Feedback on ring-fencing rental losses
Revenue Minister Stuart Nash is encouraging feedback on a proposal to change the rules around ring-fencing losses on residential properties.
An Issues Paper has been released by the Inland Revenue Department that proposes ring-fencing losses in an effort to level the playing field between speculators and investors, and home buyers.
“Changes would make the tax system fairer by ensuring that investors could not offset their losses on some property investments against their other income,” Mr Nash says.
“At the moment, tax is applied on a person’s net income, which means if a property investor makes rental losses those losses reduce their overall income, and therefore their tax liability.
“The persistent tax losses that many property investors declare on their investments indicate that they rely on capital gains to make a profit.
“In conjunction with the recently announced extension to the bright-line test, ring-fencing losses from rental properties would make property speculation less attractive and level the playing field between property investors and home buyers. The time is right to test the detail of this proposal with investors and other stakeholders.
Mr Nash says ring-fencing losses would be a useful tool to dampen property speculation. “This measure would not preclude any solutions the Tax Working Group may come up with in relation to housing”.
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