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  1. #91
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    Quote Originally Posted by SBQ View Post
    Pension funds like KiwiSaver already have the ability to produce higher returns through leverage (on margin). But using KiwiSaver to invest into a new business or towards school study is entirely a different can of beans. The fact that more than 95% of small businesses fail within 5 years is a good reason why banks shy away from lending for business ventures. Likewise with schooling. If the person takes on a useless degree than where would that leave in terms of wise use of KiwiSaver funds (when it could be kept in the pension to have more growth?).
    Sure the KiwiSaver money released for further education may result in failure for the kiwsaver concerned. The money released for real estate purchase may result in further inflating th housing market or it may be used to buy an over priced problem house. My opinion is that Kiwisaver should only be used for retirement and not as a real estate deposit saving scheme.

    The government should introduce a second tax concessionary scheme to encourage saving with the ability to withdraw savings (with a write-back of tax concessions for withdrawals over a certain amount and within a set time period) prior to retirement.
    Last edited by Bjauck; 14-12-2019 at 08:33 AM.

  2. #92
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    Quote Originally Posted by artemis View Post
    Iceman's issue was to do with serviceability rather than security. Banks can have whatever rules they like, but I would have thought a dividend stream was at least as reliable as a household's employment income.
    My point exactly artemis. They accept employment income and rental income but ignore 100% of the dividend income. I showed them back 7 years that the dividend income was certainly no less reliable than rental income but "rules are rules". That is the ridiculous part. Then we are told to diversify our savings and investments but the whole system is geared towards housing artificially maintaining worryingly high prices. And our young first home buyers and families are the biggest sufferers of this stupid policy.

  3. #93
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    Quote Originally Posted by iceman View Post
    My point exactly artemis. They accept employment income and rental income but ignore 100% of the dividend income. I showed them back 7 years that the dividend income was certainly no less reliable than rental income but "rules are rules". That is the ridiculous part. Then we are told to diversify our savings and investments but the whole system is geared towards housing artificially maintaining worryingly high prices. And our young first home buyers and families are the biggest sufferers of this stupid policy.
    Yes, employment income can fluctuate - and disappear - just as dividend income can. But if the worst happens the value of the equities usually disappears but the mortgage on the real estate remains.

  4. #94
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    Quote Originally Posted by macduffy View Post
    Yes, employment income can fluctuate - and disappear - just as dividend income can. But if the worst happens the value of the equities usually disappears but the mortgage on the real estate remains.
    Too true. Banks mitigate some risk by using a higher than actual interest rate to calculate serviceability.

    However employment income takes a big hit when the household of two with two incomes becomes a household of three with one income. Certainly very common with first home buyers. They usually make it through the tough years, often with free government money, and into calmer waters.

  5. #95
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    Quote Originally Posted by Bjauck View Post
    Sure the KiwiSaver money released for further education may result in failure for the kiwsaver concerned. The money released for real estate purchase may result in further inflating th housing market or it may be used to buy an over priced problem house. My opinion is that Kiwisaver should only be used for retirement and not as a real estate deposit saving scheme.

    The government should introduce a second tax concessionary scheme to encourage saving with the ability to withdraw savings (with a write-back of tax concessions for withdrawals over a certain amount and within a set time period) prior to retirement.
    If you really want to curb the rising real estate prices.. just tax it. Don't allow those owning more than 1 house to sell (after holding for more than 5 years) where the gains are tax free. Those that have made gains in Kiwi Saver would be a fool not to use those funds to put into their 1st home. (ie transferring from 1 asset pool that is taxable vs the house asset that has tax free capital gain). This reminds me again, i've asked local financial advisors if they worked out the difference between owning a Kiwi Saver fund vs owning a house (where they can leverage). They always come back saying "that depends".

  6. #96
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    Quote Originally Posted by SBQ View Post
    If you really want to curb the rising real estate prices.. just tax it. Don't allow those owning more than 1 house to sell (after holding for more than 5 years) where the gains are tax free. Those that have made gains in Kiwi Saver would be a fool not to use those funds to put into their 1st home. (ie transferring from 1 asset pool that is taxable vs the house asset that has tax free capital gain). This reminds me again, i've asked local financial advisors if they worked out the difference between owning a Kiwi Saver fund vs owning a house (where they can leverage). They always come back saying "that depends".
    Why the one house limit? Either tax capital gains - or don't.

  7. #97
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    Quote Originally Posted by macduffy View Post
    Yes, employment income can fluctuate - and disappear - just as dividend income can. But if the worst happens the value of the equities usually disappears but the mortgage on the real estate remains.
    In the unlikely and very extreme event of a diversified share portfolio "disappearing", IŽd say our housing market would be in serious trouble also. Best for the banks not to lend anything, just in case the sky falls in !!!

  8. #98
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    Quote Originally Posted by fungus pudding View Post
    Why the one house limit? Either tax capital gains - or don't.
    'Special' treatment for rental owners is having an effect.

    Last few headlines from Trademe's monthly rental price report -

    Rental prices continue their surge toward summer
    Rents in the main centres warm up with summer on the horizon
    Demand soars for rentals across the country
    Tenants in Wellington paying $60 more per week in rent
    Rents rise countrywide
    Rents rocket in the region

  9. #99
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    Quote Originally Posted by artemis View Post
    'Special' treatment for rental owners is having an effect.

    Last few headlines from Trademe's monthly rental price report -

    Rental prices continue their surge toward summer
    Rents in the main centres warm up with summer on the horizon
    Demand soars for rentals across the country
    Tenants in Wellington paying $60 more per week in rent
    Rents rise countrywide
    Rents rocket in the region
    What is 'special' treatment?

  10. #100
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    Quote Originally Posted by fungus pudding View Post
    What is 'special' treatment?
    Bright line test, ring fencing of rental losses, removal of building depreciation for starters. None of those apply to other businesses, including commercial property.

  11. #101
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    Quote Originally Posted by artemis View Post
    Bright line test, ring fencing of rental losses, removal of building depreciation for starters. None of those apply to other businesses, including commercial property.
    If owning an investment residential property and renting it out is a business, are there any requirements for it to be a going-concern in order for expenses to continue to be deducted for tax purposes?

  12. #102
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    Quote Originally Posted by iceman View Post
    In the unlikely and very extreme event of a diversified share portfolio "disappearing", IŽd say our housing market would be in serious trouble also. Best for the banks not to lend anything, just in case the sky falls in !!!
    I'm not arguing the bank's position here, just stating reasons why they take that position. As investors we (mostly) prefer diversified portfolios; from a bank's perspective, diversification increases complexity and oversight. Tutorial over.

  13. #103
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    Quote Originally Posted by Bjauck View Post
    If owning an investment residential property and renting it out is a business, are there any requirements for it to be a going-concern in order for expenses to continue to be deducted for tax purposes?
    Depends what you mean by going concern. Is it a taxable activity - yes. Does it have income - depends. Does it make a profit - yes.

    I think you may mean something like how long is it OK to make a loss before IRD comes knocking. AFAIK there is no (published) set rule, but IRD systems have a lot of checks and balances and they might well check if there is a pattern of losses. IRD will no doubt take into account when a property was purchased as that can skew the income / expenses ratio.

  14. #104
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    Quote Originally Posted by fungus pudding View Post
    Why the one house limit? Either tax capital gains - or don't.
    It's recognized having shelter (or a roof over your head) is a necessity. The issue on taxation should be based on necessity. For everything else, yes you should tax it because there's the intent for profit or gain. The single home owner has no intention for profiting other than to keep a roof over their head. I've just read in Silicon Valley there are IT workers living out of RVs and motorhomes because they're able to save (or basically make the sacrifice to save in order to get into a house later on).

    There are not many countries that impose a capital gains tax on everything. Even in the US as the principal residence is entitled to tax free capital gain between moving houses.

  15. #105
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    Quote Originally Posted by Bjauck View Post
    If owning an investment residential property and renting it out is a business, are there any requirements for it to be a going-concern in order for expenses to continue to be deducted for tax purposes?
    The example the CRA uses in Canada is if you rent the house out, then the capital gains are also taxable. ANY ongoing investment portfolio that runs like a "BUSINESS" with the intent to "MAKE A PROFIT" is always going to attract capital gains tax and not just the annual rental income that is taxed after deductions. In fact, CRA model for taxation is very extensive to have 3 areas of taxation when a person looks to profit. You have salary & wage income, dividend income from investments, and capital gain ; all are treated differently with different tax rates. IRD in NZ is way too lenient in allowing the use of real estate as a way to escape tax when compared to other investment or business models.

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