Taxes 'disincentive' for rebuild

Posted 31 May 2012 by MediaStuff
Posted in Business , Insurance , Rebuild , Media
This item was posted on the Stuff.co.nz website - click here to view the original

 

One of New Zealand's biggest property developers, Kiwi Income Property Trust, is calling for tax breaks for the Canterbury rebuild.

The trust said the New Zealand tax system was a disincentive towards rebuilding.

It will spend up to $40 million more on earthquake strengthening its buildings in the next 10 years, on top of projects already planned for Wellington's Majestic Centre, costing $35m, and Christchurch's Northlands Mall costing $9m.

Chris Gudgeon, chief executive of the trust, said the trust was willing to spend considerable amounts to make sure that its properties were safe, but thought incentives should be offered by the Government for earthquake-strengthening work.

Gudgeon was speaking as part of the 2012 Forsyth Barr investment series being hosted for investors in Christchurch yesterday.

He said he had some concerns about where private capital for the rebuild would emerge from, and concerns about the pace of the rebuild.

"I'd make the observation that other markets like Chile, California and Japan, after an earthquake, that their governments have come up with financial assistance packages and tax incentives to incentivise reconstruction.

"We haven't seen that here other than one concession which is the depreciation rollover relief that you get if you're an existing investor. But if you are a new investor into Christchurch, there are no incentives.

"In actual fact, our tax system rather than acting as an incentive towards rebuilding, acts as a disincentive."

The other measure working against new Christchurch investment was the lack of tax incentives to do earthquake strengthening which was uneconomic and instead for the public good, he said.

"Earthquake strengthening costs are non-deductible. So if you've got a building and you want to repair your roof, you can claim a deduction to repair your roof. But if you want to strengthen your building, you can't. To me, that simply doesn't make sense."

The $30m to $40m of earthquake-strengthening projects would take place in order of priority, with properties most at risk first.

For strengthening work around New Zealand, the legal requirement generally was to bring older buildings up to 33 per cent of a new building standard.

The trust was taking the view that a minimum for strengthening should be 70 per cent of a new building standard.

The trust had received a settlement of about $69m for its PricewaterhouseCoopers building in Christchurch, which is now being demolished.

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