Does Your Rental Property Makes Losses? Changes Could Be Coming!!

On 29 March 2018 Inland Revenue released an Issues Paper outlining proposed rules to restrict taxpayers from offsetting residential rental losses against their other income.

The rationale for proposing these rules is to make the tax system fairer, improve housing affordability for owner-occupiers and to level the playing field between property speculators/investors and home buyers.

It is proposed that these rules will apply only to residential land and not commercial, industrial or farmland. It will also not apply to:

  • a person’s main home;
  • properties subject to the mixed-use asset rules (such as a rented holiday home); or
  • land that is held by a dealer, developer or builder.

The rules will apply to all types of entities that own residential rental properties. There are special rules to prevent taxpayers from structuring around the rules.

It is proposed that the rules will apply on a portfolio basis, meaning taxpayers will be able to offset losses from residential properties against profits from other residential properties. Rental losses will also be able to be offset against profits from the sale of residential land that is subject to tax.

It is proposed these rules will come into effect from the beginning of the 2020 tax year. Submissions on these rules are being sought with the final date for submissions being 11 May 2018.

It is our view that the proposed rules provide a further tax bias against residential rental property investment, which other forms of investment are not subject to.Furthermore, the rules are likely to alter landlord behaviour in a way that is counter-productive to the reasons the rules are being introduced. McIntyre Dick is submitting on these changes and outlining our frustrations that residential landlords are being unfairly targeted.Once our submission is complete we will make this available for your viewing. If you would like to provide any feedback or have any questions on the above proposed rules please give us a call.

Brad Phillips
03 211 3782
021 317 151

Craig McCallum
03 928 5158
027 698 9511

Kathryn Ball
03 211 3774
027 454 8414

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