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  1. #101
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    Quote Originally Posted by stoploss View Post
    Not too sure what SBQ means when he says "if KiwiSaver was such a great investment the banks would be encouraging it " The largest 3 KiwiSaver providers by funds under management are ANZ $16.4 Bio,ASB $ 12.5 Bio,WBC $ 8 Bio, they get plenty of fees .....https://www.fma.govt.nz/news-and-res...isaver-report/
    So they are all over it .........
    providers aren't in it for us...they are absolutely creaming it from a captive feed, being us and our future

  2. #102
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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/

  3. #103
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    Quote Originally Posted by Bjauck View Post
    Kiwisaver is the poor person's retirement scheme with few crumbs of enticement. Even then it can be used as a boost for raising a deposit to try to get into NZ's richer person's pension scheme (residential real estate). Certainly For those that can afford it, the scheme with historically less tax per $ return (income plus capital) is leveraged residential housing - owner-occupied housing followed by investor housing.
    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.

  4. #104
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    Quote Originally Posted by kiora View Post
    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." ....
    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.

  5. #105
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    Quote Originally Posted by artemis View Post
    ... No reason it would not apply to any property, including owner occupied, and might be a slight pushback from homeowners on that LOL.
    ...
    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.
    Last edited by Bjauck; 30-11-2020 at 09:06 AM.

  6. #106
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    Quote Originally Posted by kiora View Post
    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.
    The default funds were supposed to be a holding point until a 'real' fund was chosen.
    People should take just a little responsibility for what they do.

  7. #107
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    Quote Originally Posted by dobby41 View Post
    The default funds were supposed to be a holding point until a 'real' fund was chosen.
    People should take just a little responsibility for what they do.
    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

  8. #108
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    Quote Originally Posted by Bjauck View Post
    .... However it is another very subjective matter to actually prove intent in individual cases at time of purchase.
    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.

  9. #109
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    Quote Originally Posted by iceman View Post
    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
    I don't disagree but I think it is set where it is so that the Govt has less accountability for putting a person into a fund that goes down and Growth fund will go down more often.

  10. #110
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    Quote Originally Posted by dobby41 View Post
    I don't disagree but I think it is set where it is so that the Govt has less accountability for putting a person into a fund that goes down and Growth fund will go down more often.
    "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

  11. #111
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    Quote Originally Posted by kiora View Post
    "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
    Volatility - goes up and down.
    So yes goes down more often - but has greater volatility would have said it better ;-)

    And I agree that the default funds are a poor choice for most users.

  12. #112
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    Quote Originally Posted by artemis View Post
    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.
    So in that case the house if the house was never intended to be owner-occupied in the first place, wouldn’t the brightline test apply in that situation?
    Last edited by Bjauck; 30-11-2020 at 03:57 PM.

  13. #113
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    "Inland Revenue is cracking down on residential property investors who have sold without paying tax on the profits."
    https://www.stuff.co.nz/national/300...ng-bright-line

  14. #114
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    Quote Originally Posted by Bjauck View Post
    So in that case the house if the house was never intended to be owner-occupied in the first place, wouldn’t the brightline test apply in that situation?
    The brightline applies if it isn't owner occupied basically.
    I don't see how renting it to family members who then increased changes that - the key word is 'rented'.

  15. #115
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    Quote Originally Posted by Bjauck View Post
    So in that case the house if the house was never intended to be owner-occupied in the first place, wouldn’t the brightline test apply in that situation?
    Probably, depending on dates, but the post was about the intention test which is not date specific.

  16. #116
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    Quote Originally Posted by dobby41 View Post
    The brightline applies if it isn't owner occupied basically.
    I don't see how renting it to family members who then increased changes that - the key word is 'rented'.
    Intention test, not bright line. But the bright line test only potentially applies to purchases after two specific dates.

  17. #117
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    Last year we bought the house 4 doors down from our principal residence. With the conveyance person filling out the forms, she queried us on 'intent' if we were really buying that house as a 'personal dwelling' knowing she had previously changed title of our house to our names. I thought this was quite interesting but she accepted our reason for purchasing that house last year. The full intention for buying was to provide a home for wifey's parents. Their financial situation did not permit them to buy the house outright in their name so we wanted it on our name. She accepted but informed us that IRD can check on that ; apparently they must of accepted.

    I find it interesting as in Canada, there is only ONE house that is a 'principal residence' ; you can not have 2 places with that designation on the tax filing. So if IRD is really cracking down on people selling homes, at best, they're only after those that buy into as a business, renovating, flipping, etc. Clearly in our case we collect no rent, the inlaws use the place as their own and maintain it as their own. Their mail goes to there. etc. Should we feel guilty because such a move could never be done abroad?

    and after all, bright-line tests really don't mean much in the realm of retirement planning. Everyone buys a house and treating it as a long term investment (no different to Kiwi Saver), is not going to sell within 5 years.

  18. #118
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    Quote Originally Posted by SBQ View Post
    Last year we bought the house 4 doors down from our principal residence. With the conveyance person filling out the forms, she queried us on 'intent' if we were really buying that house as a 'personal dwelling' knowing she had previously changed title of our house to our names. I thought this was quite interesting but she accepted our reason for purchasing that house last year. The full intention for buying was to provide a home for wifey's parents. Their financial situation did not permit them to buy the house outright in their name so we wanted it on our name. She accepted but informed us that IRD can check on that ; apparently they must of accepted.

    I find it interesting as in Canada, there is only ONE house that is a 'principal residence' ; you can not have 2 places with that designation on the tax filing. So if IRD is really cracking down on people selling homes, at best, they're only after those that buy into as a business, renovating, flipping, etc. Clearly in our case we collect no rent, the inlaws use the place as their own and maintain it as their own. Their mail goes to there. etc. Should we feel guilty because such a move could never be done abroad?

    and after all, bright-line tests really don't mean much in the realm of retirement planning. Everyone buys a house and treating it as a long term investment (no different to Kiwi Saver), is not going to sell within 5 years.
    I don't think you can have multiple primary residences here either.
    The house you brought in your name for someone else will not be your principle residence and will be covered by the brightline test.
    Will mean nothing if you don't sell or if you sell after the brightline because the brightline is just a very strict interpretation of the intention test.
    We don't have a CGT (exempting PPOR or not) whereas Canada probably does so the PPOR test is even more important there.

  19. #119
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    Quote Originally Posted by dobby41 View Post
    I don't think you can have multiple primary residences here either.
    The house you brought in your name for someone else will not be your principle residence and will be covered by the brightline test.
    Will mean nothing if you don't sell or if you sell after the brightline because the brightline is just a very strict interpretation of the intention test.
    We don't have a CGT (exempting PPOR or not) whereas Canada probably does so the PPOR test is even more important there.
    In Canada there is no test. The rule is clear - 'primary' = one
    There is no exemption of tax on the gains when selling a non-principal resident home either which means, there's not point of any bright-line holding period ; it's irrelevant.

    If IRD wants to be greedy, they can do what the CRA does in Canada. If a portion of the principal resident home is rented out, then THAT % portion of the home will not have tax free capital gain. So if the basement works out to be 33% of the rented area of the entire house, then the owner of the house when it comes to selling (and if the place is still being rented), will have to pay CGT on that 1/3rd of the value of the home. The rental income from the suite is taxable income too. So there are many things that the NZ gov't can do to churn in more tax revenue. It all depends on the NZ politicians willingness to pay taxes on their property investments.

    As far as IRD's concern, there is a key difference when you report your 'intent'. If I said we bought the house as an "investment" (and there is a tick mark box that describes what the purpose of buying the house was), then a brightline test would be less meaningful. Even after 5 years IRD can still come back to say you 'bought the house as an investment' and therefore, there is intent for profit, and therefore, taxes should be paid. People do not make 'investments', just like investing $ into a business, without the expectation of making a profit.

    How about this distinction? The individual person buying shares is expecting a gain on their investment. Then why is it, the capital gains from buying NZ shares are tax free when buying foreign shares, are not tax free? IRD uses 2 kinds of measuring sticks for the same asset class but when it comes to investing in houses, it doesn't matter if they're NZ residential homes or foreign homes.

  20. #120
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    Quote Originally Posted by SBQ View Post
    In Canada there is no test. The rule is clear - 'primary' = one
    There is no exemption of tax on the gains when selling a non-principal resident home either which means, there's not point of any bright-line holding period ; it's irrelevant.

    If IRD wants to be greedy, they can do what the CRA does in Canada. If a portion of the principal resident home is rented out, then THAT % portion of the home will not have tax free capital gain. So if the basement works out to be 33% of the rented area of the entire house, then the owner of the house when it comes to selling (and if the place is still being rented), will have to pay CGT on that 1/3rd of the value of the home. The rental income from the suite is taxable income too. So there are many things that the NZ gov't can do to churn in more tax revenue. It all depends on the NZ politicians willingness to pay taxes on their property investments.

    As far as IRD's concern, there is a key difference when you report your 'intent'. If I said we bought the house as an "investment" (and there is a tick mark box that describes what the purpose of buying the house was), then a brightline test would be less meaningful. Even after 5 years IRD can still come back to say you 'bought the house as an investment' and therefore, there is intent for profit, and therefore, taxes should be paid. People do not make 'investments', just like investing $ into a business, without the expectation of making a profit.

    How about this distinction? The individual person buying shares is expecting a gain on their investment. Then why is it, the capital gains from buying NZ shares are tax free when buying foreign shares, are not tax free? IRD uses 2 kinds of measuring sticks for the same asset class but when it comes to investing in houses, it doesn't matter if they're NZ residential homes or foreign homes.
    We don't have a CGT so what Canada with theirs is moot.
    We have an 'intent' test which can turn your gain into income.
    We also have a more specific form of the intent with the 'brightline'.

    People do invest with the expectation of making a profit but that profit could be capital or income (the intent).
    A person buying shares may be expecting a 'capital' gain - or they may be expecting dividend. Capital gain isn't taxed if you are expecting dividend (which is taxed as income).
    The FIF rules came in because overseas dividends are so low (mostly) that you must be expecting a capital gain - so they made a rule as such.
    With property, it could be said that for many properties the expectation of making a rent profit is so low that the only rational explanation for buying the 'rental' was for capital gain and therefore that must be your real intent - and tax them.

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