Earthquake Rebuild Demands Urgent Tax Law Change
new-zealand-first-party
Mon Nov 21 2016 13:00:00 GMT+1300 (New Zealand Daylight Time)
Earthquake Rebuild Demands Urgent Tax Law Change
Monday, 21 November 2016, 10:16 am
Press Release: New Zealand First Party
Ron Mark
New Zealand First Deputy Leader
Spokesperson for Building
and Construction
21 NOVEMBER 2016
Earthquake Rebuild Demands Urgent Tax Law Change
New Zealand First says the government must change the Income Tax Act 2007 to help businesses rebuild after the 7.8 earthquake.
“A simple change to the Income Tax Act would supercharge the coming rebuild and earthquake strengthening throughout New Zealand,” says Ron Mark, New Zealand First Building and Housing Spokesperson.
“As it stands, the government has landed New Zealanders with this perverse outcome; while earthquake repairs are tax-deductible, earthquake strengthening to prevent future damage, isn’t.
“The quake hit provincial New Zealand hard. North Canterbury and Marlborough buildings are worth nowhere near what they’re worth in Wellington or Christchurch, but the cost of earthquake strengthening is exactly the same.
“Unless the government adopts our 23-word amendment to the Income Tax Act 2007, it makes it cheaper to either demolish or to walk away and abandon earthquake-prone buildings. Is that what we want – ghost towns?
“Earlier this year we tried to get this amendment over the line but it was ruled out of the Building (Earthquake-prone Buildings) Amendment Bill’s narrow scope.
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“Despite that, we had strong indications of having the numbers, including from ACT and the Maori Party, to get this simple amendment into the Income Tax Act.
“For the good of provincial North Canterbury and the country, we’re calling on the government to adopt it now,” Mr Mark said.
New Zealand First’s proposed amendment to Income Tax Act 2007
(1) In section DA 2(1), after “capital nature”, insert “, unless they are seismic works where an EPB [Earthquake-Prone Building] notice has been issued for the building under section 133AK of the Building Act 2004”.
Explanatory note
This amendment redresses significant tax disadvantages faced by commercial, industrial, retail, and heritage property owners when looking to bring buildings above the earthquake-prone building threshold required by this Bill. Major chartered accountants (like KPMG and others), property owners, and even Local Government New Zealandhave been outspoken in their belief that Inland Revenue is inconsistently treating the tax deductibility of business costs by considering seismic works to be a capital expense for tax purposes. As the Property Council of New Zealand noted in its April 2014 submission: “The expenditure required to remedy this will not increase the value of the building, on the basis that earthquake strengthening will not qualitatively change the function of the building (i.e. will generally not result in a higher rental stream)…In short, expenditure on earthquake strengthening is largely made to mitigate a loss in economic value, not enhance to the value of a building”. Without this consequential amendment, many buildings may be demolished without replacement, creating blight in areas of lower capital value.
ENDS
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