Politics 🗳️ NZ Politics

[wizard of Tauranga]

I was talking to another designer the other day who is also a landlord. Earlier this year, the previous tenants left and most of the wallpaper in the unit he owns was pealing off so he got a contractor in to remove the wallpaper, re-stop the walls where required and paint the walls. Because of the age of the house, it had nails holding up the ceiling instead of screws and a number of them had "popped" so he got the ceilings done at the same time. Total cost was over $9,000. His accountant considered this a capital expense instead of a revenue expense.

Because he brought the rental using equity in his family home as the deposit, he borrowed 100% of the purchase price from the bank. This meant the rent didn't cover the mortgage and other expenses so he's paying around $12,000 PA to cover the difference.

With only being able to claim half of the interest, his investment property was cost him over $17,000 last year but because of the decorating and interest deductibility, his tax on the "rental income" was over $5,000. This meant his "investment" cost him over $22,000.

Yet, if he lied and said the previous tenant had instead caused the damage to the walls and he had been able to claim back all the interest, instead his tax bill would have been just over $1,200.

And, because he hasn't owned the property long enough, if he instead decided to sell it, he'd have to pay capital gains because of the Brightline test.

He said he doesn't have a problem paying tax on actual income but not when he's out of pocket by over $17,000. I wonder what other "business" in NZ is affected like this paying for tax on a loss causing investment?

This is MMP.

Each party identifies its target market of voters. It also identifies groups that will never vote for it. They then target the non voters and favour their voters with unbalanced policy..

It has encouraged taking from the ‘losers’ and giving to their ‘winners’. Divisive. And then the next group does the exact opposite.

Farmer vs city
Renters vs landlords
Rich vs poor
Maori vs others
Employers vs employees
Etc, etc.

See Maori issues where the left went pushed hard via He Puapua and co governance and now the right is doing the exact opposite. A political football where each side wins by favouring or targeting the group.

The interest deductibility rules were the dumbest policy I have ever seen and only passed because they see the rich and landlords as a cash cow that will never vote for them.

a good government will government should govern for all including those that won’t vote for them.

 

[defensivebomb]

I was talking to another designer the other day who is also a landlord. Earlier this year, the previous tenants left and most of the wallpaper in the unit he owns was pealing off so he got a contractor in to remove the wallpaper, re-stop the walls where required and paint the walls. Because of the age of the house, it had nails holding up the ceiling instead of screws and a number of them had "popped" so he got the ceilings done at the same time. Total cost was over $9,000. His accountant considered this a capital expense instead of a revenue expense.

Because he brought the rental using equity in his family home as the deposit, he borrowed 100% of the purchase price from the bank. This meant the rent didn't cover the mortgage and other expenses so he's paying around $12,000 PA to cover the difference.

With only being able to claim half of the interest, his investment property was cost him over $17,000 last year but because of the decorating and interest deductibility, his tax on the "rental income" was over $5,000. This meant his "investment" cost him over $22,000.

Yet, if he lied and said the previous tenant had instead caused the damage to the walls and he had been able to claim back all the interest, instead his tax bill would have been just over $1,200.

And, because he hasn't owned the property long enough, if he instead decided to sell it, he'd have to pay capital gains because of the Brightline test.

He said he doesn't have a problem paying tax on actual income but not when he's out of pocket by over $17,000. I wonder what other "business" in NZ is affected like this paying for tax on a loss causing investment?

He needs a new accountant

 

[miket12]

He needs a new accountant

Can you imagine how many people will need an accountant to determine their net wealth or to establish the value of their assets on Valuation Day?

https://taxworkinggroup.govt.nz/sites/default/files/2019-02/twg-fact-how-might-capital-gains-tax-work.pdf

Taxing at source and at death is far easier and more effective than a CGT or a Wealth Tax. Problem is, most of those who will support a CGT or wealth tax will because they think they'll never have to pay it..... until they retire and discover that their KiwiSaver isn't worth anywhere as much as they thought it was going to be if a CGT is brought in.

 

[Bay39er]

Problem is, most of those who will support a CGT or wealth tax will because they think they'll never have to pay it.....

On the converse side most of those that don't support won't because they will or think they will have to pay it

 

[wizard of Tauranga]

On the converse side most of those that don't support won't because they will or think they will have to pay it

No. I will actively avoid the tax so I don’t have to pay it and I don’t support it

 

[miket12]

On the converse side most of those that don't support won't because they will or think they will have to pay it

It's interesting that, at the last election, 15% of the voters gave their Party Votes to two parties advocating for a wealth tax because they believed the Greens and the Maori Party lines that cuts in their income tax would be offset by a wealth tax paid by others. But, in Spain, only 0.51% of their entire tax revenue is from their Wealth Tax.... yet the Maori Party says their Wealth Tax would generate $23 Billion PA.... given that the entire tax revenue received by the NZ Government in 2023 was $104 billion that means their wealth tax was supposed to generate 22% of the entire tax take. Sorry, but the numbers don't add up. The country with the highest revenue gathered by a Wealth Tax was Switzerland where it was less than 5% of the total tax revenue... still dramatically less than the Maori Party's 22%.

The High Cost of Wealth Taxes

Many developed countries have repealed their wealth taxes in recent years for a variety of reasons. They raise little revenue, create high administrative costs, and induce an outflow of wealthy individuals and their money. Many policymakers have also recognized that high taxes on capital and...

taxfoundation.org

View: https://drive.google.com/file/d/1enD6_apIfJi84_aI-7NjmpJ2lfpoNQsP/view

Even the Greens revenue gathered by a Wealth Tax wouldn't have added up. They said that they would tax trusts at a rate of 1.5%. Since the gross estimated value of trusts (i.e. just the value of assets) was $300 billion last year, that would have raised $4.5 billion in tax but the Greens said that combined the trust tax and wealth tax would have raise $15 billion. That means they're saying the Wealth Tax would raise $10.5 billion.... or just under 10% of the total revenue. But remember, the most strictest wealth tax in the world (in Switzerland) raised less the 5% of the total tax revenue through their Wealth Tax.

Want more prove that the Green's Wealth Tax amount of $10.5 billion doesn't add up? The Treasury prepared a paper for the previous Government outlining how a Wealth Tax might work. In it, they included a graph showing how much revenue could be generated. At the Greens thresholds and at a rate of 2.5%, a Wealth Tax would generate less than $6 billion per annum.... $4.5 billion less than the Greens campaigned on.

There's two very simple reasons I don't support a wealth tax (and we don't have enough net wealth to get over the Green's $4 million threshold so I'm not concerned that we'd have to pay it). Firstly, they're expensive to administer and collect the money. And, secondly, the figures given by the two parties advocating one simply DON'T ADD UP!!!!

 

[miket12]

OCR has dropped down by 50 basis points.

One of the first bank's to move is the BNZ who are now offering 5.99% for six months... go back to 1 October and they were offering 6.89%.

A $500,000 loan and that's a reduction of $4,500 in interest costs PA for a 30-year mortgage. Or, keep the repayments at the same rate each fortnight and the loan will be paid back 6 years and 3 months earlier and $245,000 saved in interest payments.

 

[wizard of Tauranga]

Or, keep the repayments at the same rate each fortnight and the loan will be paid back 6 years and 3 months earlier and $245,000 saved in interest payments.

Or buy a second rental and put the extra $4,500 towards that one…

The housing pyramid scheme is back