Market Snapshot

Candid, opinionated, and unedited video snapshots on all things real estate, recorded while driving around Hamilton!

This 4 minute clip considers the Budget implications for property investors ...

how can you mitigate the effect on cash flow of being unable to claim building depreciation?

Key property tax measures include:

• denying depreciation deductions for buildings, such as rental housing & office buildings, with an estimated useful life of 50 years or more. This takes effect for all such buildings from the start of the 2011-12 financial year (for most people, 1 April 2011)
• changes to the tax rules for qualifying companies (QCs) & loss-attributing qualifying companies (LAQCs), taking effect from income years starting on or after 1 April 2011
• preventing property investors from offsetting rental losses against personal income with respect to Working for Families eligibility, from 1 April 2011
• income tax rates will be cut from 1 October 2010 as shown in the table below.
• depreciation is still clawed back at sale – this can be mitigated by writing the book value into S&P Agreements, which no longer has an adverse impact on purchasers (who cannot claim depreciation on the purchased asset)
• chattels can still be depreciated for tax purposes
• building owners will still be able to claim deductions for repairs and maintenance, to maintain the condition and value of their properties. They will also still be able to claim depreciation deductions for "fit outs" not considered part of the building

Your feedback is welcome