How to reduce Tax Burden in New Zealand?????

[hannah]

Please do not slam me because this may be the wrong forum to ask this question. I am trying to find what other ways of investment available in New Zealand which will reduce my tax burden. I am not very happy to pay 33% on my earnings as tax. I do understand that investment property can substantially reduce the tax burden however am trying to explore other avenues. Your thoughts please.

[CJ]

Property reduces your tax burden due to two things:

Interest deductions (ie gearing)
depreciation

Interests deductions are avaliable for all investments provided the money is taken out for that purpose. For some reason however, people feel safer having a 50% mortgage on a $200k house than a 50% loan over a $200k share portfolio.

Other options are forestry that gives upfront deductions with income until harvested (example Greenplan). Not the Trinity type of investment that is in the court at the moment.

Australian unit trusts provide tax free capital gains. Does not reduce tax but if move investment from NZ unit trust to Australian unit trsut, this can be beneficial. Note that the government is looking to close this loop hole.

Investments in films were popular in the 80's but the deferred deduction rules have closes these done. These resulted in an investment of $10k giving you tax losses of $30k. Not sure why the govement closed these down.

Can any add to the list.

IF anyone whats to start the ethical debate, maybe this should be done in another forum. Anyone keen to start that.

[llpp]

A rental investment property can also lead to tax deductions that would otherwise not be deductible.
For instance:
1 The full cost insurance premiums is deductible
2 Paying insurance premiums on a monthly basis, using a premium funder, attracts additonal fees for this service, as it is basically a finance contract. The cost is fully tax deductible.
It is an expense but it helps you to manage your cashflow.

3 Often Banks requre loan repayment insurance to be taken out when the loan is above a specific percentage of the value of the property. This life policy is fully deductible when the loan is taken out on the investment property.

You will be able to have a life, sickness and/or disability insurance that is fully tax deductible.

Investing in property, using OPM, has advantages that would not apply to other investments, such as shares, annuities, managed funds etc. as these investments are often made with the owners' funds.

This of course is not an alternative method of investment but is shows that there are distinct advantages investing in rental properties that may not be available to other types of investments

[hannah]

Hi Guys,
Thanks for all those advices however I am looking for other means of investments which is tax deductable. More like Government bonds, Warrants etc..Any advice on that..

[Gerrard]

Why are you looking for investments that are tax deductible? Is this your prime motive - to reduce the tax burden?

If you are using an investment to reduce the amount of tax you have to pay, is that really a good investment for you? As a lot of negatively geared people found out, although they had reduced their tax bill, their outgoing were still higher then would have been otherwise!

I don't really care how much tax I have to pay, so long my investments are profitable over the top of this.

Gerrard

[hannah]

Well I am not talking about Negetively geared investment. I know in other countries, government would give you incentive in terms of reduction in tax if one invests in government funded projects. Now becuase of the fact that the government does not have much money, they need to borrow money from the people and gives incentive to people in terms of tax deduction in addition to returns on the investment as well.

[casacamo]

You could try Fiji or the Cook Islands
New Zealand is not quite a 3rd world Pacific Island yet
even though Mr Brash would have Aussies think otherwise !

Nothing is certain in this world other than death & taxes

casacamo