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Hot Topic NBR Focus: GMO
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Flaws in Tax Working Group’s property recommendations

According to some in the property industry, flaws in the Tax Working Group's recommendations could have negative impact on both commercial and residential property.
Property Council chief executive Connal Townsend was concerned at the report's suggestion

Jazial Crossley
Thu, 21 Jan 2010

According to some in the property industry, flaws in the Tax Working Group’s recommendations could have negative impact on both commercial and residential property.

Property Council chief executive Connal Townsend was concerned at the report’s suggestion that buildings do not depreciate.

Commercial property needs constant reinvestment to prevent values from deteriorating, Mr Townsend said.

“We’re currently reviewing the detail, but we strongly disagree with the idea that buildings do not depreciate. The land value might hold, but the building itself definitely depreciates.”

He added that the recommended changes would completely undermine the other National government initiatives that have set out to support capital markets.

Residential property investors could also be at risk from the Tax Working Group’s recommendations.

Those who have purchased houses to earn income from rental tenants could have their ability to finance their properties threatened, and tenants could bear the brunt of this with raised rent.

NZ Property Investors Federation president Martin Evans said many purchasers have bought properties to claim depreciation as an expense.

If the Tax Working Group’s recommendations are adopted they will have to pay this back if selling in the future.

“Depreciation claims by rental property owners help them to keep the cost of renting lower, especially in the first few years of ownership,” Mr Evans said.

“If the ability to make depreciation claims are withdrawn from rental property then many owners will be forced to sell their property as they will no longer be able to finance them.”

Jazial Crossley
Thu, 21 Jan 2010
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Flaws in Tax Working Group’s property recommendations
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