The International Monetary Fund (IMF) has released its 2015 Article IV consultation for New Zealand, which recommends the Government quarantine (“ring fence”) negative gearing losses so that they can only be claimed against property-related earnings, not unrelated wage/salary earnings [my emphasis]:
Tax measures: The newly introduced measures to deter speculative investment are welcome, and further steps in this direction (e.g., by widening the scope within which a resale of real estate is deemed for a business purpose and the proceeds taxable) could be envisaged. In addition, the incentives for buying real estate increase when real estate investors can write off interest payments against their other taxable income. This ‘negative gearing’ encourages investment that would otherwise be loss making, and thereby acts as an amplifier of price movements in the real estate market. Ring-fencing housing losses to within real estate earnings would therefore weaken an important price driver.
