Landlords say low taxes cap rents

Last updated 15:58 03/07/2014

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Nearly $500 million in tax was paid on rental incomes in the financial year ended March 2013, figures obtained under the Official Information Act show.

The New Zealand Property Investors Federation (NZPIF) requested the information in response to the Tax Working Group's finding in 2009 that rental property owners took money out of the tax system rather than paying into it.

It found that rental property owners last year collected about $1.5 billion in revenue, of which about $500m went to Inland Revenue in tax.

The federation said "only Inland Revenue data from 2008 was used to back their claim" - a year in which high interest rates saw most property owners lose money.

The federation said that based on the Tax Working Group's claims, the Government withdrew the ability of rental property owners to claim depreciation.

This had increased the cost of providing rental homes to tenants by $700m a year, or $33.65 a week per rental property.

NZPIF executive officer Andrew King said the new information "completely debunked" the idea that landlords did not pay tax.

He said the data showed that in the past 33 years there were only two years in which rental property owners did not pay tax on rental income. This was in 2007 and 2008, when mortgage interest rates were high.

"A lot of people view rental property owners as not paying tax ... because it keeps on being said. A lot of commentators just keep on repeating it," he said.

"There isn't a tax advantage. We do in fact pay tax.

"The fact that we don't make a lot of money is a benefit to the tenant. It actually keeps rents low.

"You can't have it both ways. Either rents go up and we pay more tax, but tenants find it harder to save a deposit for their first home, or we carry on where we are.

"We don't make a lot of income, but we do keep rents low."

King said the finding was "a warning to rental property owners that rental prices need to rise now if they are to have any chance of even partially offsetting the current round of interest rate rises".

He said landlords had been sheltering tenants from rises in interest rates, council rates and insurance costs.

"As interest rates go up, someone has to pay, and it's either going to be the tenants or the landlord," he said.

"If the landlords end up paying, which they do - not all of it, but most of it - then they will be making losses because of that."

He said investors pulling out of rental properties would lead to "a shortage of supply at a time when we really want people to be investing in properties".

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