Accounting for cash from the bank

[brendan]

If it is a gift, it's not an unconditional gift, as I think it was conditional on the home loan remaining with the bank for at least two years - which shouldn't be a problem given it was fixed for three years.

Of course, IRD don't mention conditional gifts.

[speights boy]

I reckon it's income, based on....

DEFINITION OF 'INCOME'
Money that an individual or business receives in exchange for providing a good or service or through investing capital.

You have invested capital; - your equity in the property in this new loan with the bank.
Without that investment from you, you would not have received the loan and therefore the cash.

[drelly]

I reckon it's income, based on....

You have invested capital; - your equity in the property in this new loan with the bank.
Without that investment from you, you would not have received the loan and therefore the cash.

But is capital a good or a service? I don't think so.

[speights boy]

Drelly, I don't see that that matters; because of the ' or '
I read ' capital ' as separate to ' a good or service '.

.....or through investing capital.

[soddy]

I think it will all hinge on the wording around the money as to how it is treated

[Anthonyacat]

If you're buying a house as a home, for yourself, and no intention of making any money from it, this would not be income. Just as you can't deduct the interest on your personal mortgage.

If this is for the purchase of a rental property, I think you'd have a very hard time arguing this to be anything other than income for tax purposes. It relates directly to the income-earning activity (the 'nexus test' in case law) and so the view of the IRD, if it is ever tested, will be that it is taxable. The structure of the investment (company, trust, etc) is completely irrelevant.

Basing concepts of "what is income" for tax purposes on websites like Investopedia is highly risky. Have a look at the income tax legislation itself. Google Income Tax Act 2007 New Zealand. I think IRD would catch you on CB1 (income related to a business), or else CB3 (income related to a profit-making scheme).

You could try to argue that the amount is capital, and so not assessable for tax purposes. But I think you'd have trouble there, too.

For what it's worth, I returned my contribution from ANZ in my company's IR4 when I bought my rental in late 2012.

[cube]

Don't Ask, Don't tell has been my approach - just make sure the money is credited to a non-business account so it doesn't show up on the books.

[Anthonyacat]

Well there's always that. Could do the same thing for the occasional rent payment. Or even get the tenants to reduce their automatic payment, and send you $50 in cash each week!

Claiming ignorance will only get you so far. Will often prevent the 100% evasion penalties, but you'd be lucky to get away without the 50%s. Course, not a high chance of IRD auditing rental property owners. Unless they decide to make it a focus one year. Or they read this forum.

[BigDreamer]

Claiming ignorance will only get you so far. Will often prevent the 100% evasion penalties, but you'd be lucky to get away without the 50%s. Course, not a high chance of IRD auditing rental property owners. Unless they decide to make it a focus one year. Or they read this forum.

Agreed. Although, I'm still on the fence about whether or not to consider the bank's cash contribution as income or not.

[Wayne]

None of our esteemed accountants have chipped in?

[Anthonyacat]

Your words cut deep, Wayne.

[Wayne]

Your words cut deep, Wayne.

only in bits.
And I need a spell checker on this browser.
Unfortunately my PC is so tied down I can't install one.

[donna]

Maybe Rosco needs a personal invitation to comment on this discussion? I'll ask and we'll see what happens....but I think the absence of a response so far suggests his comment might be "no comment".

cheers,

Donna

[Rosco]

Hi all,

My pet hate is 'what if' questions. I'm happy to give some information for people with a specific question or problem. But this sounded like someone just being curious. If it was 'I had received $4,000 contribution towards my legal costs on my rental property', then that would be different. Also by not having a specific question, it is hard to answer properly.

Plus the question has been answered above. So in discussions I try to only answer or put responses if it is not clear or hasn't already been answered.

Cheers

Ross

[PTILoveYou]

I think if you receive cash contributions in your LTC or rental trust account, that would be treated as an income...