Small Canty firms cry foul
Pru Morrall battled to keep her small property management business afloat during the Christchurch earthquakes.
She doesn’t believe the Government should be entitled to a cut if she ever decides to sell up, but that could be out of her hands.
The tax working group, chaired by former Labour finance minister Sir Michael Cullen, has recommended the introduction of a new broadbased capital gains tax (CGT) on rental properties, land, businesses, and shares, all paid at the income tax rate. Family homes would be excluded.
Morrall started her company shortly before the quakes. After the disaster she moved office three times and worked from her car, ‘‘starting at four in the morning and finishing at 10 at night’’.
She does not think paying a capital gains tax was fair after the risks she has taken and the sleepless nights.
‘‘It was a dreadful time – for everybody, not just me,’’ she said. ‘‘But to pull a business through that and still be here, and then be told that one day if you wished to sell to leave something to your grandchildren ... should [the Government] profit from that again after all the tax I already pay?’’
Morrall agreed with National leader Simon Bridges that it was ‘‘not the Kiwi way’’ as small to medium business had always been the ‘‘spinal column’’ of New Zealand. Many of her clients have one or two rental properties.
‘‘It’s tough on those owners who own one little rental property. They’re cautious, they’re good owners and owners have spent a lot of money recently. It’s an appalling concept and it just isn’t right.’’
Christchurch landlord Brenda Coster said she invested in property to provide for her retirement. She had worked ‘‘24/7’’ to get to this position.
‘‘We’re near retirement age now, or just over, and the idea was to sell them off, pay the mortgage off and live on the passive income. If we’re going to get pinged for capital gains now, that’s going to reduce that income.’’
Selling off the properties now could the best option, she said. ‘‘If [the tax] does [come in] it might be something we’d have to consider.’’ Hamish Wilson, of Canterbury Property Investors’ Association, said it was too soon to ascertain the full effect of the proposal.
Those is his association were ‘‘mum and dad investors with one or two properties’’, he said, not the 20 per cent of the country’s wealthiest people the tax is aimed at.
The implication for all Kiwi property investors would be ‘‘wide reaching’’ regardless of whether they had ‘‘one or 50’’.
Wilson, who is also managing director of rental firm A1 Property Managers, said there had been a few rental sales related to tax fears, but those were the minority.
‘‘Property is still a good vehicle for creating wealth and having a passive income later in life,’’ he said.
Any increased cost to landlords would be passed on, Wilson said. If more did sell up, demand would increase.
‘‘The real losers in this, unfortunately, are the people who depend on those rental properties.’’
District health boards have been put ‘‘on notice’’, with the health minister threatening wholesale changes to membership if spending isn’t brought under control.
After months of refusing to release the figures, the Ministry of Health has published the latest financial reports of the 20 DHBs.
A sector-wide deficit of $207 million has been posted, with every DHB now in the red.
DHBs were forecasting a $372m deficit to June 30, which had deteriorated by $24.1m since the November 2018 forecast.
Supporting documents also warned that if DHBs continued to spend to budget for the remainder of the year, or failed to achieve revenue targets, ‘‘a higher deficit than planned is expected’’.
Health Minister David Clark said he had put the DHBs ‘‘on notice’’, and would consider ‘‘a range of options to improve performance’’ if necessary.
That included changes to board memberships, which Clark said he raised with board chairs and chief executives last week.
Canterbury, Counties Manukau, Southern and Waikato DHBs posted the biggest deficits; $41m, $24m, $29m and $24m, respectively. Each DHB had its own set of cost pressures, including geographical challenges, bigger highneeds populations or demographic changes. But documents showed the Ministry of Health cited increased staff costs as the major driver of deficits, including the hiring of an additional 2667 fulltime equivalent staff in the first half of 2018-19, at a cost of about $126m. ‘‘That includes 440 extra medical staff, 1271 more nurses and 303 allied health workers,’’ Clark said.
Outsourced personnel costs however, were still unfavourable to budget by $43m – that was across 17 DHBs. Generally, outsourced personnel costs cover unfilled personnel vacancies.
Clark released a letter he sent to DHB chairs in December, alongside the release of the deficit figures, designed to both set out his expectations in cost reductions and blunt any reaction the Government had not done enough in its first budget to bring the health sector back up to sustainable funding levels. Crying out for cash
A limited amount of ‘‘equity support’’ was available but it came with stringent monitoring conditions. Of the 20 DHBs, Clark said seven had made requests for ‘‘equity support’’, or additional cash, ranging from $3m to $64m.
Canterbury District Health Board, which was facing an estimated $98.4m deficit this financial year, made the largest request.
Services slipping In his general letter to all DHBs, Clark also indicated displeasure that some key measures of performance were slipping: specialist wait times, elective surgical wait times and those for radiology or cancer services.
At Budget 2018, the Government injected $2.2 billion more into health over four years, as well as $100m tagged specifically to addressing burgeoning deficits. CDHB eyes $100m deficit Canterbury DHB’s annual deficit was expected to reach $98.4m by the end of June.
Clark has not approved Canterbury’s annual plan, instead asking the board to save more, CDHB chair John Wood and chief executive David Meates told the health select committee on Wednesday.
Meates said the funding received by the DHB did not provide for the actual post-quake population – an argument the board has made for several years.
Funding has been a major source of tension between the ministry and CDHB.
Wood said his main role as chair, when appointed in 2017, was to help repair the ‘‘dysfunctional’’ relationship between the CDHB and government agencies in Wellington including the Ministry of Health.
The main source of tension was over the region’s health funding allocation.
An independent facilitator told the minister in a briefing last November the way the health board was funded post-quake had contributed to its increasing operational deficits. ‘‘Alternative approaches that better reflected the situation faced by CDHB could have been utilised, and going forward an approach that better reflects the issues facing the CDHB is needed.’’
Canterbury was anticipating a more accurate funding allocation with the use of last year’s census.
However the ministry has confirmed it will use the 2013 census for new funding projections due to problems with the 2018 census.
Wood told the committee the region had undergone rapid population growth after the earthquakes which had put services under pressure and meant our damaged physical infrastructure is inadequate to deal with our actual population and their needs."
Another huge cost was in outsourced public surgeries to private providers while the new acute services building at Christchurch Hospital was yet to be completed. The year to date spend on external providers was $64m.