IBBZ Accounting

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Blog posts tagged in Residential Property

Ring Fencing Rental losses: another nail in the coffin of residential rental investment.

Why ring fencing rental losses are being introduced


Auckland residential market has been hot topic for several years. It has been going in only one direction upwards. The Government has been trying to make changes in tax policies since 2010. Firstly, they abolished LAQC, and depreciation on building, then introduced bright line test. Currently the bright line test has been extended to 5 years from April 2018 onwards, and Ring fencing of rental losses are being introduced from April 2019.

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New bright-line test

From 1 October 2015, the Parliament introduced some changes to the property rules called as Bright-line test. The purpose of the test is to reduce the number of foreign speculators on NZ property and thus maintain positive housing prices of big cities in New Zealand. This rule only applies to residential properties bought on or after 1 October 2015. The idea behind the test is that taxpayer has to pay tax on the gain when you selling your property (with some exceptions). By taxing on the gain, it somewhat discourages speculators for housings as the profit is not as good as before.


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