REAL ESTATE

Landlords concede depreciation tax break should end

Tuesday 16 February 2010, 12:05PM
By New Zealand Business Council for Sustainable Development
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Landlords appear to agree depreciation allowances on rental homes which are not depreciating should end, according to a new nationwide poll.

The ShapeNZ survey shows 42% of rental home owners surveyed agree the tax break should end, while 38% disagree and 20% are not sure.

Some 44% of residential property owners agree it is unfair they can claim the cost of building depreciation against income even if the building is rising in value. 35% of rental home owners say the current rules are fair.

The results cover 219 rental home owners among the 2,281 respondents to a national online survey between February 8 and 15. Results are weighted to represent the national population and have a maximum margin of error of +/- 2.1% on the national sample.

The New Zealand Business Council for Sustainable Development, which commissioned the survey, says the results are subject to a margin of error of +/- 6.4% on the rental owner sub sample, but it is significant that more of the owners support tax break change than oppose.

Some 58% of New Zealanders think depreciation allowances on residential rental properties should be removed when properties’ values are not actually falling and 64% think it’s unfair to allow these building depreciation claims against personal income.

However, rental property owners and the rest of the country are in agreement on one of the possible effects of removing depreciation allowances on residential rental properties: rents will rise as a result, according to 49% of the national sample and 70% of landlords.

Asked if removing the depreciation allowances will cause rental property owners financial problems, 22% of New Zealanders say they will, 33% say they won’t and 45% are unsure. Among landlords, however, 54% say the proposed change will cause them financial problems, 21% say they won’t and 25% are unsure.

Removing the depreciation allowances is one of a number of measures to reduce revenue leakage recommended to the Government by the Victoria University-led Tax Working Group.

The Prime Minister’s statement to Parliament on February 9 did not rule out the working group’s recommendations on changing the building depreciation allowances.

The ShapeNZ tax options survey continues at www.shapenz.org.nz