News

We won’t know the details of tax changes aired by the Tax Working Group until the budget on May 20, but naturally in our industry there has been much speculation and analysis around land tax and denying of depreciation allowances. On land tax, about $2b of the $2.3b mentioned in the report is expected to be raised from residential and rural property, but while this leaves commercial property with apparently a relatively small proportion to pay, (although still hundreds of millions of dollars annually)  history would suggest that when land based taxes are being raised, local and central government can be tempted to make political concessions to the residential and rural sectors, an example being the long term use of differential rating systems which favour residential owners. There is already speculation that property with land values below a certain threshold, such as forestry and farmland, could be exempted.

Talk of owners’ ability to pass on costs such as this (and the effective cost of denying depreciation on buildings) to tenants, as if this somehow neutralised its effect, is misplaced – costs have to be absorbed somewhere. Our rental indices forecast negative or neutral rental movement in 2010 for all sectors in the three main centres. They are likely to be further negatively affected by these tax changes if confirmed. In the interests of balance, we should mention that the potential decrease in personal and corporate tax will partially, maybe even largely, offset these changes in an overall sense, but the devil will be in the detail, and that won’t be revealed until May 20.

Print this article or Email to a friend