We strive to keep Wellington property owners up to date with the latest property information.

Here is another interesting Wellington real estate related news article that we thought may provide you with helpful information.


March 2018

Property Institute chief executive Ashley Church

The end of negative gearing is nigh as the Government launches its proposal on changing the rules around the ring-fencing of rental losses.

By Miriam Bell

It has been a busy week in the Government’s crusade to crack down on those who benefit from property investment with the bright line test extended and a ban on letting fees announced.

Now, attention has turned to the ring-fencing of rental losses and today Inland Revenue (IRD) released an issues paper on the proposed changes.

The proposal is that property speculators and investors will no longer be able to offset tax losses from their residential properties against their other income – like salary, wages, or business income – to reduce their income tax liability.

The IRD paper says that currently investors have part of the cost of servicing their mortgages subsidised by the reduced tax on their other income sources, helping them to outbid owner-occupiers for properties.

“Rules that ring-fence residential property losses, so they cannot be used to reduce tax on other income, is intended to help reduce this advantage and perceived unfairness.”

Under the suggested changes, which it is proposed will apply on a portfolio basis, ring-fenced losses could be used in future years, when the properties are making profits, or if the person is taxed on the sale of land.

But where a property disposal is caught by one of the land sale rules, ring-fenced losses could only be used to the extent they reduce the taxable gain to nil, with any further unused losses remaining ring-fenced.

The new rules would not apply to the family home, a property that is subject to the mixed-use assets rules, or land that is on revenue account because it is held in a land-related business.

IRD proposes that the new loss ring-fencing rules will apply from the start of the 2019–20 tax year.

Revenue Minister Stuart Nash says that, currently, the persistent tax…………

Continue reading this article at the original source from Landlords.co.nz




Own property in Wellington? Get our Free Halina Sells Houses e-Newsletter HERE