By Rebecca Wright
The Prime Minister plans to close the property tax loophole in which he estimates half of residential property investors are being subsidised by the taxpayer.
He announced in his tax reform speech today that investors will no longer be able to cheat the system.
For investors like Claire Morgan, her little love affair with housing could be coming to an end.
The Government will close the door on tax loopholes for people who buy a rental property, run it at a loss (by depreciating the asset), claim those losses back against their personal income and effectively get a rebate from the IRD - a subsidy from the Government.
“We're trying to put a bit of fairness in the system,” said Mr Key.
Reining in the paper losses is expected to make the Government about $1.3 billion a year.
The money will effectively come out of the pockets of people like Ms Morgan, who says in light of the announcement she may look at selling up.
“If this happens rents probably won't cover the mortgage, I’ll have no money for maintenance or any improvements so if I’m having to top them up too much each week I might have to look at selling,” she says.
Some say Mr Key’s move to close down loopholes will hit small time investors hardest.
Mr Key says not all investors are running rental properties at a loss.
“The advice we've had is that about 50 percent of people are running them properly and in the end we just want that asset to stack up in its own commercial and financial right,” he said.
The Government is trying to cool the property market but this is also about people paying their fair share, it's about removing the ability to rort the system.
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