Property investors will be waiting nervously for the outcome of the Govt’s ongoing review of the tax system. The review comes as calls grow louder from the business community for an end to the preferential tax treatment of property through the likes of Loss Attributing Qualifying Companies (LAQCs) – one of a raft of tax benefits which have helped make property investment the preferred investment option of NZers for decades.

A range of options have been suggested by tax experts charged with overhauling the tax system including abolishing LAQCs and imposing land taxes and taxes on the capital gains which accrue from selling property. For political reasons the Govt is unlikely to implement any new property sales taxes, so the abolition of LAQCs seem to be the most likely course of action.

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Changes to property taxation are likely to reduce the financial appeal of property investment for some people. Established investors with relatively low debt loadings are less likely to feel the pinch. They may also benefit from tax changes if property prices fall due to the changes Investors relatively new to the market who purchased properties at the height of the boom have been squeezed by an inability to raise rents to cope with high debt repayment levels.

Whatever happens, investors will need to take a long-term view of the property market and be prepared to ride out any turbulence.

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