fencing rule to reduce residential property investors’ tax bills by $300m a year
The Act party in New Zealand is proposing to reinstate tax rules that allow residential property investors to deduct rental losses from their total income. Proponents argue this will lower costs for renters, while critics view it as a tax break for landlords.
Why it matters
This policy debate reflects broader tensions regarding housing affordability and the role of tax incentives in the rental market.
Act is pledging to reinstate a tax rule that could benefit residential property investors to the tune of $300 million a year.
The party wants to allow investors to once again deduct losses from their rental properties from all their income, including their wages/salaries.
Investors could do this until a loss ring-fencing rule was introduced by the Labour-led Government in 2019 in a bid to make the tax system “fairer”.
Under this rule, which the coalition Government kept in place, an investor who suffered a $10,000 loss on their rental property over a year and received a $100,000 salary from their unrelated day job would have to pay tax on $100,000.
They could then carry their $10,000 rental loss forward to the following year.
Under Act’s proposal, the investor would be able to deduct the $10,000 loss from their salary and would only have to pay tax on $90,000.
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