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  1. #16
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    Quote Originally Posted by SBQ View Post
    From the individual IRD tax resident's point of view, correct. But from the whole picture point of view, the PIEs and various NZ operated fund managers, Kiwi Savers, etc. pay the tax on their gains and incomes annually. These actively managed funds are essentially 'traders' and by definition, all their short term gains made are taxable. .
    No, this is simply not correct. In a PIE fund, any capital gains made in shares in New Zealand resident companies and Australian resident companies that are listed on an approved Australian Stock Exchange index and maintain a franking credit account, are not taxable.

    For investments in offshore equities PIE funds apply the “fair dividend rate” (FDR) method to calculate the amount ofany taxable income. Under the FDR method, the funds will generally have taxable income ineach income year (1 April to 31 March) in relation to the applicable equities calculated byreference to 5% of the average daily opening market value of the applicable equities. Dividendsor sales proceeds received by the funds in relation to the applicable equities should not besubject to further tax. The funds may be entitled to a credit for any foreign withholding tax paidon dividends received from the applicable equities subject to certain limits. No tax deductionmay be claimed for any losses in respect of the applicable equities under the FDR method. If you're a 28% taxpayer therefore, you'll pay 1.4% p.a. in tax, regardless of whether the fund makes -5% or +20%, so it's hard to call it a capital gains tax.

    The only index-tracking NZ equity share fund with a 10 year record has returned 13.7% p.a. net of fees/pre tax over the last 10 years to 31/07/19. I don't have the numbers for Auckland real estate (they are amazingly hard to get hold of on Google) but I would be surprised if net of tax on income, maintenance, repairs, insurance, rates etc. they are close to comparable.

  2. #17
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    Quote Originally Posted by Tronald Dump View Post
    No, this is simply not correct. In a PIE fund, any capital gains made in shares in New Zealand resident companies and Australian resident companies that are listed on an approved Australian Stock Exchange index and maintain a franking credit account, are not taxable.
    duh i'm not speaking for NZ resident companies or those in Australia that are FIF exempt. Afterall the previous posts i've been getting at is around investing foreign shares that fall under FIF and it's a serious concern or risk if you ask NZ investors that they should be buying NZ stocks when the NZX equity market may represent less than 1% of the global equity market. I blame Michael Cullen for this because he's been h*ll bent on coercing NZ investors to favour NZ shares over foreign shares since he pushed through FIF.

    For investments in offshore equities PIE funds apply the “fair dividend rate” (FDR) method to calculate the amount ofany taxable income. Under the FDR method, the funds will generally have taxable income ineach income year (1 April to 31 March) in relation to the applicable equities calculated byreference to 5% of the average daily opening market value of the applicable equities. Dividendsor sales proceeds received by the funds in relation to the applicable equities should not besubject to further tax. The funds may be entitled to a credit for any foreign withholding tax paidon dividends received from the applicable equities subject to certain limits. No tax deductionmay be claimed for any losses in respect of the applicable equities under the FDR method. If you're a 28% taxpayer therefore, you'll pay 1.4% p.a. in tax, regardless of whether the fund makes -5% or +20%, so it's hard to call it a capital gains tax.
    Spare the FIF talk, I think readers are well aware the tax treatment of shares under FIF is unfair to shares that are excluded to FIF. Primarily because the treatment of FIF is to tax paper gains which again, Mr Cullen wanted to address that NZ investors had a clear advantage to investing in US equities because their model focusses on capital gains with little or no dividend payment (while in NZ, it's the opposite). I've been very crtical about this in many of my past posts on different threads and when you look for retirement planning, there's no worse way to erode the compound returns of the retirement portfolio than to pay 1) High mgt & admin fees by the funds 'ETF or not', and 2) Be slapped with FIF despite how it may only be 1.9% (those on the 38% tax bracket). and let's all not forget, under FIF there is NO tax credit on years when your portfolio goes negative, so when the market rebounds in the following years, FIF will cane the portfolio as it tries to recover it's value.

    The only index-tracking NZ equity share fund with a 10 year record has returned 13.7% p.a. net of fees/pre tax over the last 10 years to 31/07/19. I don't have the numbers for Auckland real estate (they are amazingly hard to get hold of on Google) but I would be surprised if net of tax on income, maintenance, repairs, insurance, rates etc. they are close to comparable.
    [/QUOTE]

    Did you forget to mention this particular NZ fund with that track record? As Warren Buffet said, there are plenty of funds that can show year after year their stellar returns but can they repeat the same returns in the next decade? There's also a level of (well lack of transparency) as i've found many of these NZ managed funds with many bold claims, but they don't report 'net' of taxes and net of admin fees. Hence why we often see the figures are unaudited and full of window dressings. As for Auckland real estate gains, the problem lies on leveraging. My cousin bought a small 2 story dump in New Market for about $400K back in 2006. Last year they sold it for a whopping $1.4M. Yes you could argue a person could of done equally as well by buying the NZX50 but the stark reality is this. VERY VERY Few investors would consider to leverage buying (on the margin or by mortgage loan) of that size on shares. Because the home mortgage rate is always going to be a lot less than the NZ broker rate for margin accounts or bank loans that don't take NZ listed shares as collateral; and thus the bank lending rate will be higher. So why is it that we have a banking industry that promotes people to go mortgage to buy their home, but none of them promote leveraging in the same way when it comes to buying NZ listed shares? I tell you why, it's because the banks know they have control of hard assets like land and houses but a person to ask the bank to lend on an asset where it's share price can go to zero? They will kindly show you the door. (remember, i'm speaking from a person that has no real collateral in ie. buying their 1st home). Second, if you think mainentance, repairs, insurance, rates is a big deal, it certainly isn't. Take a $1.5M figure for an Auckland house, add up the rates, insurance etc.. and we're only seeing around 1% for the cost of outgoings of the asset. Less than most NZ managed funds would charge and certainly a lot less if FIF was added to the cost. Comparable?

    On a slightly side topic, and again i'm speaking from a Canadian perspective. I'm a bit at a crossroads between the NZ approach to investing vs what I was taugh about finanace at uni in Canada. I'm not sure if it's because NZ is behind from the rest of the world or that the NZ gov't just doesn't care. In Canada for as long as I can remember, the gov'ts and tax dept have been very clear that the asset class of real estate is not one you can rely on for retirement because the tax treatment on owning multple houses is severe. While houses can remain unaffordable in places like Vancouver, the gov't takes the approach of taxation to discourage investment in houses (ie. taxing of non-residents, a 20% non-resident buyer's tax, vacancy tax, etc) vs in NZ they just simply banned foreign residents from buying existing houses. I much prefer the former than the latter because there's usually no complait to tax rich wealthy folk from all parts of the world.

    While the real estate has always been shunned upon for profiting, this led the door open for capital flows into the more productive part of society ; the stock market and venture capital funding. Several of new programs came out with the clear focus of helping the lower end and middle class folk. By way of forming 'tax free compounding of registered funds', the lower income people had a chance to get in the equity market no different to the big boys that had their fancy henge funds. The early introduction was RRSP (just like Kiwi Saver) with employee contibutions ; but the employee also reduces their taxable income on what they contribute (not done here in NZ). In following the same tax free compounding approach, the gov't introduced RESP (education investment plans ; where not only the gains each year are tax free but the disbursements of the fund are 100% tax free when paid / used for education purposes). There's also disability investment plans too where the gov't provides grants and again, when say the disabled child goes to withdraw from the fund, it comes out 100% tax free. I'm not sure how such scheme would come to NZ becuase we're focussed on taxation at the source ; so you can't offer any benefit to those that use their after tax disposable income to fund / invest for education? What I see is the bar is treated the same whether you're rich or poor in NZ (IRD has been very good at discriminiting the needy and low income people) ; not personal exemption limit that Can and Australia have, and when I think about it, Ms Ardern did a mistake for not creating a more fair tax system in NZ. They could of implemented a mild capital gains tax program so they can look to similar investment schemes done abroad while maintaining a tax neatral stance. Anyways sorry for my long winded garble. At times overseas perspectives can give us a clue to how things can be done better.

  3. #18
    Membaa
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    I have trouble reading books on discussion groups, but these conversations are important and interesting perspectives. The only thing missing for me is a disclosure on professional quals, with divergent views on complicated matters it would help to at least know what quals and experience backs ones assertions. Jmho

  4. #19
    percy
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    I have followed the sharemarket since I was 16 or 18.I enjoy reading about business,the people,the ideas,the successes,the failures.For many years I had no money to invest.Yet I loved seeing companies I thought were doing the right things, do well.I also enjoyed watching the bad directors/managers failing where ever they went.Each morning I love seeing whether the Dow is up or down.I enjoy reading company announcements,seeing whether I was right or wrong with my projections.I enjoy AGMs and presentations.Always come away having learnt things,and a better understanding of the company.
    On the 20th I hope to attend Syft's [unlisted] AGM.This company has a checked history.I have read up a bit on it.At this stage I do not hold shares in it.Depending on how the agm goes,I will either do a lot more research, or flag them away.To me this is my hobby.I just enjoy it.Being successful at it makes it even more enjoyable.
    Last edited by percy; 12-08-2019 at 08:06 PM.

  5. #20
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    Quote Originally Posted by justakiwi View Post
    This forum is called “Share Trader” which made me think about why we invest in the share market. I am curious to know why you all invest in shares? Do you consider yourself a “trader” with the aim to make a profit buying and selling? Are you an “investor” looking for long term returns? Someone wanting retirement income? Or just someone looking for a better place than banks to leave your money? Or a mix of some or all of the above?
    My involvement with online investment forums goes back to the e-mail based 'sharechat'. I actively avoided going on 'sharetrader' because I did not consider myself a 'trader'. However, with the demise of the 'sharechat' forum, I had nowhere else to go in NZ. IOW I don't think you can surmise that those on this forum are all comfortable being put in that 'trader' box. However, I guess any on market share transaction involves a buyer and a seller and so can be classified as a 'trade'. If you go with that literal definition, then we are all 'sharetraders'.

    My late father had been involved in the sharemarket as an investor for as long as I can remember. It served him well. He never owned rental properties. He also held fixed interest investments back in the day a 7-8% return was the norm. So in my case, the sharemarket just seemed the logical place to invest if you wanted to earn more than a term deposit return. Low hassle - no tenants to deal with, and if you needed some capital it was only a broker's phone call away. In my case to 'change the family norm', I would be answering a different question to the one you pose 'justakiwi', namely:

    "Why would you not invest in shares?"

    I can't think of a reason not to.

    SNOOPY
    Last edited by Snoopy; 15-08-2019 at 08:25 AM.
    To be free or not to be free. That is the cash-flow question....

  6. #21
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    I invest in shares because I'm too lazy to be a landlord. I have enough trouble finding the motivation to upkeep my own house.
    Anyway, the sharemarket is far more interesting than property.

  7. #22
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    Quote Originally Posted by Jonboyz View Post
    I invest in shares because I'm too lazy to be a landlord. I have enough trouble finding the motivation to upkeep my own house.
    Anyway, the sharemarket is far more interesting than property.
    I know what you mean. After many years as a residential landlord I grew tired of the work, and more-so the tenants. While I retain sufficient commercial property to provide a good living, I throw all spare income into listed property trusts. So refreshing - not even any paper work and the advantage of low tax with PIES. Outside of LPTs I don't have any shares - can't understand them.

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