Attention New Zealand Property Investors:
Rental Tax Information and Help
For Property Investors
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Dear Visitor
Are you the owner of rental property in New Zealand?
If you are, then you will know that the income you receive needs to be accounted for in a tax return.
But are you really sure that you are paying the least amount of rental tax (legally) that you can?
Read on and we’ll explain:
For a start, there is no particular rate that applies to rental income. Instead the rental income is treated as ordinary taxable income and subject to the ordinary income tax rate of the owner (you).
This means that the first thing that you (we) must do is work out whether or not there is a taxable profit or in fact a loss arising from the rental income… and then applying the relevant tax rate to the taxable profit.
When calculating the rental profit or loss you need to deduct from the gross rental income all of the allowable expenses.
This is where we at Gilligan Rowe + Associates are different. You see, property accounting and understanding rental tax is our passionate specialty!
Yes it may sound a bit dramatic, but we actually use our expertise to not just help our clients minimise tax, but to grow their wealth too.
Rental Tax Deductions
Here’s just a part of the typical expenses that are tax deductible when it comes to a rental property. They include:
- Interest,
- Rates;
- Insurance;
- Property Management fees;
- Accountancy Fees;
- Repairs and maintenance;
- Depreciation.
Yes, this is all pretty much common knowledge and easy, tick-the-box stuff for any average accountant. But we’re no average accountants.
We’ve made it our speciality and our field of expertise and we extract every allowable (and legal) expense…
This means lower costs and a better night’s sleep for our clients.
Tax and Profit
Once all allowable expenses that we ‘root out’ are deducted, you are left with either have a taxable profit or loss.
If the rental property runs at a loss, there is obviously no tax to pay. But wait…the loss may be offset against other taxable income which means you can reduce your tax liability on that other income.
If after working it all out there is a profit, then yes, there will be tax to pay. If this happens the rate will be dictated by the relevant tax rate of the owner.
Here are some considerations:
If the owner is a Trust, then the default tax rate is 33%. This tax rate may be lower by treating some of the profit as ‘beneficiary income’. This means that it is taxed at the beneficiaries’ tax rates.
Another example…
If the owner is a company, the tax rate is 30%. If the owner is an individual the tax rate will be somewhere between 12.5 to 38% depending on the total taxable income of the owner from all sources for the relevant financial year.
Does this sound a bit complicated? If it does, we understand. That’s why we welcome your call now for a free interview.
Or you can use our free Ask The Experts service.
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| Matthew Gilligan Director Asset Planning Structures Division. |
John Rowe Director Business Accounting Services Division. |
Janet Xuccoa Trustee & Estate Planning Services Division. |
P.S. Have you heard about GRA’s 12 Months FREE Accounting Services offer for Kiwi property investors? Go ahead and have a look…
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Rental Tax
