providers aren't in it for us...they are absolutely creaming it from a captive feed, being us and our future
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Old news but.....
"Yet - if given a simple tweak - it could be turned into an effective capital gains tax targeting the profits investors made when buying and selling homes, Michael Rehm and Yang Yang said in a new research paper."
https://www.newstalkzb.co.nz/news/na...didnt-know-it/
Kiwisaver would be a far better retirement saver IF the default was for growth & not these so called low risk funds. Low risk for serial underperforming more like it with 20-100% held in interest bearing funds. They so underperform by 5-10% compounding yearly its NOT funny.
Old news, certainly, and the 'intention test' is still there. As is IRD's difficult job determining evidence of intention, possibly years ago, even though IRD would place the burden of proof on the owner. No reason it would not apply to any property, including owner occupied, and might be a slight pushback from homeowners on that LOL.
The researchers miss a very important point, that rental property owners seldom start our being cash flow positive but reach break even point in time and start paying tax on rental income*. Using recent purchase prices and expense levels misses the whole point of rentals as investments. This appears to be a major flaw in their argument.
* This point in time changed with the introduction of ring fencing of rental losses. Now that rental losses can no longer be offset against other income, they get carried forward to be used once profit begins. The losses could be very substantial, so it is 'jam today' for the government but not for future governments. And for owners paying some expenses from tax paid income there is a strong incentive to look for ways to reduce liability.
I think it would apply to most first home buyers. The Kiwi way, in today's high priced property market, is to work your way up the property ladder to be able to end up with a family size home in a good neighbourhood. In fact trading your way up the property ladder is the only way for most (without wealthy families) to be able to get a family sized home.
As there is obviously no intent to earn income behind an owner-occupier's decision to buy a home, most must purchase with the intent to sell to leverage their capital to use for their progress up the property ladder.
However it is another very subjective matter to actually prove intent in individual cases at time of purchase.
Bearing in mind that new KS members today are overwhelmingly young people starting out on their life's journey, I agree with kiora that the default should be a growth fund. People can then "take a little responsibility for what they do" by lowering the risk profile if they so desire
Experienced buyers, or those getting knowledgeable advice, can demonstrate intent readily enough. Often by documenting intent in emails to solicitor or accountant at the time. That would normally work unless it is clearly incorrect.
A friend bought a small place and rented it to a family member. Next minute that household changed from 1 person to 3! Sold and a bigger place bought. Easy enough to prove intention that time if asked. No request from IRD so far.
"Growth fund will go down more often"
It may have higher volatility but go down more often?
If the right one is picked it is more likely to go up more often and by larger amounts than so called "low risk" funds. In my view the default funds are have a likely outcome of leaving the investor poor at retirement