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Dear Finance & Expenditure Committee,

Thursday, April 04, 2019


It is 6 pm and I start work at my second job, the one I am doing to make sure I can provide for my own retirement and I’m not solely reliant on the government to support me. I am a painter, kitchen builder, curtain hanger, and cleaner also known as - property investor. I continue working until about midnight, then go home and get a few hours’ sleep to do it all again tomorrow, after I have spent 8 hours at my day job, working to make sure I can pay the mortgage. I am making a loss, a particularly big one in the months that I am renovating a property without rental income, to improve the standard of housing I am providing for tenants. I invest in lower socioeconomic areas, so I might get a full night's sleep without the police calling to say that one of the back to base alarms that they have installed at the property, for women who need due to their extremely violent partners, has gone off and there is damage to my property. I choose these tenants because I want to give back to others during my investing journey, this month 50% of my tenants are single mothers who struggled to get other rentals and often have extremely violent partners.

This is my story and I am telling it to you not to impress you, but to impress on you that I could not have done this without the ability to offset losses against my income. In the beginning, I was highly geared and making significant losses, but it is often the only way to get on the ladder and I wasn’t going to make losses forever. And I think my story would be echoed many times over by new property investors at the outset of their investing journeys

My name is Kristin Sutherland and I am here on behalf of the Auckland Property Investors’ Association Incorporated. We are a not-for-profit society set up to provide education and support for ordinary Kiwis who wish to create a secure retirement by investing in rental properties. We currently represent 700 investors who largely identify themselves as long-term buy-and-hold landlords. On average, our members own just under 5 rental properties.

As an organisation, we are very concerned about the effects ring-fencing rental tax losses have on investors and their tenants.

While we join the Government in its concerns over house prices and the seemingly insurmountable hurdles for young people to buy their own homes, we do not believe ring-fencing will provide any relief for the following reasons:

1. One of the assumptions supporting ring-fencing is not only incorrect, but also wrong in a material fashion. The assumption is that investors drive up house prices by out-paying homebuyers. Investors buy on numbers and are therefore motivated to pay as little as is necessary to secure a property. The less the acquisition cost, the higher the return. Homebuyers on the other hand buy on emotion and tend to be more willing to pay over the odds in order to secure a property they have simply fallen in love with.

2. For an investor, the ability to deduct tax losses is a relief not an end-goal. Let’s not forget, in order to claim the deduction, the investor has to make a loss in the first place. No investor, in their right mind, ever wakes up in the morning and says to herself, ‘I am going to do everything within my power to make a loss today.’

3. The timing of the tax relief that is to be granted defies logic and economic reasoning. As you have already heard the after a $50,000 cash deposit, to provide the average NZ property as a home for a tenant, an investor needs to top up the investment by $200 per week for the first year. Currently, the loss can be claimed against other income resulting in an actual loss of $132 per week. Take the ability to offset losses away and $200 per week out of the average weekly income of $832 after tax income is a large amount to find each and every week. But the tax credit doesn’t go away, it is preserved, carried forward and granted when the landlord becomes profitable. It makes little sense to withhold a tax relief when the landlord and his tenant need it, only to grant it when they don’t.

4. A note on fairness - Rental property ownership is a form of business. It is often a loss-making enterprise in its initial years, much like many other businesses. As stated, business owners of all creed treat deductions as a relief to ride out the tough years, not as an end-goal. In addition to the obvious commercial outcome, rental property owners also serve an important social function - that is the provision of housing for many Kiwis who are either unwilling or unable to own their homes. Our members should be encouraged, rather than singled out by a punitive tax law that isn’t applied to other business owners. Why is it that a motel owner is deemed worthy of seeking tax relief when a residential landlord is not?

I wanted to get some numbers on small business trends (as most property investors are small business owners) - I am sure you will know these much better than me but 50% of small business fail in the first 4 years and 82% of these are because of cash flow problems, ring fencing of losses will surely exacerbate this failure rate for property investors. And who does the burden of providing housing fall back onto then?

And if we look at the break down of small businesses in general 40% are profitable, 30% break even and 30% are continually losing money, so are property investors different to any other small business in this respect, and if not why should we be treated differently to all other business owners.

In response to the government's concern regarding home affordability, We are very concerned that, by its own admission, the IRD has a ‘low’ degree of confidence that ring-fencing could ‘improve first home buyers’ ability to compete with investors. Which leads us to the question ‘Why the rush?’ If ring-fencing is to be touted as the solution for home affordability, wouldn’t New Zealanders be better served for ring-fencing to be introduced only when the government is more certain and has more control over its ability to achieve the desired objectives?

In summary

  1. Ring-fencing will not reduce house prices that bar young New Zealanders from owning their own homes. The market is driven primarily by supply and demand. Band-aiding things such as tax relief distract from the core issue of a lack of supply. Simply put, the answer lies in a better supply and demand balance
  2. Residential landlords provide an important social function of providing housing for those who are unwilling or unable to own their own homes. Our members’ interests are tied in with the interests of their tenants and for that reason, they should be encouraged. Making it difficult to hold onto a loss-making property when the landlord clearly intends on long-term profitable ownership puts tenants’ security of tenure at risk. If private landlords are not providing rental accommodation for those who need it, who is?

Thank you.

The above is a transcript of APIA's oral submission to the Finance and Expenditure Committee concerning the proposal to ring-fence rental tax losses by the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Bill by board member Kristin Sutherland. The submission was made by video link on 3rd of April 2019 to the Committee with one follow up question being whether, in Kristin's opinion, ring-fencing of tax losses would lead to an increase in rent to which Kristin answered in the positive. Click here to watch a recording of Kristin's talk and here for a recording of the entire session. 


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The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

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Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited