Sharechat Logo

Boost to listed property sector likely if building depreciation regime is reinstated

Friday 21st September 2018

Text too small?

The potential implications from Tax Working Group’s interim report, released yesterday, are positively balanced for the listed property sector, Forsyth Barr analysts Hayden Strickett and Jeremy Simpson suggest.

The interim report proposed broadening the existing narrow range of capital gains taxes to capture profits on the sale of a far wider range of assets than the current regime, but proposes reinstating depreciation on commercial and industrial buildings, following its removal in 2011.

“While a capital gains tax would increase tax paid when selling assets, potentially reinstating depreciation of building structure could be a material positive for the [listed property vehicle] sector,” said Strickett and Simpson. “It’s important to note the interim report is only an issues paper, with the finalised report (and recommendations) to come in February 2019.”

Reinstating depreciation "could reduce the average effective tax rate across the sector from about 21 percent to about 14 percent, which is about 5 to 10 percent accretive for earnings, with the benefit flowing through to investors through the PIE structure,” the analysts said. “Partially offsetting this impact is greater depreciation recovery when selling assets.”

In a letter published yesterday updating the government's instructions to the working group, Finance Minister Grant Robertson also asked for consideration to be given to the tax treatment of seismic strengthening, including for residential and heritage buildings.

The independent group’s final report is due next February.

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares fall as investor uncertainty weighs on exporters; F&P Health, A2 drop
NZ dollar drops below US68c on plan to up bank capital
Noel Leeming fined $200,000 for misleading consumers
Big four banks face stiffer capital requirements from RBNZ
Infratil signals A$50m investment in Canberra Data Centres
Govt provides $2.5 mln to develop Opotiki aquaculture
Labour co-ordinator role may alleviate kiwifruit labour shortage
NZ manufacturing activity chugs along in November
Australia's GWA lobs in $118M bid for Methven
Govt leaves door open for higher emissions price cap

IRG See IRG research reports