Here Comes The Big Stick

[OllyN]

Read and be very very afraid:

http://www.stuff.co.nz/4079549a13.htmlhttp://www.stuff.co.nz/4079549a13.html

Olly Newland

[spurner]

Whoops! There's been a stuff-up...

The page you requested is no longer available.

Not that scary...

[Seismo]

Was about to say the same...guess you're the quicker draw here.

[OllyN]

Try the link again

Never under estimate the enemy....
Olly

[spurner]

This is all "same old same old".

There are no real "loopholes", as the government puts it. The government gives tax breaks to encourage people to invest in providing rental accommodation, so that the government doesn't have to do it themselves. Take that away and rents will skyrocket, as they did in Australia in the mid 80's.

There always has been a capital gains tax for property speculators and traders. The government "cracking down" on it is nothing for people to fear, unless they are tax cheats.

"Affordable housing" if it even exists, will simply be paid for by people buying "less affordable housing". Affordable housing can't really be built or created, it just has to be subsidised by somebody else.

This is all just regurgitated trash talk from the government.

[BEANCOUNTER]

With the IRD, if intent on purchase is the criteria, we do not get off to a good start by calling ourselves Property Investors and subscribe to PI forums.

Should we call ourselves " Property Huggers" instead?

Paul

[Monid]

Hi Paul, welcome to the forums.
I'm curious to hear why you think that? If we called ourselves property speculators or property traders I guess I would agree, but I think property investor implies buying and holding for the long term...

There are no real "loopholes", as the government puts it. The government gives tax breaks to encourage people to invest in providing rental accommodation, so that the government doesn't have to do it themselves. Take that away and rents will skyrocket, as they did in Australia in the mid 80's.

I appreciate the sentiment Spurner, but don't buy into their language, we aren't given tax breaks so that we provide rental accommodation. Like any other business, we receive depreciation on our capital assets. That is not a tax break it is reasonable accounting reflecting wear and tear on our means of production. This is simply a fair and level playing field between property investment businesses and others.

Cheers
David

[BEANCOUNTER]

Thanks David, I appreciate the Welcome!

I am "taking the mickey" a bit!

Although some terms do change their meaning over " time " (if you exuse the pun) which is normally the difference between speculation and long term buy and hold investing.

However if you want to use a GST refund on a property do up to part finance it;then to obtain it from the IRD, the company or individual must show that they are in the business of Property Developement or trading.

Under the new proposals for associated persons, this could taint any other activity,( such as buying or holding), the individual, shareholder, trustee or Co director has, making them liable for tax on all activities.

This is unfair!

In the current publicity surrounding gross property speculators; well mannered pedestrian PI`s could end up with fines, (violations in the US - love that inappropriate word), ranging from walking on the grass, loitering with intent, to first degree murder of a crossing button.

[spurner]

Absolutely correct. Although looking at the issue through somewhat rose tinted glasses!

we aren't given tax breaks so that we provide rental accommodation. Like any other business, we receive depreciation on our capital assets. That is not a tax break it is reasonable accounting reflecting wear and tear on our means of production.

The government seems to have suddenly considered negative gearing a "tax loophole"?!

I'd love to see them close this "loophole". Supply will dry up, and rents will sky-rocket. Every tenant will lose, every investor who offsets their losses against other income will lose. The real winners will be full time Property Investors like me who live solely off rental income, and have no other income to offset any loss against anyway.

Among the things being looked at were ways of closing the tax loopholes currently encouraging property investors and speculators.

The Government was well aware of people gearing themselves with high debt levels to offset losses from rental activities against taxes on other income.

[Don and Liz]

fiscal and monetary policy

surely taxes on property have to be considered at some point rather than using rates only to try and influence the market. As long as it is a tax based on profits etc and not some sort of stamp duty or sales tax based on the sales prices. Traders are already paying the taxes anyway.

[Julian]

But that's just it. We already do have tax on profits from property. It is called Income Tax.

It is the same for people in all businesses that sell things or services for profit. It is no different for someone who sells machinery for profit - they pay tax on their profits.

If, on the other hand a business person buys a capital item (It could be a machine or it could be a property) for the income that this machine/property will produce then income tax is paid on the profits from these activities (selling widgets or rent)

In this case the machine or property is a capital item which can be depreciated as it wears out. (Land does not wear out so it cannot be depreciated, but the buildings and chattels do.)

If this capital item is then sold for more than its book value then the depreciation claimed will have to be repaid.

Adjustments to the OCR do work in the economy, but due to the high volume of people that fix their interest rates - often for up to five years - there is long wait between an OCR adjustment and an effect in the housing sector.

Evidence from other countries that have a capital gains tax is that this imposition does little to halt spiraling property prices (Australia is a good example here). And unless the government uses these taxes to repay overseas debt there is little effect on reining in inflation. The only difference is that the government is spending your money as opposed to you.

Julian

[AndyB]

"... but due to the high volume of people that fix their interest rates - often for up to five years ...."

I wonder what the figures are. Lately the cry (NZ Herald) is that during this year most people will be coming off fixed terms or the OCR rise will be hitting people this year.
It could be just emotive, and shoddy reporting. Though it seems several sources are saying that the rates rises are affecting people now and definitely within this year.


How many are on floating rates?
.............
In Mike Pero's article it says the OCR will "... immediately hit those on floating rates, but switching to a fixed rate, despite the quick savings, might not be best long-term.

He said people who do so sometimes find themselves paying penalties when they later move house or need extra money. 'The issue is whether once you're into a fixed rate there's a cost to break out of it. It needs to be thought out under professional advice."

Does this mean with a floating rate I can pay out my mortgage without early repayment fees?

[Monid]

Does this mean with a floating rate I can pay out my mortgage without early repayment fees?

Yes, although depending on your bank there may be administration charges of course...
The early repayment fees aren't necessarily too bad, it depends on whether the current equivalent rates are higher or lower, if they are higher the break fees are negligible we have just been told $250 by our bank.

Cheers
David

[cube]

The only difference is that the government is spending your money as opposed to you.

What a superb summary of why traditional socialist (small 's') policies don't do much good for the economy!

[cube]

I wonder what the figures are. Lately the cry (NZ Herald) is that during this year most people will be coming off fixed terms or the OCR rise will be hitting people this year.
It could be just emotive, and shoddy reporting.

And also the same thing that was said early last year - from memory 40% of fixed rate mortgages were going to mature and have to re-fix at 1-2% higher, which would cause a bloodbath around Christmas.

Isn't hindsight a wonderful thing.

cube