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

[flyernzl]

"The Personal Income Tax Rate in Sweden stands at 61.85 percent. Personal Income Tax Rate in Sweden averaged 56.78 percent from 1995 until 2018, reaching an all time high of 61.85 percent in 2017 and a record low of 51.50 percent in 2000."

I'm actually heading off to Sweden mid-June.
I'll report back.

[Don't believe the Hype]

Let's not bring other countries into the debate. Do you want Swedens' tax system?

we're heading that way arent we? - maybe not via PAYE tax rates but with all other taxes

[eri]

taxes in sweden used to be higher

and it took a change of gov

to bring them down

In 1976, Lindgren learned that because of tax laws requiring her to pay both income tax and employer’s fees, she would effectively be taxed at a rate of 102 percent. Though she was generally a supporter of the principles of socialism, paying more than she actually earned appalled her. And so she published a satirical fairytale, “Pomperipossa in Monismania,” about a children’s book author forced to pay exorbitant taxes, in the Stockholm tabloid Expressen. The satire ignited a furious debate over both the tax laws and the reigning Social Democratic Party. Because of her popularity, people listened to Lindgren. Later that year, the Social Democratic party lost the election, giving up power for the first time in 44 years.

https://www.thevintagenews.com/2018/01/04/pippi-longstocking/

[Don't believe the Hype]

Last FY my wife and I built (funded/project managed) 5 houses in 10 months after all costs ex mortgage (which a corporate landlord would self fund) a year 1 NETT ROFE of 7.4% and an LVR of 52% on this development.

Why couldn't this be scaled up (excluding the labour shortage) - for 2 managers (wife and I) who committed about 60% of our time to this project for the 10 months means that if we were full time and had the financial resources we could achieve 8-9 houses a year. We then had the management over to our PM who finds tenants and manages the properties we have no more involvement. The PM cost and ongoing maintenance is built into the above numbers.

Assuming we weren't perfect the first time we could find cost and timing efficiencies. I assume we could improve by 20% so we could deliver 5 houses built per year per manager improving Yield to around 8% and LVR to sub 50%


With 10 managers this would then deliver 50 houses a year, with 20 managers 100 houses per year based on 5 houses/manager the management costs are break even on cashflow yr 1, Yr 2 you're returning 8% on funds employed and have a 50% value gain to take to the balance sheet. The managers costs in Yr 2 is being funded by the properties they build in yr 2.

[Sportsvee]

"The Personal Income Tax Rate in Sweden stands at 61.85 percent. Personal Income Tax Rate in Sweden averaged 56.78 percent from 1995 until 2018, reaching an all time high of 61.85 percent in 2017 and a record low of 51.50 percent in 2000."

To be fair, I was rather distracted by alcohol and a particular barmaid to notice that part at the time.

[Bob Kane]

Last FY my wife and I built (funded/project managed) 5 houses in 10 months after all costs ex mortgage (which a corporate landlord would self fund) a year 1 NETT ROFE of 7.4% and an LVR of 52% on this development.

I didn't realise you pay cash and don't have a mortgage.

With 10 managers this would then deliver 50 houses a year, with 20 managers 100 houses per year based on 5 houses/manager the management costs are break even on cashflow yr 1, Yr 2 you're returning 8% on funds employed and have a 50% value gain to take to the balance sheet. The managers costs in Yr 2 is being funded by the properties they build in yr 2.

How much would you pay these managers?
How hard would it be to find 20 people who share your passion and will give their all for your success?
If they are that good, wouldn't they do it for themselves?

[Don't believe the Hype]

I didn't realise you pay cash and don't have a mortgage.

How much would you pay these managers?
How hard would it be to find 20 people who share your passion and will give their all for your success?
If they are that good, wouldn't they do it for themselves?

me having a mortgage is irrelevant. I used my financial performance and backed out the impact of a mortgage KS funds wouldn't need a mortgage- try to keep up.

something being hard isn't a reason not to do something. Is it?


If they were good wouldn't they do it for themselves - hmm... let me think about all the employed people I've ever worked with... nope can't think of a single one that is any good at what they do so I guess you're right on that one.

[Bob Kane]

We'll just have to wait for a corporate investor to announce they're getting involved with residential property to see if it's as easy as you think.

[Keys]

^^^If it made a profit Bob, it would be done already.

[Sportsvee]

Or start something like Property Moose in NZ and reap in the fees, but don't take the risk. Pity the bright test is 5 years now.

[Perry]

Press Council Stance

Who amongst us - let alone the NZPIF - has the energy to make a complaint to the Press Council pointing out that the item is a lie: NZ does not have a capital gains tax.

---

EDIT
O.K. Lead by example. (So tis said.)
I have e-lodged a formal complaint.

Well, I never!
The Stuff item has been amended, since I lodged my complaint.
The inclusion of the word comprehensive is a strawman logical fallacy intended to distract readers from the false CGT information still embedded in the article.
[To be continued.]

Being dis-satisfied with the Stuff response, the matter has now progressed to the Press Council.

As the expression goes: watch this space.

Case No: 2663

Adjudication By The New Zealand Media Council On The Complaint Of Perry Against Stuff
Finding: Not Upheld
Not To Be Published Before 28 May 2018

1. Perry complains that a Stuff article of 15 February 2018, subsequently also published in The Dominion Post and The Press, breaches the Media Council’s principles of Accuracy, Fairness and Balance (Principle 1) and Comment and Fact (Principle 4). The Stuff piece was headed “More investment property sales to be stung with capital gains tax.”

2. The article was about the Government seeking to extend the amount of time for which investment properties must be held before their owners can avoid a capital gains tax. The complaint centres on what is a capital gains tax liability and whether its portrayal of it in the piece was inaccurate.

The Complaint
3. Perry argues that the new bright-line test will create an income tax liability in certain circumstances. Not a capital gains tax liability. The IRD website is clear – there is no capital gains tax in New Zealand and so the headline banner and subsequent piece is false, deceptive and / or misleading.

4. Perry notes that the headline would be more accurate if it said “…avoid paying income tax on any capital gains.”

5. Any appeal by Stuff to popular belief or previous custom of certain interpretation does not change the fact. In New Zealand there is no capital gains tax.

The Response
6. Ellen Read responded initially to the complaint. This was followed up with a formal response from Roeland van den Bergh. Stuff argues that Oxford Dictionary definition of capital gains tax is “a tax levied on profit from the sale of property or an investment.” Technically there is not a comprehensive CGT, the Government taxes the capital gains in situations captured by the bright-line test. It is therefore accurate for the headline to refer to the tax as a CGT because it effectively is – headlines are often abbreviated or simplified to terms people / readers understand.

7. Use of the CGT term was informed by past reporting and discussions with various tax and economics experts who have no doubt that the bright-line test is in effect a CGT. Stuff’s response notes the views and opinions of tax experts to reaffirm their view. The use of the headline and the term within it was therefore reasonable in the circumstances and doesn’t breach the Media Council principles.
8. However, Stuff does recognise Perry’s distinction. The story was amended to achieve the distinction Perry raises, the issue was discussed “extensively” and relevant reporters were briefed on the distinction.

The Decision
9. The complainant notes the accurate description is: “it’s income tax on any capital gains.” Stuff argues that CGT is a term used previously in similar circumstances and therefore understood by its readership. It provided expert advice to back up its point. It seems the use of the term has become practice or custom for Stuff.

10. While New Zealand does not have a capital gains tax it does tax capital gains. Whether you can accurately use the label in New Zealand is as much political as it is technical and there has been much political debate over whether the brightline test amounts to a capital gains tax. It's not for the Council to make political distinctions.

11. We do note that for the non-expert reader there is no difference between a capital gains tax and a tax on capital gains.

12. Stuff did amend the story to include a sentence which noted that New Zealand does not have a comprehensive capital gains tax which, in the Council’s view, satisfactorily explains the point made by the complainant. The Council also notes the briefing of relevant reporters and extensive discussions within Stuff around the issue. It’s through that, the Council believes a new practice in Stuff’s reporting might take hold which recognises the distinction made by Perry.

13. The complaint is therefore not upheld.

Media Council members considering the complaint were Chris Darlow, Liz Brown, Craig Cooper, Tiumalu Peter Fa’afiu, Jenny Farrell, Hank Schouten, Marie Shroff, Christina Tay, Tracy Watkins. Tim Watkin stood down to maintain a public member majority.

My response:

A disappointment to me, but that's the way it is. I was surprised at this comment.

10. While New Zealand does not have a capital gains tax it does tax capital gains.

That is incorrect. There is no tax of any sort on capital gains made from selling any assets such as businesses, farms, shares, works-of-art, or the like. Likewise, there is no tax of any sort on capital gains from selling any real estate assets which have been held for more than five years.

Income tax (only) is levied on capital gains from selling any real estate assets [only] which have been held for less than five years.

It concerns me that the Council incorrectly believes otherwise. It seems that the media disinformation on the matter has become accepted as factual by some, non-expert or otherwise.

I wonder if the Council saw and heeded the 2015 report on public trust of professionals?

Trust and confidence in members of Parliament has increased, but in the public mind MPs are still second-to-bottom of a list of 10 types of jobs and organisations.

MPs rank slightly ahead of journalists, the least-trusted group, and behind local council members, lawyers and civil servants, who are all below the half-way mark in a survey of public trust and confidence.

Not an enviable position, at all.

[flyernzl]

Thanks for trying, Perry.

But the decision illustrates what a disheartening uphill battle we face.

[Keys]

Not appearing on the media council page yet Perry.

Today *is* the 28th.

[Perry]

Agreed. The embargo said

Not To Be Published Before 28 May 2018

I have respected that request.

As we know, accuracy is a nice-to-have, but not essential consideration in today's ratings-driven, sensationalist, crisis mentality media hype.

[Courham]

Good try Perry. The old adage "Never let the truth get in the way of a old story." Yet another nail in the coffin of informed unbiased journalism in NZ. Just because they have been using unfactual terms they seem to have use them enough to believe they are true. Legalese semantics.

Craig