90 seconds at 9am: English flags tightening of property trading rules, ringfencing

Watch on our video page here. Watch on YouTube here. Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news reported by the NZHerald's Brian Fallow that Finance Minister Bill English told Parliament's Finance and Expenditure select committee yesterday that the government may yet tighten up the rules around trading income for property investors, which could bring in tax revenues on capital gains. Currently property investors can be taxed on their capital gains if the IRD can prove their 'intent' to trade for capital gains, rather than just holding for rental income. If property investors can prove they never intended to 'flick' a property then they don't have to treat sale proceeds as 'income'. English talked about tightening the 'intent' rules or introducing a 'bright line' test of say 2 years for capturing property trading income. English also said the government was still looking at ring-fencing of losses for property investors.

"There has been discussion about whether the intent test in the tax act is well understood and properly administered, and should there be other tests like a bright line test, for instance a two-year test," he said. That would make a gain taxable if the vendor had held the property for less than two years. "I'm not signalling today any particular conclusion the Government might come to." English also confirmed that ring fencing, or preventing tax losses on investment properties from being used to offset other income, was another option still on the table.

Meanwhile, Federal Reserve Chairman Ben Bernanke signalled how he might withdraw monetary stimulus, suggesting a hike in the discount rate first, but said the Fed Funds rate would stay low for an extended period. Confusion still reigns in Europe over whether to bail out Greece ahead of a crisis meeting tonight. Also, Standard and Poor's cut its outlook on the A ratings for Citigroup and Bank of America, saying bondholders may be hit by any further government bailouts.