Harmoney

[beacon]

I think deducting RWT on Gross Interest is outrageous.

After so many years in business, it is hard for these P2P providers to argue that they are still confused about the tax deductibility or tax treatment of their fees. There is no case-by-case element in fees. Fees paid are a tax-deductible cost of earning P2P interest.

[RMJH]

It is always good to read the blog here as I always learn a thing or two. People have been saying if you pick your loans right you can do alright on Harmoney, I have been trying to pick loans with an aim that the borrower doesn't default.

I do use filters but more important is to have sufficient numbers to benefit from diversification. Harmoney have more information than we get to see so are better placed to grade loans so I doubt picking actual delivers much of a premium on a like for like grade and age weighted portfolio. A higher return doesn't necessarily mean a better return.

[Ellipsis]

So Squirrel P2P can deduct RWT on the net interest (after deducting its fees) paid to lenders who lend to borrowers on the Squirrel platform because it is more like a traditional finance company and the income its lenders earn is even more passive than the interest earned by those who lend via Harmoney?

There is no gross/net concept for lenders on Squirrel. If they bid for 9% then that’s what they get pre-tax, Squirrel then levies their fees on top on the borrowers’ side. Which btw means there is nothing to deduct for tax from a lender’s perspective, rather than having Squirrel automatically deducting it for lenders.

Not debating the merits of either model, that’s up to the individual investors. Just wanted to point out that Harmoney cannot deduct RWT off “net interest” after fees. And this should have no relevance to whether or not Harmoney’s fees are deductible for tax.

I agree with all the posters who have commented, on multiple occasions, that Harmoney’s fees are deductible given the fees are incurred in the course of deriving taxable income and are not limited by the general limitations.

[Bjauck]

...I agree with all the posters who have commented, on multiple occasions, that Harmoney’s fees are deductible given the fees are incurred in the course of deriving taxable income and are not limited by the general limitations.

From 2016:
Peer-to-peer investors should seek advice on their tax obligations before they start investing, Inland Revenue says.

https://www.mortgagerates.co.nz/arti...ax-advice.html
"“Generally, for the lender to be able to claim expenses relating to their lending, such as commissions and other fees, they would need to be in the business of lending. As for defaults – generally if a loan is not repaid there is no deduction for the loss of capital,” a spokesperson said."

So following this advice, regardless of the advice received, a small retail investor has to pay for professional advice which would eat into thier returns from their P2P for a start.

With regards to deductibility, P2P needs clarity in the form of official guidance. I think other jurisdictions have provided that

[Stevecp]

The deduction of service fees for tax purposes is a given.

Under certain circumstances you can also claim charge offs.

[Bjauck]

The deduction of service fees for tax purposes is a given.

Under certain circumstances you can also claim charge offs.

Who has made that a given?

Retail investors are advised to pay for professional advice on their individual circumstances.

Even Harmoney only states that they should be deductible.
"The Service Fee or Lender Fee is deducted from repayments into the lender account and should be tax deductible."

For it to be a given for all lenders, I would have expected wording such as "The lender fee is tax deductible."

The IRD spokesman in the article referenced previously said that generally the test for fee deductibility is whether there is a business of lending.

[777]

Straight out of the IR3 guide

If you were charged commission on any of your interest, claim this at Question 26.

Pretty straight forward I would think.

[leesal]

Borrower interest rates: As Harmoney continues to innovate and improve its credit algorithm and scorecard, the business will continue to review and price risk accordingly. Review the interest rate updates here.

https://www.harmoney.co.nz/how-it-wo...and-fees#rates

excellent news!

I started when platform 1.5 was introduced, so RAR has struggled to get above 14% without any defaults. Roll on the new and improved platform

[Investor]

Borrower interest rates: As Harmoney continues to innovate and improve its credit algorithm and scorecard, the business will continue to review and price risk accordingly. Review the interest rate updates here.

https://www.harmoney.co.nz/how-it-wo...and-fees#rates

excellent news!

I started when platform 1.5 was introduced, so RAR has struggled to get above 14% without any defaults. Roll on the new and improved platform

They're also reducing the application fee to $450.

Is it safe to assume that expected default rates remain unchanged? It doesn't seem there way any communication of change in that area.

[myles]

Good news maybe. Roller-coaster interest rates say something about poor forecasting or errors to me.

Let's hope this now becomes more stable.