Kiwi Income Property Trust said tax changes in the government's budget have reduced the wealth of investors in listed property trusts, many of whom are retirees.Changes include a reduction in the depreciation rate applicable to buildings to zero from Apri
Kiwi Income Property Trust said tax changes in the government's budget have reduced the wealth of investors in listed property trusts, many of whom are retirees.
Changes include a reduction in the depreciation rate applicable to buildings to zero from April 1, 2011, and the removal of depreciation loading for assets acquired after May 20, 2010. But from April 1, 2011 the Portfolio Investment Entity (PIE) tax rate applicable to the trust drops from 30% to 28%.
"It is disappointing to note the New Zealand government's decision to effectively target tax increases at investors in property trusts listed on the New Zealand stock exchange," Chris Gudgeon, chief executive of the manager of the trust, said.
Many of the trust's 11,000 unit holders were retirees supplementing their income in retirement and people saving for retirement through Kiwisaver schemes, he said.
The government's actions resulted in a significant diminution of unit holder wealth across the whole listed property sector on the New Zealand stock exchange.
The government had not differentiated between residential rental property investors seeking tax-free capital gains and listed property trust investors who, in contrast, not only supported New Zealand's capital markets but also paid significant tax through the trust on rental income.
The trust said the net impact of the tax changes produced an estimated $121 million increase in its net deferred tax liabilities and income tax expense, resulting in a reduction in both profit after income tax and unit holders' funds. These adjustments will be reflected in the trust's accounts for the six months ending September 30. These deferred tax adjustments will not affect distributions to unit holders.
