30-12-1899

Inquiry into the Future Monetary Policy Framework

1. News
2. 1999
3. December

Whilst the inquiry’s terms of reference do not directly reference investment property/housing some submitters have canvassed the tax regime on investment property area.

One notable and influential submission is that of the Reserve Bank (who joined with the IRD in preparing the April 2006 report on “Supplementary Stabilisation Instruments”). The Bank published its submission to the Finance and Expenditure Committee’s inquiry into the future monetary policy framework on 27 July.

Of particular interest and concern to the Federation was the Bank’s position and recommendation to the Select Committee to:

“Review(s) the taxation of investment income and the tax treatment of the financing
of the purchase of investment assets. This should include examining the possibility 
of modifications to the existing provisions that allow any losses on investment 
activities to be fully offset against a taxpayer’s other income at that taxpayer’s 
marginal tax rate (“ring-fencing”)

• Investment property purchases have no doubt exacerbated cyclical pressures in the housing market.
• There appear to be an increasing number of negatively-geared private landlords whose only prospect of making a positive return rests on possible future capital gains.
• The tax system has some features that favour the purchase of houses, and there is certainly a widespread perception that the system is particularly favourable to leveraged investors.
• Supports strengthened Inland Revenue enforcement of the existing provisions of the Income Tax re: capital gains made on property purchased with the intention of resale.
• Believe limiting the ability to deduct investment losses against wage and salary income might help dampen market cycles. [NB: from 1982 to 1991, the ability to deduct such losses, from any investment activity, was limited to $10,000 (around $20,000 in today’s dollars).

Worrying for property investors the Prime Minister Helen Clark has been quoted as saying that the ring-fencing of tax losses claimed on rental properties “sounded a good idea”.

The Select Committee is expected to report back to Parliament on the findings of its inquiry by the end of the year.

TENANCY TRIBUNAL DATABASE – Launch delayed

The Department of Building & Housing has again advised that the long promised launch of the on-line Tenancy Tribunal Decisions Online database has been further delayed, due to software problems.

The Ministry of Justice has responsibility for the roll out of the database.

When the database is running it should enable landlords (and tenants) to search a website containing all Tenancy Tribunal decisions – albeit historic and after the appeal period for each decision has passed.

POLITICAL - Other

Parliament sat between 17-19 and 24-26 July. During these sessions the Commerce Select committee resumed consideration on the housing affordability inquiry.