A survey of chartered accountants and tax agents has revealed that incoming legislation intended to help cool New
Zealand’s over-heated housing market is already having a major effect on investors – but largely because of confusion
and lack of detail rather than clear policy.
The annual survey, jointly run by Chartered Accountants Australia and New Zealand (CA ANZ) and Tax Management New
Zealand (TMNZ), sought the views of 361 accountants in public practice, on recent tax policy developments.
Among the findings, the survey revealed that 70% of respondents have already seen clients change or voice their
intention to change their residential property investment behaviours due to ongoing changes to the extended bright-line
test, and proposed changes to deny interest deductions.
CA ANZ NZ Tax Leader John Cuthbertson said that further results from the survey show to key factors in play; the
complexity of the proposed rules, and uncertainty as the details could change before the legislation is enacted in March
2022, despite the bright-line and denial of interest deductions coming into play from earlier this year.
“The survey suggests that the housing market has been given a policy placebo, in the form of legislation that is
influencing behaviour before it is fully developed and enacted.”
“Residential property purchasers and investors typically react to the specific detail of legislation. However, in this case
the market appears to be reacting to the complexity of the proposed legislations carveouts and inconsistencies, and the
fact that it won’t know exactly
what is in place until March 2022, despite it being backdated to capture activity in 2021.”
“To be fair, the Government’s aim was to cool down the overheated housing market, which is causing a range of economic
and social issues, but we’re not sure this is the best way to do it.”
The survey shows that over 21 per cent of the respondents, or 1 in 5, feel ‘not at all confident’ about advising clients
on the proposed new build interest limitation rules, and over 65 per cent of participants felt the phase out and denial
of interest deductions would be somewhat or extremely difficult to comply with.
Similarly, almost 50% of respondents said they were either somewhat confident, or not at all confident on advising on
the new build bright-line test.
“Because this policy hasn’t been developed in line with the generic tax policy process
(GTPP), there’s a much higher chance of unintended consequences and collateral damage. The survey shows a considerable
lack of confidence in how the legislation will work, and that will likely result in non-compliance and issues around who
is captured and who isn’t.”
“It’s important to note that the level of complexity encountered will depend on the number of properties owned, banking
arrangements in place and the mix of interest limitation rules and concessions in play,” added Mr Cuthbertson.
TMNZ Chief Executive Chris Cunniffe said the survey provides a good indication of how the proposed rules would be rolled
“In their current complex form, there’s likely to be a lot of variability in compliance with these laws. Especially as
not everyone has a tax agent or accountant helping them.”
“While the extension of the bright line test to 10 years might land well for most mum and dad property owners, the
denial of interest deductions and how that relates to new builds is likely to be misunderstood.”
“There’s opportunity for Government to provide greater clarity on the law changes and simplify certain aspects to help
owners and accountants alike.”
CA ANZ will be making an oral submission to the Finance and Expenditure Committee on Monday.