The dust of the election is still settling, but we want to keep you informed about how potential changes may impact you as a property investor.
Preliminary Election Results and What Lies Ahead
The National Party appears to have won the election, but it’s worth noting that the final government formation isn’t confirmed yet. More than 500,000 special votes are pending, and the conclusive result will be available on November 3rd. National will require support from coalition partners and we have reviewed their policies that impact you below. From this we can get a good understanding of where things are headed.
National Party: Key Policies Impacting Property Investors
- 90-Day Notices: They plan to reintroduce the 90-day notices to end tenancies without cause which contrasts with the current Residential Tenancies Act (RTA) requirements where landlords must fall within the specified reasons
- Interest Deductibility: National plans to reinstate interest deductibility gradually;
- For the year ending 31 March 2024: 50% of your interest is deductible
- For the year ending 31 March 2025: 75% of your interest is deductible
- For the year ending 31 March 2026: 100% of your interest is deductible
- Brightline Test Alteration: National pledges to pull the brightline test for rental properties back to two years from Labour’s existing 10 years by July 2024. This implies that properties acquired before July 2022 will not come under the brightline test during sale.
- Foreign Buyers: National will allow overseas buyers to purchase properties valued over $2,000,000 provided they pay a 15% tax
ACT Party: Key Policies Impacting Property Investors
- Immediate Interest Deductibility: Unlike National’s phased approach, ACT will reinstate interest deductibility for residential landlords from April 2024 directly.
- Brightline Test Abolition: They propose to abolish the brightline test, which they perceive as a covert capital gains tax initially brought in by National.
- Tenancy Rules: ACT seeks to simplify the process for evicting troublesome tenants, allowing landlords to issue a 90-day notice without providing any specific reason.
- They also aim to reverse Labour’s alterations to notice periods: Tenants’ notice period will return to 21 days (currently 28). Landlords will have a 42-day notice period if they wish to sell or move in (currently 90 days for selling and 63 days if they want to occupy).
- Pet Bond: To increase the number of rentals accommodating pets, ACT plans to permit landlords to charge a dedicated pet bond.
New Zealand First: Key Policies Impacting Property Investors
New Zealand First, another key player in the political landscape, also has policies aligned with the interests of property investors:
- Interest Deductibility: New Zealand First has pledged to reinstate interest deductibility for landlords.
It’s crucial to remember that these are policy proposals, and the final legislation may differ once the new government forms and policy discussions ensue. Nevertheless, we can see that National’s possible partners have more favourable policies on interest deductibility and changes to the brightline and RTA
How Will This Impact Property Investors?
Interest Deductibility – When this policy was announced, we did a webinar with Kirit Lal from Walker Wayland Accounting and we created an example spreadsheet. We have now updated this sheet with an additional tab that includes the National party interest policy, so you can enter your data into this to see the reduction to your tax bill.
In our example of a 750k loan at c3.5% our tax savings across Ye 2025 and Ye 2026, we would have paid $16,500 in tax across the two periods and under the possible changes with National this will drop to c$4,500
This represents a significant change in the feasibility of this investment moving forward.
You can find the example Excel sheet here. We have left our data in it, but please feel free to enter yours into the first tab and the results of the rest will populate. Please note this is for advisory purposes only and you should always seek your own advice from an accountant. We recommend Kirit at Walker Wayland.
90-Day Notice Reinstatement – This will give greater power to landlords, plain and simple passed under the guise to allow us to take chances on tenants that might be considered more risky as you will be able to give a 90-day notice during a periodic tenancy or stop a fixed term automatically continuing if you are not happy with the tenant.
We hope you find this information useful, and we’ll have another update when the government has been finalised, with the impacts to investors explained.