KPG - Kiwi Property Group Limited

[Habits]

For what its worth, in my opinion you will find that many investors affected by the new 39% tax rate will be instructing their accountants to form an investment company for them which attracts a maximum tax rate of 28%. Once you go above a one third tax rate people tend to do something about it and its easy enough and perfectly legitimate for people to hold their investments in an investment company. For many, distributions from such company will not be an issue as they will take same as part repayment of the loan they lent the company to purchase the shares held previously in their own name. Company could be part or wholly owned by their family trust as an exercise in succession planning and / or asset protection down the track. Too much is being made of the 39% thing in my opinion in terms of gross implied yield as most with significant investment income in this tax bracket will be diverting this into family trusts or family investment companies.

That is good for the accountants I guess

[Waltzing]

Mr B is describing the standard practise which we adhered to right through the late 80's and 90's of the companies being owned by the Trusts and the individuals with the distributions going out to all holders.

This reduced tax and allowed company profits to be held tax free as investments also in Trust before profits were distributed to trust beneficiaries.

We handled blood stock this way with the partnerships set up by Faye and co as the bankers and under writers.

These days we have all this automated, as the standard accounting systems dont handle this level of complexity very well.

A lot of this was based on published articles available to practitioner's via the Accounting societies research archives.

US 10 year down over night, good for commercial property.

[Beagle]

That is good for the accountants I guess

I've done countless thousands of tax returns over the last 40 years. There is only a tiny fraction of people who make over $180,000 personal income. Everyone I know earning more than that already has a family trust and / or company structure set up and the work was done years ago. People caught by this 39% personal tax rate will be those on a salary of more than $180,000, like ministers of parliament, Cindy and many of her colleagues how sad, never mind

Yeah, 10 year rates in the US down overnight but what happens when the Fed's bond buying program comes to an end ?

[Waltzing]

US 10 Year.. would need to overlay the FED's buying programs. sorry the numbers were missing on the quilk cut and paste... but the general trend is there during the unwinding and the Taper tantrum.

us10yr.JPG

[bull....]

good result , i like how they are transitioning there model to community hub's. I think the govt making interest undeductible on rentals will pave the way for kpg to supply long term rentals and provide very stable returns.

[fungus pudding]

I've done countless thousands of tax returns over the last 40 years. There is only a tiny fraction of people who make over $180,000 personal income. Everyone I know earning more than that already has a family trust and / or company structure set up and the work was done years ago. People caught by this 39% personal tax rate will be those on a salary of more than $180,000, like ministers of parliament, Cindy and many of her colleagues how sad, never mind

Yeah, 10 year rates in the US down overnight but what happens when the Fed's bond buying program comes to an end ?

How does a company structure save a taxpayer money, unless he or she doesn't ever want to spend it?

[Beagle]

How does a company structure save a taxpayer money, unless he or she doesn't ever want to spend it?

Perhaps a worked example is in order.

Jack and Jill are comfortably well off baby boomers in their late fifties both with good careers in upper middle management and both earning $170K per annum.
They've done well in life and have built up a very good nest egg of $2m in investments with an average gross yield 5% returning them $100K passive income per annum.
Rather than take Cindy's new tax rate on the chin they form a new investment company called Jack and Jill investments ltd part owned by their family trust in which they already have their house and bach.

They sell their $2m worth of shares into the investment company and the company owes them a debt of $2m for the purchase of the shares.
The odd time Jack and Jill want special treats for their children and grandchildren that isn't covered by their already good salaries they get a part repayment of the $2m loan from Jack and Jill investments to fund that fancy first class Swiss ski holiday for the whole extended family. The income earned in the company $100K per annum before tax, $72,000 after tax is used to make partial repayment of the loan to fund the nice holiday. This lovely story pre supposes a post Covid recovered world where such indulgences can be enjoyed.

Later in life they sell more of their shares in Jack and Jill investment to their family Trust and start gifting back part of the loan as and when appropriate.
People need to take professional advice on these sort of structures.

[fungus pudding]

People need to take professional advice on these sort of structures.

That's one off those structures that will earn you a pleasant little chat with a nice inspector from the IRD. Always opt to meet at their offices rather than your place. That way you will get a free cup of coffee.

[Scrunch]

That's one off those structures that will earn you a pleasant little chat with a nice inspector from the IRD. Always opt to meet at their offices rather than your place. That way you will get a free cup of coffee.

Or you could buy KPG shares directly which is why this discussion is on the KPG tread. Beagle however makes an excellent point that many high income individuals will have structures like this so the new 39% tax rate may not create much extra demand for KPG or other listed PIE's

[fungus pudding]

Or you could buy KPG shares directly which is why this discussion is on the KPG tread. Beagle however makes an excellent point that many high income individuals will have structures like this so the new 39% tax rate may not create much extra demand for KPG or other listed PIE's

I agree. Collect PIES myself. That's easy, whereas Beagle's suggestion is far from easy and far from a definite winner