6. Question No. 6—RevenueANDREW BAYLY (National—Port Waikato) to the Minister of RevenueQuestion No. 6—Revenue6. ANDREW BAYLY (National—Port Waikato) to the Minister of Revenue: What reassessment if any has he made on the merits of removing interest deductibility from rental income now that public consultation has closed and what is his response to Chartered Accountants Australia & New Zealand who said the proposal risked making the housing affordability situation worse? Hon DAVID PARKER (Minister of Revenue): The member's premise is incorrect. Firstly interest deductibility is not being removed for investment in new builds. Secondly the public consultation was on the finer design details of the removal of interest deductibility for existing residential property and how the exemption for new builds will work. The consultation was not on the merits of the overall policy. The chartered accountants' submission was one of many. The Government is considering all submissions and will make and announce final decisions on the design details in the coming weeks. Andrew Bayly: Why does he maintain that interest deductibility on rental income is a tax loophole when tax professionals say that it isn't? Hon DAVID PARKER: There's no doubt that the ability of highly leveraged investors to deduct interest in their property portfolios is a very significant matter in the market. We believe that action was needed. Investors in the housing market who were investors for rent increased substantially over the past year. In quarter four at the end of last year around 40 percent of all property transfers were to the owners of multiple properties and the amount that was being borrowed by investors who can deduct their interest was increasing at a higher rate than was able to be borrowed by owner-occupiers. We stand by our view that change was necessary and we also believe that the data—as the Minister of Finance outlined earlier—shows that this policy is helping turn things around. Andrew Bayly: Can he confirm that long-term build-to-rent developments will be exempt from the new tax rule? Hon DAVID PARKER: I can confirm that we're consulting on the details to ensure that new builds are properly exempt from the rules. Andrew Bayly: Does he still believe as he stated in his response to my oral question on 8 July that it would be absurd" for a landlord to evict their tenants if the removal of interest deductibility forced landlords to sell their property despite Treasury advising it will? Hon DAVID PARKER: Putting aside the fact that there is a four-year transition in respect of existing properties that are leveraged the point that I was making was that if they do choose to sell their property the house does not—I think the phrase that I used was sort of erupt into flames. It actually becomes housing stock for someone else to use so the net effect on the housing market and the availability of housing would be nil. Andrew Bayly: What proportion of the $800 million in extra tax that the Treasury forecast this change will cost landlords do officials expect will be passed on to tenants through higher rents?Hon DAVID PARKER: The calculations as to what the tax effects of this are can't be finalised until the design detail is."