Finance Minister Bill English's recent comments indicated he was considering removing some of the bias towards investing in that sector.
"The Government is saying that New Zealand's economic interests have not been well served with large amount of investment into residential property," Mr Truman said.
However, there were other reasons, apart from tax benefits, why investors favoured residential property.
The housing market was one that most people understood and they could readily see the market prices of property through reading the Otago Daily Times each Saturday, he said.
It was easy to obtain a lot of leverage on the investment because bank funding was accessible.
If a highly leveraged property increased in value, owners could increase their equity investment many times over.
"The investment is tangible.
You can drive down the road and see it and you have some control through choosing to sell the property at a time that suits you."
Mr Truman acknowledged some tax bias on residential investment property.
Owners could claim tax depreciation on buildings and chattels; owners could borrow 100% of the purchase price which could give a tax loss through the ownership period; a tax deduction could be claimed for legitimate repairs and maintenance; provided the property was not bought with the intention of resale, there was potential to treat the gain on the sale as a capital gain and not pay tax on it.
Mr Truman said the Tax Working Party was considering design issues with the New Zealand tax system and was due to report to the Government by Christmas. Alternatives the Government might consider included limiting the ability to offset a loss from residential property investments against other income, including salary and wages.
Other possible measures were removing the ability to claim tax depreciation on residential properties, tighter provisions on claiming tax-deductible repairs and maintenance, and taxing capital gains on sales.
Some of those had been in place in previous years but had been repealed.
"The Government appears to be signalling that a universal capital gains tax is too hard politically to introduce.
However, the electorate may be receptive to a capital gains tax on residential investment property or a limited capital gains tax that applies if the residential investment property is sold within, say, 10 years."
Mr Truman said it would be easy, and there would be limited political fallout, with a regime that ring-fenced rental losses so they could not be offset against other income; depreciation could no longer be claimed for tax purposes and repairs and maintenance could not be deducted.
Introducing any of the other alternatives would be radical and could have significant political fallout.
If the Government was to crack down on residential property investment, it needed to encourage investment into a wider range of asset classes so the overall level of investment did not fall, he said.
A lot of people had made significant money from rental property.
That was positive as people had built up equity relatively easily.
If those opportunities had not been there, those people might not have made any investment.
Having greater safeguards for investing into finance companies and encouraging a greater depth in NZX-listed companies would make investors feel more comfortable about putting their money elsewhere, he said.
