Renting Taxes
Renting taxes add to the cost of rental home .
When rental homes fail to pay their costs -
● Homes disappear
● Rents increase.
● State housing demand increases
(Each state rental looses around $700 weekly without possible
capital gain)In 2022, three "landlord" taxes were introduced.
Later, two of these taxes were removed leaving only "Ring-fencing tax".In 2026 NZ Labour party committed to introduce a new "capital gain tax" for rental homes. They also want to add "Interest deductibility tax".
Normal Income Tax
Normally, "taxable incomes" (E.g. wages, benefits, interest, dividends & business activities). are totalled for income tax assessment. If any of these income sources makes a loss, then this loss reduces the tax payable.Income "Ring-fencing Tax" for rental homes
Taxable profit is added for income tax payments like all businesses. However, unlike other businesses when a "rental home" makes a loss, this does NOT reduce the income tax payable, The additional cost is "Ring-fencing Tax"
Example of "Ring-fencing Tax"
A "residential" rental property that looses $5,200 is charged $1,700 or $33 weekly more income tax than others encountering the same loss.NOTE: Ring-fencing tax may be reduced if:-
● Annual losses are recorded and offset by future profits.
● Owners with multiple properties (with some showing taxable profits), combine them all into a "portfolio" with IRD. Declaring one combined (positive taxable income) income.
Proposed "Capital gains tax" for rental homes
CGT is 28% of the capital growth made when when the property is sold
If introduced, this CGT begins to accumulate from July 2027 only on home rental properties. Our calculator shows this tax will add around $86 weekly to rental costs just for inflation growth.
Proposed "Interest tax" for rental homes
If introduced, this "renters tax" stops a home rental business from claiming a reduction of any taxable profit based in the cost of interest it pays to any other lenders. (E.g. bank mortgages). All other businesses deduct interest costs from their taxable incomes. Our calculator shows this tax will add around $57 weekly to rental costs.
These two proposed taxes have been enforced and removed then proposed for reintroduction. Together these taxes add around $150 weekly to the costs of renting a home.
See also viability
Note:-
Owners should seek advice from an experienced, qualified professional accountant or tax advisor on whether to continue with long-term renting or to sell "residential" rental properties and find other more profitable investments with lower risks and taxes.