Proposed CGT may cause holiday home sector to suffer

by Duffie Osental25 Feb 2019

Holiday homes management company Bachcare warned that the holiday home sector could suffer if the proposed capital gains tax (CGT) included the family bach.

According Bachcare, a CGT that included the family bach could have a detrimental impact on the amount of accommodation available for domestic and international visitors.

“The holiday home sector is a significant contributor to visitor accommodation in New Zealand and many regions have a heavy reliance on holiday homes to provide accommodation, as there is little in the way of commercial accommodation,” said Leslie Preston, founder of Bachare. “Without this accommodation option smaller regions would not benefit as much as they currently do from tourism.

Bachcare indicated that a CGT would only be a disincentive to owning or continuing to own a holiday home. “We accept that it is an asset for the owners but, for many, it isn’t an investment particularly if it’s been in the family for generations and it’s certainly not a lucrative business that should have further taxes applied to it.”

“On average a holiday home costs around $3,000 a year to own, including rates, insurance, electricity, gas, upkeep and maintenance etc.,” said Preston. “Owners spend another $6,000 a year renovating or maintaining their properties. If an owner chooses to rent their place to visitors, they might make around $12,000-$15,000 per year based on an average daily rate of $200.00 - $250.00 and having the property occupied approximately 60 days a year. Once all costs are paid (excluding mortgage repayments) there’s not a lot left over, if anything.”

“It is also becoming increasingly expensive to own a holiday home with a number of local Councils having introduced or considering the introduction of commercial and targeted rates on holiday home owners over and above their residential rates if they rent their properties out on a short-term basis. Any further added costs or taxes will make it very hard for owners to afford to keep them.”

“This means everyone loses out, the bach owner and their families, the visitors wanting to enjoy of slice of real New Zealand by staying somewhere a bit different and the regions who won’t benefit from visitors spending money in their towns.”

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