Private property issue #29 - interest deductibility repealed?

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I’ve just returned from the NZ Property Investors Conference in Palmerston North, where I was a guest speaker.

A hot topic around the conference was ...

“Is Interest Deductibility going to be repealed if National get in at next year’s election?”

So here are two lists.

One contains reasons that interest deductibility will be repealed.

The second is a list of reasons interest deductibility won’t be repealed.

Reasons why interest deductibility will be repealed

1. National has committed to repealing interest deductibility

Chris Bishop – National’s housing spokesman – spoke at the conference.

The crowd cheered when he said National wanted to “stop the war on landlords”.

He confirmed that if National secures the top spot, the interest deductibility rules will go.

2. National wants to repeal the legislation quickly

While coy when asked when the rules would be changed back, Bishop said he wants

to move quickly.

One idea is to create one “big repeal bill”. This will overturn a lot of current legislation at the same time. If he can pull it off, interest deductibility would be included.

If National wins the election, these tax rules could be repealed before Christmas next year, depending on when the current prime minister calls the election.

If the PM calls the election for September (and National gets in) – Bishop reckons the new tax laws could be gone before the holidays.

However, if the PM calls the election in November, then parliament will only sit for a few weeks before the end of 2023.

In that case, interest deductibility wouldn’t be repealed until February 2024 at the earliest.

3. National has a shot at winning

According to the Taxpayers Union Curia Poll, National and Labour are neck-and-neck.

This poll had the National/Act block on 58 seats and Labour/Greens on 57.

Te Paati Māori would hold the balance of power with 5 seats (61 are needed to govern).

The centre-right block is heading upwards. This poll has them returning to parliament with 15 more seats than they currently have.

Reasons why interest deductibility won’t be repealed

1. National wouldn’t win under current polling

If the election turned out like the Taxpayer Union Curia poll, Te Paati Māori is more likely to go with Labour.

They don’t get on with Act, so they are unlikely to form a coalition with the centre-right.

2. A lot can change between now and election day

The election is still at least a year away. A week is a long time in politics, and 52 weeks is even longer. National may rise. They also could fall.

3. Parties can change their minds

Even if National gets in, they may not implement the policy.

During his speech, Olly Newland – a well-known property investor – said that governments are known to say one thing before election day and do another after.

“Should I start buying property now?”

Some conference attendees I spoke to questioned whether they should start investing in existing properties now, anticipating a change in the tax rules.

Other conference speakers, like Mark Withers – a property accountant – said:

"You can’t base your investment decisions on what a political party who isn’t in power may or may not do.”

I agree.

There is a possibility the tax rules could change back in the next 18 months.

However, to base your investment decisions today on the hope that the law will change … that’s just wishful thinking.

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