Relief for Residential Investors In Large Scale Remedial Works

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Owners may be aware the IRD has reviewed a large number of elements of the tax legislation.  Included and focussed on a policy decision to encourage growth in NZ’s housing stock is the issue of purchasers of new builds being exempt from the removal of interest deductions on borrowings on residential investment properties.

 

Following a comprehensive discussion  paper the first reading of the Bill passed through Parliament and moved to Select Committee stage.  BBCL and others made submissions suggesting the new-build exemption should be extended to expenditure on existing dwellings needing major repairs (essentially leaky buildings and earthquake impacted buildings).

 

BBCL Director, Craig Leishman, addressed the Select Committee, over the logic of increasing the exemption to include existing complexes whereby major remedial works serves to increase the life of housing stock and to improve the quality of such stock.

 

Craig submitted that by encouraging and supporting an exemption for significant remedial repairs this would prevent existing dwellings from falling out of the current housing stock.  If not included, housing suitable for refurbishment may be seen as a commodity and demolish and rebuild would result simply because of the tax settings.

 

BBCL is pleased to note its submissions were well received and it is now proposed the exemption for new-builds will be extended to include leaky buildings that have been reclad (at least 75% of the dwelling) and with a code of compliance issued on or after 27 March 2020.

 

The new-build exemption will also apply to many earthquake rating impacted buildings and permit interest deductions for 20 years.  The exemption over interest claims are transferrable to subsequent purchasers during the 20 year period.

 

At this stage it is unclear when the next reading of the Bill will occur.   It does look extremely likely investors borrowing to carry out significant repairs will enjoy interest deduction relief on residential units which undergo recladding.

 

Link to full reports below:

 

Please let us know if you would like any further advice on the details of the proposals.

 

BBCL thanks supporting submitters PWC and HA law who supported BBCL’s submissions.

Design Adding Value

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Harbour Lights

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It is believed the 20 residential units known as Harbour Lights (99 Mokoia Road Birkenhead) is the first multi-unit complex to be the recipient of a financial assistance package under the Government’s much touted Weathertight Homes Assistance Scheme.

The package, brought in to affect in mid-2011 is designed to assist home owners in repairing their leaky homes.  The promise was a 25% government contribution with a further 25% from the territorial authority if the authority was responsible for the inspections and code of compliance on failed building works.

Since announcement of the scheme Boutique Body Corporates Limited has been pursuing claims for five Body Corporates, which meet the necessary criteria.  Recent media criticism has highlighted the challenges within the scheme design and surrounding processes.  To date this had seen not a single multi-unit complex receive a payments under the Scheme

Mr Leishman, Director of Boutique commented:  “There has, quite rightly in our opinion, been criticism of the bureaucracy which has wrapped itself around the issue of eligibility and the process involved in satisfying the Department’s stipulations. This has contributed to significant days and added costs as consultants and Quantity Surveyors struggle to fit square pegs into round holes.”
Thanks to the combined efforts of Boutique and the professionals engaged by the Body Corporate Harbour Lights is delighted to report the first payment has been received by Body Corporate.  All involved, including the staff on the ground at the WHRS who assisted in facilitating the processing of the application through what can only be described as a tortuous journey are to be commended for the efforts.  Mr Leishman noted  however “It is difficult to escape the impression that the structure has been designed with a view to making it so difficult that the majority will simply give up.”

Boutique is  now look to deliver a similar outcomes on the four remaining complexes that it is currently working with the Department on.