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18-05-2010

Budget 2010: What's instore for landlords and tenants?

TV3.co.nz

Thursday is budget day when the Government will announce what it's got in store to get the economy back on track.

In the second part of our (TV3's) special budget series – today 3 News examines the possible changes planned for landlords and tenants.

Lee Whiley is an Auckland property investor who owns five houses and makes a living out of renting them out.

“Most of tenants are kids basically – university kids – and it takes me back to my days flatting as a university student, it’s great,” Mr Whiley says.

But life as a landlord might soon be less profitable; property tax changes are looming in the budget.

“The biggest thing for me is possibly taking away the depreciation on my buildings against my income and that could have quite major affects,” Mr Whiley says. “I'm picking it could double the amount of tax I pay at the moment.”

Property investment is currently taxed the same as investment in local shares or any other business.

“It's not fair in that it seems they're going to take property investors and put them into a different category to everybody else.”

Andrew King of the Auckland Property Investor’s Association believes the Government has failed to do its homework.

“They're claiming that we don't pay tax and we don't do this year after year when, in fact, the Inland Revenue have provided them with information that there have only been two years in the last 28 when rental properties have made a loss so the whole basis for targeting rental properties for tax increases is actually false,” Mr King says.

Removing landlords' tax benefits could open up the market to first time home buyers. Mr Whiley won't be selling – but he won't buying either.

“I intend to dig in there and live a little bit more frugally,” he says.

The Government could ring-fence property tax losses but even if it just removes depreciation claims, each rental property could be affected on average by about $35 a week.

While that'll certainly dent investors' cash flows, the biggest losers could be the country's tenants – with rents almost certain to go up.

Source: TV3.co.nz

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