Labour eyes property investor sales tax
RENTAL property investors will be in the gun under a future Labour government, with the party set to announce a crackdown that would automatically sting them with a tax on their profits if they sell within five years of buying.
Leader Andrew Little will announce the plan at a speech in Auckland that is expected to also extend Labour’s 2012 Kiwibuild plan to fund and on-sell 100,000 new houses over 10 years – although its 10,000 houses a year target is unlikely to change.
The proposed tax crackdown would extend the current twoyear ‘‘bright line’’ test imposed by National only last year. It taxes profits from residential property bought and sold within two years.
Labour is expected to maintain the current exemptions, which include the main residence or family home.
Little canned the party’s 2011 policy of a broad-based capital gains tax when he was elected leader in 2014. But he is branding the bright-line move a ‘‘speculators’ tax’’ and said on Friday it was the right public policy ‘‘to go after those speculators’’ with a targeted tax – while insisting a capital gains tax was ‘‘too crude’’.
The move comes after Prime Minister John Key’s call for the Reserve Bank to strengthen borrowing limits.
But deputy governor Grant Spencer indicated any move to require 30 per cent deposits from Auckland property investors would not come quickly.
Spencer also turned the spotlight back on the Government suggesting it look at ways to boost housing supply, reduce the tax advantage enjoyed by residential property investors and review immigration numbers.
He said the prospect of capital gains remained a key driver for investors, in the face of falling rental yields, fuelled by the ready availability of credit ‘‘and a tax system that favours debt-funded capital gains’’.
Little’s speech today is the last in a rolling series of announcement on housing policy coinciding with Labour’s 100th birthday celebrations and aimed at highlighting the Government’s failure to get on top of a range of housing-related issues, from growing homelessness to soaring prices and a shortage of new and affordable houses.
The party has included a pledge of $60 million over four years to boost emergency housing and earlier promises to ban foreign-based investors from buying existing homes.
At a special centennial conference yesterday, Little said he would turn Housing New Zealand into a ministry instead of a corporation, so it no longer acted as a ‘‘cash cow’’ by paying more than $100m in dividends to the Govern- ment each year.
Instead, the money would go towards building at least 1000 state houses a year until there were enough to meet demand, while stopping the Government’s sell-off of existing homes.
Treasury has long argued in favour of a ‘‘bright line’’ test, and in 2010 pushed for it to be set at five years saying it would help bring about ‘‘behavioural change’’, though it would not raise much revenue.
The current two-year test, which kicked in last October, is expected to bring in $1.25m in the period to June and deliver $2m a year to Treasury’s coffers when it is fully implemented.
IRD has consistently opposed the bright line rule.
Labour is expected to hold off until election year 2017 to flesh out the plans for its state house building programme.