PM John Key not ruling out further tax changes which might affect property market, but says comfortable with current system

PM John Key not ruling out further tax changes which might affect property market, but says comfortable with current system

National is not ruling out further tax changes that could affect the property market, although Prime Minister John Key says he is happy with the structure of the tax system following changes made in the 2010 Budget, and actions such as the removal of gift duty earlier this year.

Asked on National Radio this morning whether altering depreciation rules on buildings - which National says is taking NZ$800 million out of the property sector a year - was as far as National thought it needed to go, Key replied:

"Well, you never say never of course in politics - for the most part you don't - but actually I think we've tightened that sector up a lot and we're doing well there. If you go back to what we've done with the tax system, we have heavily reduced the bureacracy and compliance - we were able to get rid of gift duty."

"Gift duty was a tax that raised us just under NZ$2 million a year, and cost the country about NZ$70 million to comply with," Key said.

"We look at the tax system as genuinely a mechanism for incentivising business and investment as opposed to something which ultimately carries a deadweight cost and a compliance cost. We're very happy with the structure we've got," he said.

Treasury is still considering a policy to index interest payments for inflation - a move which would hit property investors who write off mortgage interest payments against their taxable incomes. If enacted, the indexation rules would mean investors could only write off the real interest rate (once it has been adjusted for inflation), rather than the real rate - a move that mean they had to write off less against their income if there was inflation.

Key was not asked about this policy this morning, but Finance Minister Bill English discussed this as an option several months ago.

(Updates with link to previous article)

More soon.

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I was listening to this interview on Radio NZ....and if I was a property investor I'd be a little worried...the response from Key left the door wide open for further changes in the property sector...a raging stockmarket with regular IPO's creating headlines is what Key wants, not Ma & Pa squeezing every last penny out of tenants...

Its politics, mate!!! This way he plays both sides!!!

Yer right JK, that's a tui award about the gifting, as the new gift duty provisions are not as some might expect.  My lawyer says unless one continues to gift $27k a year, if and when you might get sent to an old person's home, govt will still consider any one-off gifting as your individual capital, even if you did it 20 or 30 years prior.

The gift duty changes have had a zero- nil -nothing - zilch affect on RSU subsidy's.  Your lawyer is porking you if he says otherwise.  

The only downside to the changes are the risk from the Gummit side...that being the 27k per year that was typical did leave a trail to follow when confirming the assest of the the trust verse those of the individual.

This caught my eye "Treasury is still considering a policy to index interest payments for inflation"

The first I'd heard that indexing interest payments to inflation for tax purposes was being considered. I presume that would include all business and, of course, interest earned on deposits for savers.

Any clarification?

This has been talked about for a while. Came out of the Tax Working Group.

More detail in this report from Alex

http://www.interest.co.nz/news/54845/government-still-eyeing-savings-tax...

cheers

Bernard

"Key comfortable with current system". 

Of course he is, it presents no barriers to the rich getting ever-richer.

Must be a fair bit of back-slapping going on between Key & his rich mates at how they have managed to keep the system porked their way

Cheers to all

This is just rediculous how we can see this happen and cannot do anything about it... we could have done something, if we had a better Opposition party!!!

Gareth Morgan's take on this issue:

"National is deadly quiet on the tax loopholes and that is not a good look for those of us concerned about the inequities in our tax regime. The biggest loophole is enjoyed by the owners of capital that generates an un-competitively low taxable return yet delivers a handsome post-tax return overall. That is unjust, it distorts the deployment of capital around the economy and produces lower GDP than is necessary."

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10764433

Cheers

But it makes the rich very happy.