that property investors were not paying their fair share of tax. “I don’t think people understand the difference between an investor, a speculator and a developer.”

He pointed out that anyone who bought with the intention of selling for profit was required to pay tax.  "If tax isn't paid when the intention is to buy and sell for a capital gain then it is tax evasion i.e. illegal. It is like a person going into a bike shop and stealing a bike. While you can correctly say the person who stole the bike obtained it for free, it is against the law.”

Bruce said while some landlords might be negatively geared for the first few years of their investment, the aim was to achieve positive cashflow, which is then taxed. “This is very similar to many start-up companies as it's not always possible to generate a profit from day one.”

Removing the ability to claim depreciation had made a big difference to buy-and-hold investors, he said. “Just because you remove depreciation, it doesn’t mean repairs and maintenance stop needing to be done.”

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