mrdrifter:

 

This is the government saying not all businesses are equal.

 

Yes. I don't see that as a problem

mattwnz:

 

 

 

If the motivation to buy is capital gain rather than income from rent, then is that an investment or speculation?

 

Speculation is a quick buck, which is available now. Property investment has always been about capital gain, so yes its always been part of it. Its a great investment. Its now being removed from fueling the market. 

Handle9:

 

mrdrifter:

 

This is the government saying not all businesses are equal.

 

 

Yes. I don't see that as a problem

 

Me neither. Shelter is a basic need, I'd feel the same way if there was a price craze on bread.

mrdrifter:

 

The part that keep bugging me, people describing the tax deductibility as a loophole - People saying 'oh great they closed the loophole' have just bought into the PR spin and I'm sure the government thanks you.  If you are a landlord renting a house for compensation, it's a business, any other business can claim a tax deduction against interest on business borrowing as well, it's not actually taking anything from the taxpayer as that is how the law was written and a business can claim the deductions. Businesses borrow for all sorts of reasons. This is the government saying not all businesses are equal.

 

When the homes that people have a right to live in are being locked out by treating a house as a risk free block of shares, yes, not all businesses are equal. 

mattwnz:

 

I was listening to a NZ finance podcast this week, and the person they were interviewing said that NZers see it is as a right to be able to profit off property, in a similar way to the right of US citizens to bear arms, 

 

Thats because every single signal that has been sent to property investors for decades has encouraged them to do it. Every time a tax was introduced in other areas but not property, it reinforced the message.

It's going to take a long time to unwind the mentality but you know what, certain sectors of the electorate are going to be screaming about these changes at election time.

If we really want things to change long term, for the better, we're going to have to shut them down.

Labour could do a lot more to make property less attractive. What about a stamp duty on every house sale, for example?

mrdrifter:

The part that keep bugging me, people describing the tax deductibility as a loophole - People saying 'oh great they closed the loophole' have just bought into the PR spin and I'm sure the government thanks you.  If you are a landlord renting a house for compensation, it's a business, any other business can claim a tax deduction against interest on business borrowing as well, it's not actually taking anything from the taxpayer as that is how the law was written and a business can claim the deductions. Businesses borrow for all sorts of reasons. This is the government saying not all businesses are equal.

mrdrifter:

 

The part that keep bugging me, people describing the tax deductibility as a loophole - People saying 'oh great they closed the loophole' have just bought into the PR spin and I'm sure the government thanks you.  If you are a landlord renting a house for compensation, it's a business, any other business can claim a tax deduction against interest on business borrowing as well, it's not actually taking anything from the taxpayer as that is how the law was written and a business can claim the deductions. Businesses borrow for all sorts of reasons. This is the government saying not all businesses are equal.

 

Another difference: Businesses are required pay tax on profits. Most property investors escape paying any tax on profits.

If landlords want tax equality with other businesses they should also be asking for a capital gains tax that over full period of ownership.

(but strangely, they’re not).

Batman:

mrdrifter:

 

The part that keep bugging me, people describing the tax deductibility as a loophole - People saying 'oh great they closed the loophole' have just bought into the PR spin and I'm sure the government thanks you.  If you are a landlord renting a house for compensation, it's a business, any other business can claim a tax deduction against interest on business borrowing as well, it's not actually taking anything from the taxpayer as that is how the law was written and a business can claim the deductions. Businesses borrow for all sorts of reasons. This is the government saying not all businesses are equal.

 

Not all businesses are equal.

As an employee you get no tax deduction. You work as hard or harder than a sole trader who claims everything off his tax bill.

If you are an employee and your wife doesn't work, you get double screwed. Eg if you earn 100k your tax bill is higher than if both parents earn 50k each.

 

I'm not saying it's good or bad, simply that the government likes to point fingers at everyone else be that the reserve bank or landlords and the result is continuing and significant social division (both sides of the aisle do this). As was said above, every successive government keeps people in the mindset of property being a no lose situation and that needs to change, ideally without a massive crash that leaves half the country bankrupt. Diversity of investment is a good thing.

I would suggest the income splitting should be something looked at again as it actually empowers the stay at home partner in many different situations from raising children through to people with significant illness or disability. I'm sure it would get labelled as a loophole by some.

dafman:

 

mrdrifter:

 

The part that keep bugging me, people describing the tax deductibility as a loophole - People saying 'oh great they closed the loophole' have just bought into the PR spin and I'm sure the government thanks you.  If you are a landlord renting a house for compensation, it's a business, any other business can claim a tax deduction against interest on business borrowing as well, it's not actually taking anything from the taxpayer as that is how the law was written and a business can claim the deductions. Businesses borrow for all sorts of reasons. This is the government saying not all businesses are equal.

 

 

Another difference: Businesses are required pay tax on profits. Most property investors escape paying any tax on profits.

 

If landlords want tax equality with other businesses they should also be asking for a capital gains tax that over full period of ownership.

 

(but strangely, they’re not).

 

 

 

Realistically the CGT would have been the proper way to fix this and would have caused a bit of squealing but possibly with less potential impacts such as rent increases etc... 

mrdrifter:

 

Realistically the CGT would have been the proper way to fix this and would have caused a bit of squealing but possibly with less potential impacts such as rent increases etc... 

 

The CGT proposed was massively overreaching and would have led to some transactions being taxed at a lower rate than under the Brightline test. It was far from the silver bullet many want to make it out to be, and the dissenting TWG report pointed out that extending the Brightline would give you most of the benefits without the huge administrative burden. 

mrdrifter:

 

I'm not saying it's good or bad, simply that the government likes to point fingers at everyone else be that the reserve bank or landlords and the result is continuing and significant social division (both sides of the aisle do this). As was said above, every successive government keeps people in the mindset of property being a no lose situation and that needs to change, ideally without a massive crash that leaves half the country bankrupt. Diversity of investment is a good thing.

 

I would suggest the income splitting should be something looked at again as it actually empowers the stay at home partner in many different situations from raising children through to people with significant illness or disability. I'm sure it would get labelled as a loophole by some.

 

 

 

yes agreed. 

the main problem is building more houses and it doesn't seem like there is any move on getting more stock. if they could also cap rents there is no limit to what they can do - eg enforce commercial rates for lending, tax capital gains at 50% etc - that should remove demand ... but the supply bit - well this is not the politics section so ...

mrdrifter:

 

... ideally without a massive crash that leaves half the country bankrupt.

 

Flip side of the same coin. Without a massive crash, the other half the country will never own a house and will be unable to afford market rents when they retire, leaving them homeless. 

That’s the real mess we are currently in ... any which way, one half of the population are in dire straits.

mrdrifter:

 

I'm not saying it's good or bad, simply that the government likes to point fingers at everyone else be that the reserve bank or landlords and the result is continuing and significant social division (both sides of the aisle do this).

 

The social division is quite real now. It's not a political construct, it's between the landed gentry (of which I am one) and those who can never afford a house.

dafman:

mrdrifter:

... ideally without a massive crash that leaves half the country bankrupt.

Flip side of the same coin. Without a massive crash, the other half the country will never own a house and will be unable to afford market rents when they retire, leaving them homeless. 

That’s the real mess we are currently in ... any which way, one half of the population are in dire straits.

I still like the idea of the government offering a retail product with low or no interest loans to help those who are hit hardest by prices unwinding, and then making a point of unwinding prices to the point where houses are actually affordable again (5x etc).