Close negative gearing tax loophole, spend money on insulation

Labour is promising to spend $1.2 billion making 600,000 homes “warm and dry”.

Homeowners will be able to claim up to $2000 per dwelling to go toward insulation, a heating system or double-glazing of windows.

It will be available to 600,000 homes over 10 years and cost $1.2billion – which is the exact same figure the party estimates will come in from closing a tax loophole that favours property investors.

It aims to tackle negative gearing. Negative gearing is a process which investors make a loss on their property investments, and can offset that loss for a tax break on some of their income.

So in basic terms, if an investor pays $20,000 a year in interest on a mortgage, but only makes $10,000 in rental income on that property, they’re making a loss of $10,000. They can then take that $10,000 loss and offset it against their total income – so if they make $90,000 a year, they only have to pay tax on $80,000 of it.

But Finance Minister Stephen Joyce says the promise just shows that Labour hasn’t done its sums.

“It’s [the] wrong policy, all it would do would put up rent and reduce the number of homes being built.”

He says that housing isn’t a weak point for the National Government, with house prices flattening out and even dropping.

Labour’s plan is to ringfence property income so any losses can’t be offset against other income.

“Labour will close the speculators loophole,” Labour leader Andrew Little says. “This will create a level playing field for home buyers and help families get a fair shot at buying a place of their own.”

According to Inland Revenue figures, investors used this mechanism to avoid paying $149m in tax in 2015.

Analysis of the data shows that 80 percent of those losses were claimed by those in the top three income brackets.

Labour says it will use the revenue collected by closing the loophole to invest in insulation grants for homes. Read full article here >