There’s promising news for the landlords who are looking at heat pump prices in Auckland as the new Healthy Homes standards draw ever closer. The price they pay for their heat pumps could be offset by tax relief.
The Healthy Homes standards will set minimum requirements for heating, insulation, ventilation, moisture, drainage and draught-stopping in New Zealand’s rental properties. Landlords have until December 1, 2020, to include detailed information in their new or renewed tenancy agreements about how their property meets the standards before compliance is required from July 1, 2021.
Under new tax laws, their obligations will be cushioned quite significantly. The Government recently passed legislation that temporarily increases the low-value asset threshold for depreciation from $500 to $5,000. This is a significant change in value, and would allow a landlord to deduct the full cost of business assets with a value of less than $5,000 in the year they purchased them. With most heat pumps falling under the $5,000 threshold, they will qualify for this deduction.
Andrew King, an executive committee member of the Property Investors Federation says this will be good news for landlords and their tenants:
“What that means is that previously a heat pump is never usually tax-deductible, but most of them are going to be under that $5000 limit now. That means it’s cheaper for [landlords], and it also means that there’s less pressure on rental prices to have to go up.”
It must be remembered that this raised threshold is only temporary and is a measure brought in to encourage people to keep investing in their businesses during the COVID crisis. On March 16, 2021, the threshold will drop again. As Andrew King says:
“As soon as that was announced, we contacted all our members and told them about that change, that it was only available until next March, and encouraged them to go out and get the heat pump if they were going to do that – get it earlier rather than later.”
Of course, landlords don’t have to buy heat pumps to lift the heating standards in their rental properties. They can choose whatever heating source they wish, provided it comes up to the regulated standards. But heat pumps certainly appeal as the easiest and most energy-efficient way to heat a home, and are cleaner and more efficient than many of the heating alternatives.
This heat pump supplier and installer with branches in Auckland and Wellington, expects that most landlords will opt for heat pumps as they upgrade their properties to meet Healthy Home standards next year. With the raised asset threshold, as temporary as it is, it makes the investment in heat pumps an attractive one, with tenants being the ultimate beneficiary thanks to being able to live in a warmer and healthier home.