Little gunning for speculators
Labour is lining up property speculators with a clampdown on tax loopholes to even the playing field in favour of New Zealand’s firsthome buyers.
In a speech this weekend to Labour’s election-year congress, leader Andrew Little said the loophole that let property speculators offset losses from their rental properties against other income for tax purposes would be closed.
‘‘Labour will close the tax loophole that allows speculators to claim taxpayer subsidies for their property portfolio,’’ Little said.
‘‘Right now, speculators can take losses from their rentals and offset that against their personal income.
‘‘It allows them to avoid paying tax. This loophole is effectively a hand-out from taxpayers to speculators. It gives them an unfair advantage over Kiwi families.’’
Under the proposed change socalled ‘‘mum and dad’’ investors who bought rentals as a long-term investment would not be affected as most of them did not use the loophole, Little said.
Those that did would have time to adjust.
"This policy is about the big speculators who purchase property after property." Labour leader Andrew Little
‘‘This policy is about the big speculators who purchase property after property.
‘‘It’s about those big-time speculators who are taking tens of thousands of dollars a year in taxpayer subsidies as they hoover up house after house.’’
The change would save about $150 million a year, with that money being diverted to Labour’s healthy homes policy.
Homeowners and landlords would be able to get up to $2000 towards the cost of upgrading their property’s insulation to modern standards or installing heating.
Over a decade, that would add up to 600,000 homes across the country, costing $1.2 billion.
Property Institute of New Zealand Chief Executive Ashley Church labelled the party’s tax crackdown a cynical electoral ploy that risked slowing housing supply.
‘‘Your typical property investors are average mums and dads – not wealthy, cigar-smoking fat cats – and their ability to purchase an investment property is usually leveraged against the equity in their home and their ability to claim losses in the early years, like any other business does.
‘‘This move would certainly stop them investing but, in the process, it would quickly lead to a shortage in rental housing, which would fall back on the Government – so it would end up costing the taxpayer a lot more in the long run’’.
Instead of punitive action, politicians should encourage private investment in the construction of new dwellings as quickly as possible, Church said.
‘‘There’s a need for smart and innovative solutions that harness the power of mum and dad investments to get those houses built quickly.
‘‘That might include giving preferential tax treatment to investors who build, or buy, new homes – not punishing them for doing so.’’