The IRD has issued a discussion document entitled “Residential rental properties - depreciation of items of depreciable property”. See: http://www.ird.govt.nz/resources/file/ebd2d10fc071845/IS0064.pdf
The draft interpretation statement concludes that if an item in a residential rental property is distinct from the building it can be separately depreciated if it meets the definition of 'depreciable property'. If an item is part of the building, it cannot be separately depreciated, but can be depreciated with the building.
The draft interpretation follows from Budget 2005 announcements that depreciation claims on building fit-out and chattel items are to be depreciated at the new building rate of 3%.
IRD advise that property owners can still depreciate chattels such as carpets, drapes, light fittings, whiteware, water heaters, clothes lines and other fittings that are not part of the building, as separate assets.
However, assets such as internal walls, doors, electrical wiring and plumbing, kitchen cupboards, bathroom vanities and built-in wardrobes and so on, as well as furniture and fittings that are permanently attached are to be regarded as being part of the building and as such depreciated at 3% per annum.
IRD have said property owners who have been splitting these components out from the cost of the building will have overstated their depreciation claim in the past, and will not have to adjust previous years' income.
IRD have invited formal responses to the discussion paper, by 20 April 2007.
The Ministry of Economic Development is leading a review of Financial Products and Providers.
Of interest to the Federation is the government intention to change the bankruptcy laws (which offers relief from debts). This measure could have implications for landlords.
It is proposed that a 'no asset' procedure as an alternative to bankruptcy for low-income debtors with few or no realisable assets be introduced.
And that Debtor's petitions and summary instalment order applications to be filed with the Official Assignee rather than the Court. In all, this would avoid bankruptcy for some debtors.
A preliminary view is that the proposal could encourage some low-income people to accumulate debt without facing the financial consequences of their actions. For landlords, this would compound an already difficult area in attempts to recover debt from former tenants.
Parliament's Commerce Select Committee has decided to hold an inquiry into housing affordability.
The terms of reference cover things such as:
The committee has the following members:
It is likely that the review will have difficulty sticking to the above terms of reference and the debate could degenerate into a convenient platform to attack residential landlords who are often cited for driving up the cost of housing for first time buyers.
Additionally, it is expected that the review will provide a fresh platform for proponents of a Capital Gains Tax or other tax rule changes (e.g. ring fencing losses on rental properties, changes to the LAQC regime) to supposedly dampen the alleged speculative demand for residential property investment.
The Reserve Bank Governor’s statement to the markets on 9 March give further credence to the likely (re)focus on tax initiatives when he said: “These include a tightening of tax rules applying to housing investment and changes to bank capital requirements to help moderate the amplifying effect of credit on the housing cycle”.
Any tax changes would likely be announced in the Budget (due 17 May).
The Palmerston North tenants’ union is proposing a bylaw to require flats to pass a certificate of fitness before they can be occupied and other student centres are supportive of the idea.
The Fire Service has backed the proposal that would require smoke alarms to get a certificate.
Currently, landlords must ensure flats are in a reasonable state of cleanliness but tenant groups say that is not often enforced and the bylaw would mean regular inspections.
We note that the NZPIF president gave an interview to TV1 News on 3 March on the issue.
The Department of Building & Housing intends to launch the long promised Tenancy Tribunal database – detailing tribunal rulings early next month in Christchurch – coinciding with the opening of a new Tenancy Services office.
The database enables landlords (and tenants) to search a website containing all Tenancy Tribunal decisions – albeit historic and after the appeal period for each decision has passed.
The database is limited in that landlords will not know whether the former tenant has complied with any orders made by the Tribunal.
As recommended previously and for extra protection landlords should ensure they get a tenant's full name and date of birth on the Tenancy Agreement. An ID photo too could prove invaluable as well.
The top-line results of the annual ANZ Property Investor Survey have been made available.
Of relevance to the Federation’s ongoing government relations program (see also Appendix A list of current regulatory issues) we note that the survey reports that:
See: Optimism running high with property investors says survey
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