“An educational campaign on property taxation should be funded with some of the extra money to target residential property speculators the IRD may receive in this year’s budget,” says Andrew King, Executive Officer of the NZ Property Investors’ Federation (NZPIF).
Deputy Prime Minister and Minister of Finance, Bill English, recently hinted that this extra funding is likely and the NZPIF supports the move.
There is a wide held belief that investment property has some form of tax advantage, but this is completely wrong. The misapprehension is not helped by certain commentators continually repeating that property has a tax advantage without actually stating what it is.
"At a meeting some time ago I asked a prominent media commentator, who continually says that rental property has a tax advantage, what that advantage was. He came out with a couple of issues that were wrong. When he couldn't answer the simple question he finally said that everyone knew there was an advantage," says King.
The fact is that if anyone buys a property in New Zealand with the intention of selling it for a profit, then any profit they make is taxed.
As long as some commentators continue to say that property is not taxed, the general public can be forgiven for believing it is true. Based on this, some people will no doubt trade in property believing they don't owe tax. With the IRD likely to have ways and means and more resources to uncover these peoples’ actions, they are putting themselves at serious risk.
Because of this, the NZPIF believes that part of the extra funding that the IRD receives to target property speculators should be applied to education. While commentators are providing misleading information to the general public it is unfair to prosecute people who unwittingly don't comply with the tax rules.