Investment in real estate, especially residential properties, remains a popular choice of investment. One can see why it is attractive to New Zealand taxpayers —
- For one, there is no capital gains tax on the eventual sale of the property and land tends to appreciate with time;
- The current rate of after-tax return on fixed-term deposits is low;
- Many are risk-averse when it comes to sharing investments in the wake of the 2008 financial crisis.
However, property owners should be aware of the following regarding residential rentals:
- Repairs and maintenance expenses are only claimable if the repairs were carried out while the tenant was still living in the house or the house was still available for renting purposes. Often overseas owners returning home realize the damage done to the property after the tenants have moved out and because of the change to private use, accordingly Inland Revenue may not allow a claim for repairs to such damages.
- Splitting losses – unless the Inland Revenue is satisfied with documentary evidence to the contrary, a couple owning the property jointly cannot split rental losses unevenly. Often the higher income earning spouse claims all or most of the losses when they should be split equally.
Important: This is not advice. Clients should not act solely based on the material contained in the Client Newsletter. Items herein are general comments only and do not constitute or convey advice per se. Changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.
