Bay of Plenty Times
  • Bay of Plenty Times home
  • Latest news
  • Business
  • Opinion
  • Lifestyle
  • Property
  • Sport
  • Video
  • Death notices
  • Classifieds

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • On The Up
  • Business
  • Opinion
  • Lifestyle
  • Property
    • All Property
    • Residential property listings
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
  • Sport

Locations

  • Coromandel & Hauraki
  • Katikati
  • Tauranga
  • Mount Maunganui
  • Pāpāmoa
  • Te Puke
  • Whakatāne
  • Rotorua

Media

  • Video
  • Photo galleries
  • Today's Paper - E-Editions
  • Photo sales
  • Classifieds

Weather

  • Thames
  • Tauranga
  • Whakatāne
  • Rotorua

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In

Advertisement
Advertise with NZME.
Home / Bay of Plenty Times / Business

Avoid the common mistakes of property investment

Jeremy Tauri
NZME. regionals·
23 Jun, 2016 11:23 PM3 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save
    Share this article
Jeremy Tauri.

Jeremy Tauri.

Rental property, investment and trading are a hot topic at the moment.

With new rules in place, Inland Revenue is looking more closely than ever at the sector to make sure that everyone is paying their fair share of tax. But for the average property investor, remaining compliant can seem daunting. There are so many records that need to be kept, files to be attended to and accountants to be wrangled. Here are a few common mistakes I see, and some tips on avoiding them.

I make a loss, not a profit so I don't need to file a return: You might be surprised at how many people think that keeping on top of tax returns is such a hassle that they might as well not bother at all. Some people seem to think that they'd be doing the IRD a favour by not declaring any losses they might make on an investment from a rental property. If the loss is small then some think it's an immaterial refund anyway, so no one will mind if they don't declare it because it's costing IRD in time and money. The danger with this is that as the mortgage comes down over the years at some point it will make a profit, and that means tax to pay. Also why would you not want a tax refund? A $500 refund may not sound like much but over 10 years that's $5000. And remember: If you're renting a house you're obliged to file a return whether it's a loss or profit.

I don't draw any money from the rental bank account so I don't have to pay tax: Profit is calculated by adding the rent income and deducting expenses for that property such as insurance, rates, interest, repairs and maintenance, bank fees and other associated costs. Tax is calculated on the profit that you make from the rental and is not dependent on any withdrawals you make from the account. It doesn't matter whether you're lining your own pockets or leaving the money tucked up securely in a bank account. A lot of people think they only pay tax on money drawn from a business or bank account - that's just not true.

My rental is not making a profit because after I pay my mortgage there's no money left: The largest payments you'll make for a rental is likely to be the mortgage repayments. Mortgage repayments consist of interest and principal repayments unless you've decided on interest only. The interest is tax deductible, the principal repayment is not but both will come out of your bank account. This is best illustrated by an example. On a $400,000 loan at 5 per cent over 20 years in year one you'll pay $31,678 out of your account. The interest is $19,729 of that amount and the principal is $11,949. Only the $19,729 interest you can claim against your rent income.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

As always it pays to get advice to make sure you are fully compliant.

- Jeremy Tauri is an associate at Plus Chartered Accountants

Discover more

Preparing the ground to grow strong companies

21 Jun 06:30 AM

Crown research bureau hits the Bay

22 Jun 07:30 AM

Gold3 bids reveal strong demand

23 Jun 04:30 AM

Workshop on options for raising business capital

24 Jun 05:30 AM
Save
    Share this article

Latest from Business

Bay of Plenty Times

Bumper avocado crop pushes prices down

11 Sep 08:19 PM
Premium
OpinionMark Lister

Mark Lister: NZ's economic recovery delayed, but not derailed

07 Sep 04:00 PM
Premium
Bay of Plenty Times

'Blindsided': Former restaurant staff say they are owed $16,000

03 Sep 08:49 PM

Sponsored

Kiwi campaign keeps on giving

07 Sep 12:00 PM
Advertisement
Advertise with NZME.

Latest from Business

Bumper avocado crop pushes prices down
Bay of Plenty Times

Bumper avocado crop pushes prices down

Avocados are selling for as little as 19c in parts of New Zealand.

11 Sep 08:19 PM
Premium
Premium
Mark Lister: NZ's economic recovery delayed, but not derailed
OpinionMark Lister

Mark Lister: NZ's economic recovery delayed, but not derailed

07 Sep 04:00 PM
Premium
Premium
'Blindsided': Former restaurant staff say they are owed $16,000
Bay of Plenty Times

'Blindsided': Former restaurant staff say they are owed $16,000

03 Sep 08:49 PM


Kiwi campaign keeps on giving
Sponsored

Kiwi campaign keeps on giving

07 Sep 12:00 PM
NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • Bay of Plenty Times e-edition
  • Manage your print subscription
  • Manage your digital subscription
  • Subscribe to Herald Premium
  • Subscribe to the Bay of Plenty Times
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • Bay of Plenty Times
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP