Who'd want to be a landlord now ?

[SBQ]

Sounds like you had better get every last cent invested in real estate - pronto. That's the only thing I invest in, either directly or through the LPT's that have that PIE advantage. I didn't realise how lucky I am.

I can't speak for yourself and there are exceptional cases where individuals have done well in shares. The bold reality is people in NZ are not investing directly. You simply can't pitch a model where the average person is able to produce exceptional returns with shares. I'm not seeing this like I do in N. America.

Do you wonder why all the banks don't care for share investments and all they encourage is to loan mortgages? As the previous person mentioned in this post, his bank did not care about the share investment holdings when looking to buy his daughter's 1st home. What banks will do is lend on equity of real estate but NOT on equity in shares. I'm sure you are aware of this ; banks are freely able to lend on houses and nothing else.

It may seem i'm all bitter about this disparity between investments in residential housing, & shares on the stock exchange (from a NZ perspective). My greatest concern is for the average NZ resident, even for say 90% of the NZ population, pitching a model of Kiwi Saver to them would prove worse than if they invested in real estate directly. Of course things could of been different IF taxes were more equitable like they are in Aus/Can/US. You can give hats off to Michael Cullen for ramming Kiwi Saver down on the people.

Personally I hate real estate as an investment because it's a non-productive asset. But what can be done when you're living in NZ? I look at my children to see what choice they have for investment planning and the picture tells me clearly. 1) The next generation living in NZ will never have as much wealth, in terms of shareholder / pension investments, then those living abroad in the US or Canada. and this is ALL due to the differences in tax treatment. 2) Choosing Kiwi Saver vs a mortgage to buy another house (because you can leverage) will net you more wealth at the end ; again due to differences in tax. Following link elaborates the issue: (for which at the time they were talking how much wealth would be left on the house IF CGT was passed ; we know now we can forget about CGT):

https://www.nzherald.co.nz/business/...ectid=12209227

Look at the graph showing the timing of tax; the brown line (assuming the house investment) having a lot more wealth at the end than the blue line (assuming ie managed fund share investment where the gains are taxed every year). As quoted from the link:
"They are taxed at the same rate, but they do not end up with the same returns. The investment that's taxed at the end earns compound growth on everything, while the line that's taxed annually loses part of its growth immediately, along with the compound growth that would've come with it. In this scenario, that amounts to a $142,000 difference."

And no person has been more vocal about robbing wealth from compounded returns than John Bogle (RIP) in his Vanguard empire where he was critical on high management fees by managed funds. Likewise, no different to paying tax on annual gains or in the FIF. If your Kiwi Saver fund is invested in the US listed shares, unfortunately FIF literally robs them by taxing on the whole investment amount of FDR 5% regardless on years where they make no gain or loss. Meaning why is there a difference in FIF treatment for those invested in managed funds vs individuals owning US shares directly ?? If you're not following, the individual person under FIF on years where they have a loss, can elect out of the FDR and choose the 'comparative rate' FIF and pay no tax. Managed funds CAN NOT do this ; they're forced to pay FDR on the entire portfolio value having gain or no gain. Below link is an example of what i'm getting at: (which proves the person in a PIE fund is worse off... You say PIE advantage?)

https://www.consilium.co.nz/media/10...-consilium.pdf

There was another web link that has gone off line but it's titled "For FIF’s Sake: Why NZ global tax rules need a rewrite” by Anthony Edmonds". Which shows even more tax disparities between the individual directly investing under FIF and those investing under a PIE.

But of course... people in NZ only should invest in NZ shares because it's the right thing to do LMAO...

[fungus pudding]

I can't speak for yourself and there are exceptional cases where individuals have done well in shares. The bold reality is people in NZ are not investing directly. You simply can't pitch a model where the average person is able to produce exceptional returns with shares. I'm not seeing this like I do in N. America.

Do you wonder why all the banks don't care for share investments and all they encourage is to loan mortgages? As the previous person mentioned in this post, his bank did not care about the share investment holdings when looking to buy his daughter's 1st home. What banks will do is lend on equity of real estate but NOT on equity in shares. I'm sure you are aware of this ; banks are freely able to lend on houses and nothing else.

It may seem i'm all bitter about this disparity between investments in residential housing, & shares on the stock exchange (from a NZ perspective). My greatest concern is for the average NZ resident, even for say 90% of the NZ population, pitching a model of Kiwi Saver to them would prove worse than if they invested in real estate directly. Of course things could of been different IF taxes were more equitable like they are in Aus/Can/US. You can give hats off to Michael Cullen for ramming Kiwi Saver down on the people.

Personally I hate real estate as an investment because it's a non-productive asset. But what can be done when you're living in NZ? I look at my children to see what choice they have for investment planning and the picture tells me clearly. 1) The next generation living in NZ will never have as much wealth, in terms of shareholder / pension investments, then those living abroad in the US or Canada. and this is ALL due to the differences in tax treatment. 2) Choosing Kiwi Saver vs a mortgage to buy another house (because you can leverage) will net you more wealth at the end ; again due to differences in tax. Following link elaborates the issue: (for which at the time they were talking how much wealth would be left on the house IF CGT was passed ; we know now we can forget about CGT):

https://www.nzherald.co.nz/business/...ectid=12209227

Look at the graph showing the timing of tax; the brown line (assuming the house investment) having a lot more wealth at the end than the blue line (assuming ie managed fund share investment where the gains are taxed every year). As quoted from the link:
"They are taxed at the same rate, but they do not end up with the same returns. The investment that's taxed at the end earns compound growth on everything, while the line that's taxed annually loses part of its growth immediately, along with the compound growth that would've come with it. In this scenario, that amounts to a $142,000 difference."

And no person has been more vocal about robbing wealth from compounded returns than John Bogle (RIP) in his Vanguard empire where he was critical on high management fees by managed funds. Likewise, no different to paying tax on annual gains or in the FIF. If your Kiwi Saver fund is invested in the US listed shares, unfortunately FIF literally robs them by taxing on the whole investment amount of FDR 5% regardless on years where they make no gain or loss. Meaning why is there a difference in FIF treatment for those invested in managed funds vs individuals owning US shares directly ?? If you're not following, the individual person under FIF on years where they have a loss, can elect out of the FDR and choose the 'comparative rate' FIF and pay no tax. Managed funds CAN NOT do this ; they're forced to pay FDR on the entire portfolio value having gain or no gain. Below link is an example of what i'm getting at: (which proves the person in a PIE fund is worse off... You say PIE advantage?)

https://www.consilium.co.nz/media/10...-consilium.pdf

There was another web link that has gone off line but it's titled "For FIF’s Sake: Why NZ global tax rules need a rewrite” by Anthony Edmonds". Which shows even more tax disparities between the individual directly investing under FIF and those investing under a PIE.

But of course... people in NZ only should invest in NZ shares because it's the right thing to do LMAO...

And here's silly ol' me thinking we were talking about NZers investing in NZ. I even thought paying 28% tax through a PIE was better than paying 33%. Silly me.

[Bjauck]

And here's silly ol' me thinking we were talking about NZers investing in NZ. I even thought paying 28% tax through a PIE was better than paying 33%. Silly me.

Maybe because of the relative appeal of residential housing investment and until recently an the lack of widespread pension scheme assets, The NZ share market has been hollowed out. So many NZ companies have relocated overseas - or have been taken over. For example just to maintain a shareholding in ex-NZ company Xero involves holding foreign shares on the ASX.

Much of the banking sector is in Australian hands so for the NZ resident for that business sector the only way to have a shareholding in that substantial part of the NZ economy is to have shares in a foreign company through foreign shares trading either on the ASX or on the NZX. A NZ company owning those banking assets would enable the NZ shareholders to claim a substantial imputation credit as opposed to the current situation of a minimal imputation claim for NZ resident holders.

I think NZers owning shares in specific overseas companies, which have assets in NZ, is sometimes the best way for NZ residents to have targeted exposure in certain NZ businesses and sectors.

Many NZ business and companies have ended up under overseas shareholders. Why not vice versa.

[SBQ]

Maybe because of the relative appeal of residential housing investment and until recently an the lack of widespread pension scheme assets, The NZ share market has been hollowed out. So many NZ companies have relocated overseas - or have been taken over. For example just to maintain a shareholding in ex-NZ company Xero involves holding foreign shares on the ASX.

Much of the banking sector is in Australian hands so for the NZ resident for that business sector the only way to have a shareholding in that substantial part of the NZ economy is to have shares in a foreign company through foreign shares trading either on the ASX or on the NZX. A NZ company owning those banking assets would enable the NZ shareholders to claim a substantial imputation credit as opposed to the current situation of a minimal imputation claim for NZ resident holders.

I think NZers owning shares in specific overseas companies, which have assets in NZ, is sometimes the best way for NZ residents to have targeted exposure in certain NZ businesses and sectors.

Many NZ business and companies have ended up under overseas shareholders. Why not vice versa.

I'm quite sure you know the answer why. I've never been happy with the whole idea of dividend payments and with inputation credits because the more efficient method from a tax point of view is to keep the funds in retained earnings / shareholder's equity and let the share price reflect that. Therefore generation a tax free capital gain. Just allow the shareholder to elect any disbursements of payment by simply selling a portion of their share holding. This creates liquidity on the NZX (for which the reality being, the liquidity is drying up on the NZX).

I also question how many foreign companies abroad actually have full interest in owning NZ companies? Who would risk that kind of involvement? I've seen the Canadian "Ontario Teacher's Pension" come and buy NZ's Yellow Page holding for a large sum... to only later be wiped out by online information for finding ph# instead of out of the traditional Yellow Pages directory books we see delivered to homes each year. Then there's "sensitive assets" like the Auckland airport where foreign funds tried to invest in. When you look at the NZX, what reputable managed fund from the US would ever find 'undervalued' companies there? Not when politically, you have an investment environment that discourages NZ residents ability to invest in foreign shares ; i'm certain brokerage firms in the US have simply cut off access to buying equities on the NZX over the recent FMA regulation. You have a ban on non-residents being able to buy houses in NZ. It doesn't take long (or the damage has already been done) to tell the investment community abroad that NZ does not play fair when looking at both sides of the fence.

Reason why many NZ companies like Zero have gone abroad? It's the very same reason why the individual would seek their investments abroad. They seek a more fair equitable tax system. Does NZ's corporate tax rate of 30% seem competitive on the OECD scale?

It's just so sad the individual living in NZ gets the worse situation being stuck in Kiwi Saver and the price of owning houses have been an exclusive for only the high income earners...

[Bjauck]

I'm quite sure you know the answer why. I've never been happy with the whole idea of dividend payments and with inputation credits because the more efficient method from a tax point of view is to keep the funds in retained earnings / shareholder's equity and let the share price reflect that. Therefore generation a tax free capital gain. Just allow the shareholder to elect any disbursements of payment by simply selling a portion of their share holding. This creates liquidity on the NZX (for which the reality being, the liquidity is drying up on the NZX)..

I think I may not have made my point clear in my response to another poster. Namely: Much of NZ business is now actually in foreign ownership. So, owning foreign shares may actually be a way to invest in those companies who own NZ businesses now.

However in relation to imputed dividends I disagree. It gives a tax-neutral flexibility for companies to either retain or distribute tax paid profit. Attaching imputation credits means that the shareholder is not then in effect double-taxed on the company profit. If the tax paid profit were kept in the company, then the only way for a shareholder (who relies on an income stream from investments) would be to sell shares thereby incurring transaction costs.

Other countries have investment schemes with discounted tax rates on dividends and/or a tax threshold before dividend income is taxed. Certainly until NZ introduces such schemes, imputation at least tries to address double taxation on the income from NZ shares.

A few years old:
https://www.interest.co.nz/business/...reholders-says

[SBQ]

I think I may not have made my point clear in my response to another poster. Namely: Much of NZ business is now actually in foreign ownership. So, owning foreign shares may actually be a way to invest in those companies who own NZ businesses now.

However in relation to imputed dividends I disagree. It gives a tax-neutral flexibility for companies to either retain or distribute tax paid profit. Attaching imputation credits means that the shareholder is not then in effect double-taxed on the company profit. If the tax paid profit were kept in the company, then the only way for a shareholder (who relies on an income stream from investments) would be to sell shares thereby incurring transaction costs.

Other countries have investment schemes with discounted tax rates on dividends and/or a tax threshold before dividend income is taxed. Certainly until NZ introduces such schemes, imputation at least tries to address double taxation on the income from NZ shares.

A few years old:
https://www.interest.co.nz/business/...reholders-says

I'll try to keep this short as it's off topic. I completely agree on the reasons for the imputation credit, which avoids double taxation. Canada addresses this via a dividend credit directly to the shareholder on their tax return. But eitherway, i'm not buying this argument one bit. You have critics that have been very vocal against Warren Buffet why he doesn't pay dividends in Berkshire Hathaway because quite simply, they don't know better. This is not to rain against issue dividends because Buffet collect a heap of dividends. His view is simply again, not tax efficient and encourages the companies that Berkshire hold to retain profits for use in EXPANSION to maintain growth. Otherwise if there's no growth then dividend payment is acceptable.

If you really want an income stream, then choose a different asset class. But to assume these NZ listed companies to have an expectation to pay dividends? No matter if they're in a growth stage or mature type of company say like utilities (huge lack of distinction). It's prevalent entirely through NZ's finance industry ; NZ brokers such as MacQuires giving out their investment approach that focus on dividends and .. none other. No wonder companies like Xero have left the NZX. On the US front, US brokerage firms are shutting out access to the NZX because of the NZ gov'ts FMA. Then I hear liquidity in the NZX is drying up. Should be interesting to see where the NZX will be in 10 years. Wouldn't be happy to be holding Kiwi Saver focused solely on NZ listings.