Ring Fencing Matters

[Bluecoat]

And

.20% super funded by the taxpayer

[Wayne]

Meanwhile

MPs generally use these super-exclusive super schemes to buy a property they can then rent to Parliamentary Services as their Wellington residence, said Prosser, who is no longer an MP but whose entry in the 2017 register showed his trust was "not yet active".An MP's accommodation allowance – currently $28,000 a year – can be legally paid to the super scheme as their landlord.In addition, MPs can ask for their superannuation contributions to be paid into the private super scheme. MPs get a contribution of 20 per cent of their salary, and only have to put in $1 of their own money for each $2.50 contribution from the taxpayer.It's a far cry from the 3 per cent employer contribution ordinary KiwiSavers have to put up with.

https://www.stuff.co.nz/business/mon...dges-to-wealth

Not totally exclusive it seems - anyone can have one I believe.

[Rosco]

Ring Fencing of property losses

RING FENCING - Rumour has it that Ring Fencing will also be included in the legislation currently making its way through Parliament, that includes the change to 5 year brightline rules. This is the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) bill that is expected to be passed before 31/3/18.

[artemis]

RING FENCING - Rumour has it that Ring Fencing will also be included in the legislation currently making its way through Parliament, that includes the change to 5 year brightline rules. This is the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) bill that is expected to be passed before 31/3/18.

The change to the bright-line period is in SOP 13, but does not include ring-fencing of rental losses in general, only in relation to the bright-line. For now anyway.

From the Explanatory Note -

"Losses arising from the bright-line test are ring-fenced so they may only be used to offset taxable gains from other land sales."

[Rosco]

The information came through from CCH tax experts, that also expecting Ring Fencing of property losses to be added in! As I put it is a rumour, but from a reasonable source.

[artemis]

IRD Issues paper on ring fencing released today -

http://taxpolicy.ird.govt.nz/

[artemis]

Those with properties in trusts will only be able to claim one as the main home. Even if there is more than one beneficiary or principal settlor with their own home in the trust. If I read this correctly - see sections 3.9 to 3.11.

Seems this is already applies to the bright-line test but the ring fencing proposal will have much wider and longer impact if the trust has multiple residential properties in it. As many do. .

[Perry]

If they keep it up, Comrade Commissar Cullen's 4-million-dollar-cost-to-taxpayers-clique will be really cruising along over extended lunches and morning and afternoon breaks to rest from their non-existent hard work.

[Perry]

Media statement

29 March 2018
Feedback on ring-fencing rental losses

Revenue Minister Stuart Nash is encouraging feedback on a proposal to change the rules around ring-fencing losses on residential properties.

An Issues Paper has been released by the Inland Revenue Department that proposes ring-fencing losses in an effort to level the playing field between speculators and investors, and home buyers.

Related thread
We know what is squeezing the life out of the rental market

[Rosco]

Ring Fencing of rental losses – Why don’t we make it fair?

The IRD officials' issues paper released yesterday applies to residential rental properties, but not
- Business
- Commercial property
- Personal home (ie flatmates, or Airbnb etc)
- Holiday home
- Farming
- Forestry
- Shares (ie can still borrow to buy shares and offset this loss against other income)

I would much prefer to see an approach where losses are only allowed for say 4 years for everything! So if you buy a residential rental you have 4 years to access the losses and turn the rental into a profitable rental. The same with a business, a farm, a holiday home, a commercial business, a forestry investment , a personal home getting rental income or investing in shares. Everything should be treated equally.

At this stage it is only an officials’ issues paper, but it gives a fair idea of how IRD expect to apply this. So it is looking like
- 1/4/19 start
- Might be phased in over 2-3 years
- Also apply to overseas rentals
- Will apply to sole traders, companies, Trusts, partnerships and LTC’s. So apply to all entities
- They are trying to make it hard to work around, but there are some obvious holes that can be exploited, especially for business owners
- If you Trade properties, a loss from rentals will be able to offset this profit.

In the long term this rule should not create any extra tax, as the losses are still there, they just carry forward to future years.

OVERALL – Commercial property could become more attractive to invest in, otherwise as we have been saying for a while, if you have a rental portfolio that is cashflow negative, it is important to have a plan to turn this positive over the next few years!

What effect do you think this will have on house prices?

[Perry]

Ring Fencing of rental losses – Why don’t we make it fair?

From whence came this perverse notion of fairness?

This is about appeasing the Labour voters, asstd. do-gooders, the watermelon crowd and a muddied-brained, addle-headed bunch of social engineers.

How long did it take Xero to get to profit? That's if it has, as yet.

[cube]

Xero is healthy, but heavily invests. You know, like putting in mandated heating and insulation, that sort of investment.

[flyernzl]

When you have more than one job all your income is added up and you pay tax on the total income amount.

For instance, your primary job pays $60,000 per year and your secondary pays $10,000 per year so you pay income tax on the $70k - just the same tax as if you had one job at the $70k.

Similarly, if your secondary income is a part-time business that returns you a net $10,000 per year the same rules apply.

So if your part time business, in that particular year, shows a net loss of $10k then you can deduct that loss and pay tax on your total income of $50.

It matters not if your part-time business is retailing fidget spinners through TradeMe, boarding cats, catering at the bowling club, or renting out a residential house to tenants - under tax law exactly the same rules apply in each and every case.

So this is not some special tax lurk that only applies to landlords. It applies to each and every taxpayer.

Those who want those rental losses ring-fenced are actually asking for a special tax law that would only apply to landlords and to nobody else.

Why penalise landlords - and only landlords - in this way?

We need to emphasis this when we see items about the ring-fencing proposals.

[Perry]

How Do They Compare?

Another question that could be asked: what are the actual income tax losses incurred by the residential rental sector?

If I read their books correctly, Xero has approx. one quarter of a billion in tax losses to carry forward.

[Perry]

Those who want those rental losses ring-fenced are actually asking for a special tax law that would only apply to landlords and to nobody else. Why penalise landlords - and only landlords - in this way?

Is it all LLs?

Or is commercial / industrial proposed to be exempt?