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Tax Efficiency For Landlord-Tenants

How can landlords who rent themselves make their situation tax efficient?


1 March 2016


I have moved out of my house and a tenant lives in it. I had to move to find work. Now I am a tenant myself and a landlord. I pay more rent than I collect. I am doing my tax return. How can I make this situation work for me?


I agree this circumstance is not very tax efficient. The net rent from your old home is fully taxable and no deduction against this is available for the rent you pay as this is a private and domestic cost.

There isn't a quick or easy solution but, if your move becomes permanent, you might consider buying in your new location. If you buy and wish to keep your old property you could undertake a restructure with the old property being sold to a Look Through Company (LTC) that borrows to buy it from you. This will release your equity and reduce your personal non-deductible home loan. The company will run under the burden of a higher debt which will reduce the taxable rental income.

If the return on your old home is too low to justify retaining it, I would suggest selling it and buying a new home.

- Mark Withers

Devonport Versus Hawkes Bay


I am 58 with a free hold property in Devonport. Is it a good time to sell my property in Devonport – given the property market is slowing?


I also live in Devonport and have noticed that its market can be different to other parts of Auckland. For example, when the Auckland market was booming last year, Devonport auction clearance rates weren't as high as other parts of the city. You don't mention whether you would move out of Auckland if you sell. This is a big factor as rents are likely to continue increasing. Therefore, if you were to remain in Auckland but renting, over time the increased cash flow you get from developing a rental portfolio outside Auckland could be negated.

You also don't mention your income situation. But, if your income allows, one other option could give the best of both worlds. This would involve retaining ownership in the Auckland market (either by retaining your Devonport property or by downsizing) and then looking to purchase properties outside Auckland which may give you a cash flow stream.

- Kris Pedersen

Indemnity For Property Managers


Our property managers have failed in many areas of our rental management contract. Late and absent rent from their account, incorrect bond collected, failure to inspect (subsequent damage), failure to quote for repairs with many more dollars spent than agreed to in non-emergency situations. We would like to take the case to the Disputes Tribunal but we have noted the following clause in the small print of our contract: “We as owners acknowledge that we indemnify the agent against all actions/claims/costs and expenses of any kind which may be taken or made against the agent or exercise of any powers, duties, or authorities contained in this management authority.”

Does having signed up to the contract which includes this clause rule us out of taking this dispute to the tribunal? We are owed thousands of dollars.


You have listed a few areas where you believe your property managers have breached their contract. Some of these (for example late payment of rent) may be beyond the property manager’s control. In such issues the tenant may well be at fault.

However, there are some basic functions that the property manager must carry out to fulfil their contract with you. You are entitled to rely on the property manager as your agent to carry out the duties such as inspections that have been promised.

The Agent Indemnity clause you cite is not uncommon with property managers’ contracts. Its purpose is to protect the property manager against orders of the Tenancy Tribunal where the agent has not complied with the required maintenance owing to a lack of spending authority from the property owner.

In such an instance the Tenancy Tribunal order for specific work to be done, is really an order against the property owner. The Indemnity Clause says precisely that and any order against the property manager while they are acting on behalf of the property owner is indemnified by the owner as his own cost. However, an Indemnity Clause cannot insulate a property manager against their contractual duty to act in the best interests of the property owner. I suggest you take these issues up with your property manager. Your final recourse, if you cannot sort out the matter appropriately, is an application to the Disputes Tribunal.

- Bernard Parker

Commercial Insurance Responsibility


We have just bought our first commercial property. We organised and billed our tenant for the building insurance. But they've come back and said they already have it with another provider. Is it normal for the tenant to have this insurance?


The landlord almost always raises the insurance and the tenant pays it because the landlord wants/ needs to ensure the building is covered to a sufficient sum insured and because the landlord holds the insurable interest in the property. The majority of lease agreements will state this. I would ask to see your tenant's insurance documentation and, ideally, have your insurance broker review it.

- Myles Noble

Addressing A Tenancy Breach


We have signed a six-month tenancy agreement and paid two weeks’ bond as deposit. We didn't have access to the property before signing the tenancy agreement and didn't fill in the property inspection report in the agreement until we gained access for inspection before moving in. When we accessed the property, we found the interior of the house was in a poor state (mould on ceiling and walls, paint coming off the walls and ceiling, cracked walls and frames, carpet in poor condition). Can we cancel our tenancy agreement before moving in and get a full refund of our bond? The landlord only did touch ups and it looks terrible. That was three days before the moving in date and eight days after signing the incomplete tenancy agreement.


Under the Residential Tenancies Act, options for terminating a tenancy once an agreement has been entered into (regardless of whether the tenancy has commenced) will depend on the type of tenancy in place.

It appears from your query that you may have entered into a fixed term tenancy, which cannot be terminated by notice, but can be ended early by mutual agreement between the parties, or by the Tenancy Tribunal in certain circumstances.

Landlords have an obligation to provide the premises in a reasonably clean and tidy condition at the start of the tenancy, to provide and maintain the premises in a reasonable state of repair, and also to ensure the premises complies with all of the relevant health, safety, and building regulations.

Where a landlord has not complied with their obligations, the tenant should first notify the landlord of their concerns. If this does not resolve the matter, the tenant may give the landlord 14 days’ written notice to fix the problem. If the notice is not complied with, the tenant may make an application to the Tenancy Tribunal to have the matter resolved.

You should discuss your concerns with the landlord to try to resolve the matter. This could include establishing whether they are happy to end the tenancy earlier, and return any monies paid. If you are unable to resolve the matter directly with the landlord, you may wish to initiate the steps above by giving the landlord 14 days’ written notice to conduct the required work.

- Allan Galloway (MBIE)


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