Forget that you can still buy positive cashflow with capital growth in New Zealand. Forget that there is much stronger rental demand.
I will forget those things but could we adopt some of the other minor differences.
No Stamp Duty
No Capital gains tax
4% depreciation on the building no matter how old and it starts from the day you purchase.Do you think some of these things may encourage some personal savings. I guess that our leaders that people do not need that kind of incentive
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
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How does the depreciation work after 25 years?
How about after 50 years?
Does it keep going back up to the higher purchase price and start again from 100% each time a property is transferred?
Robert Bou-Hamdan
Mortgage AdviserHI Robert
The depreciation begins every time the property is sold. So if you purchase a 100 year old home you can still depreciate it at 4%, based on the replacement construction cost.
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
http://propertyknowhow.com.au
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Hi Robert
the depreciation of 4% is based on the amount you paid for the house rather than the replacement construction cost. For example:
if you buy a house for 50,000 and the valuer determines the land to be worth 5K, and the chattels to be worth 2K, then that leaves you with 43K of house. Now it may be that the house would cost 80K to reconstruct if it burned down for example, but you have 43K to be able to depreciate at your 4%.
If you sell the house to me for 75K, then a valuer can determine the new land/building/chattels figures as a proportion each of 75K, and I start from scratch with my new figures and my 4% depreciation…. and so it goes…Cheers
CD
CastleDreamer
http://www.nzpropertytogo.comThey use about 50%of the purcahse price it is still supposed to represent deporeciation on the building. However alas the New Zealand government have just reduced the 4% to 3%
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Yes, Nigel – a small and unfortuante setback for property investors, that’s true.
However for those wanting to know more about this curly topic, here goes. You can still chose straight line or diminishing value for depreciation. Or you can choose not to depreciate at all.
Building, land and chattel values are based on the written valuation at time of purchase (if you get one), if not then the information is usually sourced from NZ’s Quotable Value (and will be some sort of aggregate of your rates notice compared with your purchase price usually calculated by your NZ accountant). QV’s web site is https://www.qv.co.nz/default.htm
The choice not to use depreciation usually depends on how long you intend to hold the property, as the amount you depreciate it by is added to your sale profit (i.e. it reduces your net purchase price and therefore the profit on your sale is higher). So if it’s a short term hold then it’s probably not worth depreciating.
As our NZ accountant said depreciation is only a tool used to defer profit – it does not eliminate it!
Have I lost anyone? There’s a whole chapter devoted to the thrilling topic of taxation, including depreciation, in our book. Otherwise contact your NZ accountant or NZ’s Inland Revenue Department to learn more.
Cheers
Sigrid & Tonyhttp://www.kiwiproperty.biz
New book “The Guide to New Zealand Property Investing – Australian Edition”
Available at our web site along with other NZ Resources for Australian Investors
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