She hoped the changes introduced around property tax would free up houses for first-home buyers so they could consider buying instead of renting.
Finance Minister Bill English and Revenue Minister Peter Dunne announced major changes in the Budget to the tax treatment of investment property.
Included in the measures were denying depreciation deductions for buildings, such as rental housing and office buildings, with an estimated useful life of 50 years or more. That would take effect from April 1 next year.
Changes were also announced to the tax rules for qualifying companies and loss-attributing qualifying companies.
New measures would prevent property investors from using rental losses to inflate Working for Families eligibility and payments.
There was increased funding over the next four years for Inland Revenue to target property speculators who had been avoiding paying tax on their trading gains.
Ms Peart said changes to personal tax rates for high-income earners - from 38% down to 33% - could soften the blow for property owners. But a commercial property investment, with a good tenant, should provide a viable return even without the depreciation.
Mr English said the changes would make the tax system fairer by ensuring the treatment of property was consistent with other forms of investment.
"This will reduce the incentive for people to buy property purely for tax reasons and will help tilt the economy towards saving, productive investment and exports.
"Closing loopholes that allow well-off families to use investment losses to inflate their eligibility for Working for Family payments will remove another incentive to invest in property."
The changes would generate about $2.48 billion additional revenue over the next four years, he said.
Treasury estimated the impact on rents of the Budget tax changes would be slight, with rents rising about 0.7% more than they otherwise would have over the next three to five years.
Deloitte Dunedin associate tax director Peter Truman was surprised to see owner-occupied buildings included rather than just rental properties. This would impact on businesses that owned their own premises.
Some specialist buildings might have a useful life of less than 50 years. Provided IRD agreed to the shorter useful life, those buildings would continue to be depreciable.
"Landlords will put increased focus into separating out assets which are distinct from the building proper," he said.
Depreciation was still available on carpets, stoves, fridges, stand-alone cupboards and wardrobes, curtains and blinds, water heaters and hot water cylinders.
There would be increased focus on ensuring the cost of those assets could be separately identified on purchase of a property so that they could still be depreciated, Mr Truman said.
Landlords would be relieved there were no moves to limit the amount of debt-funding that could be deducted.
It would still be possible to 100% debt-fund a property purchase (secured over other assets) and offset any tax loss against other taxable income.
The tax savings would potentially be reduced with the reduction in the top individual tax rate, he said.
"Overall, the tax changes will reduce the attractiveness of owning rental properties. However, they are still likely to remain an attractive investment option due to factors such as ease of gearing, accessibility and understanding of the market," Mr Truman said.
Mr Dunne said ending depreciation tax breaks on buildings made sense. On average, New Zealand buildings increased, rather than decreased, in value over time.
LOOPHOLES CLOSED
• No depreciation allowed on buildings where building has useful life of 50 years or more.
• Specialist buildings may be exempt.
• Tax avoidance on trading gains to be targeted.
