RESIDENTIAL RENTAL PROPERTY- FEATURES AND TAXATION

 

BENEFITS OF INVESTING IN RENTAL PROPERTY IN NEW ZEALAND

capital appreciation ( not guaranted but occurs more than not)

no capital gains tax- unlike Australia or the UK, New Zealand has no capital gains tax.   Wealth, profit or estate equity created through personal or business investment is not taxed. 

no interest clawback

no stamp duty on residential property- in 1999 the Stamp Duty Abolition Act amended the Stamp and Cheque Duties Act 1971, stating that instruments executed after 20 May 1999 no longer attract conveyance duty or lease duty, and do not need to be submitted to the department for stamping.

no financial transfer taxes- unlike Australia, the New Zealand government doesn't tax the transfer of funds through the banking system.

no wealth or death duty- unlike many other countries, New Zealand has no indirect taxes on wealth.   Inheritances on death can be passed to beneficiaries without estate duties applying.

personal tax rate-  New Zealand has low personal tax rates compared to the western world.

no limit on losses available

favourable depreciation rates.   New Zealand has one of the highest residential depreciation rates in the world.   Tax deductible depreciation allowances may be carried forward indefinitely and be offset against future tax income.  It should be noted though that depreciation should be declared back as depreciation recovered income when the property ceases to be a rental property or is subsequenly sold at a value higher than cost

stable government policies

allows easy entry into the Investment Property owning field

provides a service which has a high demand

is the best security for lenders

it is easy to spread your risk over several properties with several points of income

it provides instant and consistent cash flow

it protects the value of your investment (hedge against inflation) assuming property values increase at rates equal to or higher than inflation

it provides an asset that is easily tradeable

it is not time consuming

many taxpayers derive more satisfaction and feel more comfortable with an investment which is  bricks and mortar and which they  can see, touch and take pride in as opposed an investment with a certificate.

 

TAX ADVANTAGES OF RENTAL PROPERTY

only rental earned is treated as assessable

capital gain (the excess of sale price over original cost) is not treated as income

can claim all costs involved

the opportunity to keep the property in good repair and claim these costs throughout the years which may improve the resale value

no interest clawback when the property ceases to be a rental property

if there is a loss (i.e. expenses higher than assessable income) this can be deducted against other income earned by the taxpayer which will reduce the income tax liability

 

EXPENSES CLAIMABLE ON RENTAL REAL ESTATE

 rates

insurance

interest on borowings

borrowing costs

loan repayment insurance

agent's comission

management fees

repairs

cleaning

gardening

depreciation

advertising

telephone

stationery/ postage

hire charges

pest control

body corporate fees

accounting fees

business deductions

electricity

bank charges

heating and cooling

mower fuel

rubbish disposal costs

motor vehicle

any other relevant costs 

 
McLean and Co prepare Property Investment Financial Statements for a number of clients.   Please make contact with us if we  can assist you in this regard.

 

 

If we can assist further, please email McLean and Co as follows:

 CONTACT McLEAN AND CO. BY EMAIL BY CLICKING ON THIS LINK

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