Tamsyn Parker

Money Editor for NZ Herald

Tax warning issued for new landlords

Those who rent out a residential property, a room in their own home, sleepout, caravan or holiday home may have to pay tax on the income. Photo / NZ Herald
Those who rent out a residential property, a room in their own home, sleepout, caravan or holiday home may have to pay tax on the income. Photo / NZ Herald

First time landlords are being warned to check how much tax they may need to pay on rental incomes ahead of the July 7 deadline.

The Inland Revenue is concerned there may be a number of people in Auckland and Christchurch who have temporarily rented out property to meet shortage demands and don't know they have to pay tax on the income.

Those who rent out a residential property, a room in their own home, sleepout, caravan or holiday home may have to pay tax on the income.

Patrick Goggin, Inland Revenue group manager investigations and advice, said people on salary and wages may not have completed a tax return before and may not know they need to file an income tax return if receiving rental income.

"People who are thinking of renting out accommodation should find out what tax they'll need to pay so they can include it in their plans.

"If landlords have been renting out property for some time and have not saved their tax payments they may find themselves under some pressure and we would encourage them to speak to us as soon as possible," said Goggin.

Inland Revenue did not have rental numbers for Auckland but Statistics New Zealand Census data shows around 36 per cent of Auckland's 469,500 dwellings were not owned or not held in a family trust in 2013.

That has increased from 33.6 per cent in the 2006 Census.

In Christchurch more than 44,000 households rented their home out in 2013 and that is expected to hit a peak at the end of this year.

Andrew King, chief executive of the New Zealand Property Investors Federation, said there was a high demand for rentals in Auckland and constant turnover of landlords.

While accommodation in Christchurch was under pressure from people being displaced from their homes and workers helping to rebuild the city.

"Many people renting out accommodation may be first-time landlords and some may not be aware they have to pay tax."

Landlords can find out if they need to pay tax at this website.

How the tax is calculated varies depending if the property is a residential property, if you have taken in boarders or if it is a holiday home.

Those who file late income tax returns face penalties of up to $500 depending on their net income.

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n6 at 20 Sep 2014 10:36:09 Processing Time: 771ms