ACT's rental loss plan explained: cost, timing and supply
ACT has promised to let landlords use rental losses to reduce tax on other income, such as salaries.
Under the current rules, those losses are ring-fenced. That means they can only be used against rental profits, now or in future years, according to RNZ. ACT would scrap that limit and let landlords claim the loss against other income in the year it occurs.
ACT leader David Seymour said the change would make rental investment more viable, including investment in new homes. He presented it as a way to keep investors in the rental market and support new supply.
Seymour said the policy would reduce government revenue by $264 million in year one, rising to $303 million in year four. He said the cost is covered in ACT's fiscal plan.
Seymour said the change is about timing, not scale. He said landlords would get tax relief earlier for losses they could already deduct later, with no increase in the total deduction.
It helps to think of an unused loss as waiting in line. Under ring-fencing, it waits in the rental accounts until there is a rental profit to offset. Under ACT's plan, the same loss would jump the queue and cut other income straight away. The amount stays the same. Only the timing moves.
The broader context here is why timing still leaves a yearly cost in the Budget. If new losses are brought forward each year, revenue is lower in each forecast year even though lifetime deductions do not change. Fiscal analysts will test the costing assumptions, the pattern of losses, and how it fits the forward estimates.
In my view, the political test is narrower than the tax mechanics. It is whether extra cash in the early loss-making years changes decisions to invest in rentals, especially new homes, or mainly lifts returns on investments that would have gone ahead. That will shape whether the $264 million to $303 million path is judged as a cost or an incentive.
For campaign scrutiny, the fiscal plan point matters. By putting the revenue impact inside its fiscal plan, ACT has invited judgment on its own terms. The figures are specific and the treatment is clear. Attention will now fall on that plan, and on how other parties would use the same revenue.
