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Interesting point, but as noted above the real test is how much it costs to replace the old house, not what you would get for it if sold as is. The difference from your past cost in the latter is inflation, and the imbalance of demand over supply. More noticeable in dollar terms over a extended period of time.
Mark Weldon was very negative on property investment and use of LAQC's in the paper the other day. Don't see the problem myself. Depreciation is claimed by all businesses. Its just more noticeable for providers of rental property as this is a big part of the cost of provision of accommodation - for obvious reasons.
His beef was with offsets against salary and wages for tax purposes. I guess he wants the wage and salary tax base as extensive as possible so that the government can afford to reduce coy tax rates?? It all boils down to an allocation bun fight and guess who always wins. A fine example of Financial Darwinisiam ; )
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Yes, there's no problem with off-setting depreciation against the income of a business.
It's when it's off-set against other income, particularly wages and salaries that the distorting effect cuts in with property investment getting an advantage over other forms of investment. Not surprising that Kiwis favour buying rental properties over equity investments.
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You could use the LAQC for "other forms of investment" if deemed suitable too. LAQC is not limited to property of course. LAQC is not even needed to xfer losses. Operate as a sole trader (in your own name) for example. Issue then is asset protection. Only advantage of LAQC IMO is bonus of asset protection, i.e. you can transfer shares in coy at little cost/hassle when/if circumstances require a ownership change. Negative is additional compliance/cost requirements of operating a valid coy.
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Member
Originally Posted by macduffy
Yes, there's no problem with off-setting depreciation against the income of a business.
It's when it's off-set against other income, particularly wages and salaries that the distorting effect cuts in with property investment getting an advantage over other forms of investment. Not surprising that Kiwis favour buying rental properties over equity investments.
Regarding depreciation, the IRD utilises "claw-back" where it is
applicable. I think it is a bit of a "timebomb" especially if your tax rate
has gone up at the time of sale!
Happy New Year to all - off to Salmon fishing for a couple of
months.
Cheers
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Originally Posted by foodee
Regarding depreciation, the IRD utilises "claw-back" where it is
applicable. I think it is a bit of a "timebomb" especially if your tax rate
has gone up at the time of sale!
Happy New Year to all - off to Salmon fishing for a couple of
months.
Cheers
It's not a time bomb. It's always a benefit because it defers taX. It features in your profit/loss calculation as an expense but it is a non cash expense, and anyway is only payable if the depreciation claimed is recovered on sale. Remember that it is so ofen the land price that has gained or appreciated. Numerous sales result in depeciation not being recovered, or only partly recovered.
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If you transfer shares in a LAQC (holding property) you don't trigger the claw back.
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...when i started investing in rentals 30 + years ago...I had never heard of a LAQC....I new there were a few advantages like leverage and capital gains...but the main reason for investing in houses was because i did not trust ...blokes in suits...like brokers,money managers,advisers,R Jones and his ilk....in fact thats what really peeves me off ..the "powers that be" have been screaming at us to forget rentals and invest in business's etc....but to a great extent how have the likes of doug-somers,watson,hotchin,feltex,bridgecorp,dnz et al have all been permitted to flourish and end the investing career.s of so many...I believe that regulations about disclosure,related party borrowings and the like have never been stingent enough to convince folk to change there views.
Mr Weldon may well think the market is distorted...he still is a young chap...and lastly I believe that this whole debate has arisen as more and more NZ ers focus on investment strategies and tax implications.
30 years ago i cannot recall if investment entities were established solely for the purposes of tax minimsation/avoidance...like trinity,LAQC and the like....
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Member
Depreciation
Originally Posted by Wilkins_Micawber
But you have it both ways - you deduct the expense of the repairs AND claim depreciation on the items being repaired. I only disagree with the ability to claim depreciation on the buildings as they do not really depreciate (providing that normal repairs and maintenance are carried out).
I am not sure where you are comming from, but if you replace a kitchen bench, this is a capital item to be depreciated and not an expense to be claimed against your taxable income.
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Member
Invest in business like PGW ? PGC ? or SKL ? or FTX ??? Or would rather buy a rental and sit tight regardless ?
I bought a rental for 140k 10 yrs ago and it's RV is 300k, I bought another one for 340k 3 yrs ago and its RV is 380k. The rents are $300 and $340 a week.
I bought PGW at $2, worth $0.58; PGW $2.50 worth $0.48; SKL $1.15 worth $0.51 and FTX $0.70 worth $0.000.
You be the judge which better business or brick and mortar.
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Last edited by nztx; 04-01-2010 at 11:56 AM.
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