Advocacy in a Nutshell | May 2019
Welcome to the May edition of Advocacy in a Nutshell; the latest update from our advocacy team, featuring all of the projects, policy and issues that matter to you.
This month we're highlighting:
- Capital Gains Tax off the table, for now
- Overseas Investment Act Reform: Tranche II
- Hamilton's 'growth pays for growth' philosophy is unsustainable
- Wellington Annual Plan submission
Good news; the Government has backed away from many of the Tax Working Group's recommendations, including a capital gains tax. Regardless of your political affiliations, as this has been a purely political decision, this is a win for commercial property sector. However, this doesn’t mean it’s gone forever, just for right now, and potentially the next election.
One of the biggest wins for the commercial property sector is the Government has agreed with the reintroduction on depreciation on commercial buildings for seismic strengthening. The Government clearly saw the absurdity that if a building collapsed in an earthquake you could get a deduction, but without any incentives to progressively upgrade buildings for seismic strengthening. This had been a short-sighted decision to help pay for the 2010 income tax cuts.
Regardless of where you stand on a capital gains tax, of interest has been the actual process undertaken. This is the first time that some of the technical issues associated with a potential capital gains tax have been looked at...
The Government recently launched public consultation on the second phase of its reforms to the Overseas Investment Act which is aimed at cutting red tape and giving decision-makers the ability to consider the broader impact on New Zealand of potential investments.
The key areas they will be looking at are:
- What should be considered sensitive adjoining land
- Who or what constitutes an ‘overseas person’
- How the Government determines whether to grant an investment consent.
Property Council are in the process of consulting with members to get their input on the consultation and invite those who are interested to please contact our Senior Government Relations Advisor, James Kennelly.
Hamilton City Council’s “growth pays for growth” phrase is often used as a blanket principle to increase development contributions. The 2019 proposed policy update is no exception, with Property Council opposing the high increase in development contribution costs on the back of the 2018 policy increases. Property Council’s submission urges Hamilton City Council to define what “growth pays for growth” means for development contributions. In particular, the phrase “growth pays for growth” is vague and has not been further defined, and seems to be used as a blanket statement to increase development contributions. As a result of these increases our members feel their developments will no longer be viable and they will likely look elsewhere.
In Hamilton, development contributions are a significant cost to development. In some cases, the council are charging more in development contributions than the cost of the overall project. Our submission has three clear examples of developments that have been cancelled, stalled or would be unfeasible due to the recent 2018 and proposed 2019 policy changes.
Property Council recently submitted on Wellington's Annual Plan, opposing the business rates differential increase for the following reasons:
- It is inherently unfair and disproportionally burdens the commercial sector.
- Compared to other councils, the commercial sector pays a higher portion of total rates which creates a large imbalance with residential properties.
- Increasing rates on commercial properties, coupled with higher insurance costs and a massive seismic strengthening burden will be an issue for attracting business investment and lead to businesses relocating to other cities to reduce their rating base.
We recommended that the Wellington City Council (WCC) take the following actions:
- Defer the decision to increase the business rates differential until after the release of the Productivity Commission report into local government funding and financing in November 2019.
- Begin reducing the business rates differential in future years with the aim that it be phased out.
- Look at alternative funding methods such as targeted rates, public-private partnerships (PPPs), toll roads, the Government’s regional development fund.
As Property Council's Chief Executive, Leonie leads the organisation and acts as 'Chief Advocate' on behalf of our members. Supported by a talented team of policy advisors and analysts, Leonie has her finger on the pulse of central government, providing valuable insights for our membership and acting as the conduit between our members and the country's movers, shakers and policy makers.
Read more about Leonie here.