Beloved bach could be on endangered list

The beloved Kiwi bach could be on the endangered list if the Tax Working Group’s recent inclusion of a ‘‘bach tax’’ in its discussion papers is implemented. Increased costs for owners aside, there are wideranging implications of taxing baches that cut right to the heart of our culture and heritage, as well as our tourism offering.

Baches are an integral part of New Zealand culture and have long been the domain of the Kiwi holidaymaker. International visitors are, however, increasingly seeking them out as they go in search of a real New Zealand holiday in ‘‘off-the-beatentrack’’ locations.

Holiday homes provide additional short-term accommodation when big events come to town, but do not require the same constant flow of visitors as hotels do to be sustainable.

Regions often rely on this extra capacity so they can take a chance on attracting new events, safe in the knowledge there will be enough accommodation.

The attraction of visitors to remote corners of the country, often where baches are the accommodation mainstay, means more communities benefit from money being spent by visitors.

There have been a number of opinion pieces written about the ‘‘bach tax’’ or

‘‘wealth tax’’, as it has also been called, but we haven’t heard the voice of the bach owner.

As the founder of

Bachcare, which manages nearly 2000 holiday homes throughout the country, I speak to owners daily. For the most part they are not wealthy – they are ordinary people who may have had the bach in their family for years, or it’s been handed down through the generations, or they’ve just worked really hard to purchase their piece of paradise.

Many owners won’t know what a ‘‘bach tax’’ could mean for them, as it’s not clear what it actually is. It’s not a capital gains tax and it’s not an income tax. Instead, it’s a tax on ‘‘deemed income’’ which might be based on the 10-year government bond rate (currently 2.5 per cent).

The average capital value of a bach is about $500,000. At 2.5 per cent of the bond rate, this means an owner would have to include in their annual personal tax return about $12,500 ‘‘deemed income’’ and pay tax on that.

The issue here is that ‘‘deemed income’’ doesn’t actually mean any income has been made as it’s purely a mathematical calculation, not money coming in the door.

On average, a holiday home costs $3000 a year to own, including rates, insurance, electricity, gas, upkeep and maintenance. Owners spend another $6000 a year renovating or improving their properties. If an owner chooses to rent their place to visitors, they might make $12,000-$15,000 a year based on an average daily rate of $200-$250 and having the property occupied approximately 60 days a year.

Once all costs are paid (excluding mortgage repayments), there’s not a lot left over, if anything. So for many a ‘‘bach tax’’ based on ‘‘deemed income’’ could mean that owning their beloved holiday home is no longer viable.

Bach owners’ message is simple: don’t tax baches into extinction, they are a quintessential part of holidaying in New Zealand, whether you are a local who goes to the same bach every year or an international visitor trying out the BBQ for the first time – on the deck overlooking the beach – in your recently purchased togs and jandals.

Holiday homes provide additional shortterm accommodation when big events come to town.