The IRD has ring-fenced losses relating to rental properties, with the New Taxation Act, which was passed into law on the 1st of April this year. The Taxation (Annual Rates for 2019 -20, GST Offshore Supplier Registration and Remedial Matters) Act has now received Royal Assent and is passed into law, meaning losses from rental properties are now ring-fenced.
The biggest change to arise from this new bill is that property investors will no longer have the ability to offset any losses incurred from rental properties against other sources of income eg salaries, self-employed income etc. The losses from rental properties can now only be applied against future income earned from any rental property owned by the same entity.
The ringfencing of rental properties only relates residential properties. There is no change to losses incurred from commercial rental properties.
The Labour Government’s 2018 Budget confirmed their commitment to restrict the ability of investors in residential property to offset tax losses from their rental properties, with the exact details being subject to a public consultation process.
This is another measure aimed at trying to take the heat out of the residential property market. It follows on from the increased restriction on non-residents acquiring residential land, and the extension of the bright line test, taxing residential land sold within five years increased from two years.
Tax can be complex, and Greenlion’s expert team guides their clients through this complexity allowing them to achieve their goals without undue obligations. Also, Greenlion’s expert accountants can help you with tax minimisation, planning and structuring, pooling and intermediary services, GST, FBT, PAYE and much more, so for more information on accounting firms Auckland, chartered accountants Auckland and business advisory services please go to https://www.greenlion.co.nz .