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Ring fencing

Ring fencing National Propertyscouts

The new law takes effect from 1 April 2019

The Government has introduced legislation removing the right for rental property owners to off-set rental losses against tax paid on other income. The new law takes effect from 1 April 2019. Instead of losses being able to be offset against other income such as salary, investment or business income those losses now have to be carried forward to be offset against future rental income. Its dumb law! There is no other wat of describing it. We think it will be one of the biggest drivers in seeing investors exit the residential investment market just when we needed them the most. So, if it’s so dumb why has the present Government introduced it. Well, they thought the way ring fencing worked gave investors an advantage over first home buyers. NZPIF Executive Director Andrew King stated that the Governments premise was wrong. Rental providers, he said, like any business which receives income are liable to pay tax on that income, whereas a home buyer gets the benefit of accommodation – which isn’t taxable. Rental providers can claim expenses (just like any business) against income however homeowners don’t receive any income from their property and therefore have no income to have expenses to claim against. In our view in deciding on this legislation the Government thought they were comparing apples with apples when in fact they were comparing apples with lemons. And we all know what the lemon turned out to be!

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