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T(65)6259 0880
F(65)6353 3070
1 Goldhill Plaza
#02-47
Podium Block
Singapore 308899
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In New Zealand, there is no
capital gains tax. However, if a property is purchased
with the intention of selling it at a profit, then the profit
is taxable. You are therefore able to obtain some of your most
substantial profits (capital profits) tax free, even if you
realise them by selling your property.
Two major areas of taxation that affect property investors are
income tax and
goods
and services tax .
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1. income tax ...
For income tax purposes, property investors are treated the
same as any other business people. The income (rent, in the
case of property investors) is assessable income, but you can
deduct any expenses incurred in gaining that income.
Tax rates in New Zealand are as follows:
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Annual
Taxable Income (NZD) |
Individual
tax rates |
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Between 0
– 38,000 |
19.5 cents
in a dollar |
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Between
38,001 – 60,000 |
33 cents in
a dollar |
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Over
60,001 |
39 cents in
a dollar |
Company tax rate and Trust tax rate
are 33 cents in a dollar.
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All income earned in New Zealand
are taxed.
For further information on tax matters in New Zealand, visi
Inland
Revenue - Te Tari Taake, New Zealand ,
or access the pdf file
Inland
Revenue Rental Income Booklet which gives information
on taxation rules for renting residential property, boarders,
flatmates and child care.
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» tax deductible expenses ...
The usual categories of expenses that property investors claim
are as follows:
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Accountancy fees: This includes any book-keeping or
management charges.
Advertising: This covers the costs of advertising any
property that you have to lease. However, cost of advertising
for the sale of a property is not tax deductible except
against depreciation recovered.
Bank charges
Depreciation: This covers the depreciation on the
property and its chattels (things such as carpets, drapes,
light fittings, etc). However, depreciation on land is not
allowed. Upon purchase, you need to apportion value of the
property between:
Land -- on which claim of depreciation is not allowed.
Building/Property -- depreciation at 4% diminishing
value.
Chattels -- depreciation at varying rates from 10 to
40%.
For further details on depreciation, see
FAQ
for Overseas Property Investors by O’Halloran .
Entertainment: This covers the costs of entertaining
any person associated with your property business, be they
vendors, purchasers, tenants, real estate agents, valuers,
professional advisors, etc. You may claim only 50% of this
expenditure as a general rule.
Insurance
Interest charges: The interest on your mortgage.
Home/Office expenses: As you would most certainly work
from home, your home also becomes your business office. Thus
you may claim part of the expenses from running your home
office. This covers such items as interest on any mortgage,
rates, insurance, cleaning, repairs and maintenance. You would
normally claim about 10 to 20% of these costs, depending on
the size and layout of the home and the amount that you used
to run your property rental business.
Legal fees: Legal fees for conveyancing are not
deductible, but legal fees for the arranging of finance, lease
documentation and general property advice are. Thus, it is
necessary to apportion your lawyer’s account on purchase,
showing what was for conveyancing and what was for other
matters.
Meetings, conferences and training costs: This includes
travel, accommodation and course costs.
Motor vehicle expenses: These expenses are claimed
based in the proportion of business use shown in a log book,
which you must keep for three months every three years. You
can then claim that percentage of all vehicle expenses,
including petrol, registration, insurance, maintenance and
depreciation.
Postage and stationery
Rates: Refers to all rates paid on investment property
such as water and council rates.
Repairs and maintenance: Costs of repair and
maintaining the property are tax deductible. However,
improvements to the property, which are of a capital nature,
are not deductible.
Subscriptions: Magazines, journals, newsletters and the
newspaper are deductible.
Travel and accommodation: Costs of any travel and
accommodation associated with your investment may be claimed.
Telephone/Fax/Internet connection
Valuation fees
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DISCLAIMER
All information provided are to the best of the authors'
knowledge true and accurate. No liability is assumed by the
authors, or publishers, for any losses suffered by any person
relying directly or indirectly upon this information. It is
recommended that clients should consult a senior
representative of a reputable accounting or tax consulting
firm before acting upon this information.
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