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What's on the Horizon and some top summer tips!

Posted 1/2/2019

In this blog post we cover an update about what is on the horizon for legislation changes that will affect rental properties, and some tips for summer time!

Future Changes on the horizon

In this blog, we thought we might share a few changes that might be on the horizon for potential legislative changes that may affect rental properties.

Ring-fencing of rental property losses?

There was a draft release of a taxation bill in December 2018 that gave us some detail around the possibility of ‘Ring-Fenced’ losses for rental properties. What ring-fenced means is that instead of a rental property loss being able to used in your tax return to off-set against other income such as a salary, ring-fenced means that the loss could only be used to off-set against future profits from the rental property.

So, if your rental property made a loss of $3,000 and a salary of $60,000, currently this would reduce taxable income to $57,000 and you would have less tax to pay (and probably receive a tax refund).

If ring-fencing was to be implemented, this loss would be carried forward into the future to off-set against any future profit. The potential implementation time for this is for the 2020 tax year, which for most people would be from the 1st of April 2019.

Now, this hasn’t been passed into law yet, so we don’t know if it will work exactly like this or be changed. However, here are a few things you could do:

  • Do extra maintenance in your 2019 tax return. This may be the last year that you may be able to do a loss off-set, so if you do lots of Repairs & Maintenance in the next few months, then it won’t be wasted expenditure – you can make a bigger loss this tax year and get a larger refund. Just make sure it is proper Repairs & Maintenance (check out our courses to make sure).
  • Review the interest rates you have for your rental property. There are some great interest rates on offer if you fix for a certain time (even down to 3.99%). Have a chat to the bank to minimise the amount of interest you pay.
  • Consider other ways to make your rental property profitable. If your rental property is running at a profit, then that is a really positive thing and you don’t need to worry about ring-fencing of losses. Ideally, it should also be Cash Flow positive as well (putting money into your pocket each week). To get to this stage, have a look at all your expenses that you have and see if any can be altered.
    Also, look at the amount you receive for rent and see if you should be charging more to cover all your expenses of the property (you can find the market rates for any suburb here)


Capital Gains Tax

This issue has been on the radar as the Tax Working Group has reported back to the government about their findings. And their findings were... we have to wait for a couple of months. The government is going to take their report and  work on it and release something publically soon. That is quite vague as they haven’t made any promises on exact dates!

Probably there will be some sort of Capital Gains Tax to come out to try and make the tax system a bit fairer. This would impact property, but maybe also share investments and any other assets. To off-set this, they may reduce some income tax rates to off-set this.However, it is all a bit of a guess of the final proposal!

I wrote a blog last year about this issue about how everyone gets incensed when a new tax is proposed. Have a read of it (Capital Gains Tax and Monkeys – What’s the Link). Hopefully, we all keep that in mind and life continues on!

We will keep you posted when the details come out.

Heating and ventilation for Rental Properties

These requirements on the horizon were passed in the ‘Healthy Homes Guarantee Act’ when the labour government came into power. The requirements will come in from 1st of July 2019 with a 5 year adoption period (so 1st July 2024 to be compliant). However, the details of the actual requirements are not yet set.

The current requirements for rental properties can be found on the Tenancy Services website here. There has to be a form of heating in any living room is a current requirement. There are some good suggestions on the website, but no other details.

So, what could be required? Maybe a requirement to supply a heat pump. Maybe a ventilation system if the property is prone to mould. Maybe an increase in the R-Value rating of insulation. We will keep you updated and keep our course material updated once we know these details.

It’s summer time!

It is in the middle of summer and hasn’t it been hot! Here are a few tips and ideas that can help your tenants and the property through the summer.

Water Tank

Many councils are now operating on some form of water restrictions which can impact on using hoses or sprinklers to water the garden and keep things alive. Why not install a water tank? By tapping into the down-pipe of your roof, you could install a small tank to collect rain water for watering the garden. Tank sizes can range from this small 250 litre one, through to 1000 litres or more.

Air Conditioning time

Does your rental property need a fan or air conditioner installed? A heat pump unit can be helpful during the summer and also the winter. However, a fan can be a simple way to cool the house down.

Clean the roof and gutters

Did you know that when a new iron roof is installed, they recommend you clean it with water and a brush at least every 6 months? (see here and download the Factsheet) This prevents any build-up of dust and grime that can lead to rust. Get a long brush that plugs into hose and do a wash of the roof to keep it in top shape. While you are there, clean out the gutters before any heavy rain comes!

Swimming Pool Fences

If your tenant has purchased a small swimming pool and the pool has a depth of more than 40 centimetres, then it will need some sort of fence or barrier around it according to current regulations. Have a look here for the updated legislation summary page on the Auckland Council website.