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Thread: Budget 2012

  1. #1
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    Default Budget 2012

    Bach, boat tax dodges hit by Budget

    Tax rules will be tightened around high income earners who rent out assets for some of the year such as holiday homes and yachts, Finance Minister Bill English indicated this morning.

    The move to tighten the law regarding "mixed use assets" was foreshadowed in last year's budget.

    it is not clear in tax rules whether the owners can claim tax deductions for some expenditure relating to the time when the asset is not in use at all.

    "We continue to focus on improving fairness in the tax system so that people who should be paying tax are paying tax - not finding ways around it - and keeping a broad tax base so that we can keep the rates relatively low.

    "We have no big steps but we continue each year to patch some holes, improve fairness, keep the revenue base broad."

    There was a change on January 1 closing loopholes that allowed people to minimise their income to qualify for student allowances and working for families.

    "That has already been tightened up and in the Budget there will be a few more tax measures that tighten up where we believe people are avoiding their obligations and that will be focused mainly on high-income earners."


    The changes would be around issues that had already been discussed over the last 12 months.

    "There's no deep dark secrets there."

    Commenting on the launch today of a "living wage campaign" by unions and social service groups, Mr English said he was not sure what was meant by a living wage but "of course we want to see higher incomes across the board."

    "To achieve that we need a flexible, resilient and growing economy."

    "You can't just invent higher wages. You can't just go and borrow them off someone or legislate them. You've got to earn them and I think most New Zealander understand that."

    The theme of tomorrow's budget is "confidence is uncertain times," Mr English told reporters at the Petone printing firm where the Budget has been printed.

    "Things haven't all gone New Zealand's way but the Budget shows the Government's confidence in getting its own books in order but also in being able to support a growing economy that generates more jobs and better incomes."

    The Budget, Mr English's fourth, will forecast a surplus in the 2014 - 15 year.
    http://www.nzherald.co.nz/business/n...ectid=10807836

    Hmmm, let's see what they do with this, eh??
    Last edited by essence; 23-05-2012 at 01:52 PM.
    Patience is a virtue.

  2. #2
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    Default

    Next article

    Tax base broadening measures in Budget 2012 will target high income New Zealanders who structure their financial affairs in ways to avoid their obligations, Finance Minister Bill English says.

    Speaking to media ahead of tomorrow's Budget, English would not be drawn on what those measures might be, or how much revenue the Government expected to raise with those measures. Prime Minister John Key has said there will be one new base-broadening measure in Budget 2012.

    English confirmed the new measure would not be anything like a capital gains tax. The Government is already tightening up on the use of trusts, and how mixed-use assets such as baches attract tax.

    Meanwhile, the theme of Budget 2012 was confidence in uncertain times, English said.

    "Things haven't all gone New Zealand's way, but the Budget shows the Government's confidence in getting its own books in order, [and] also in being able to support a growing economy that generates more jobs and better incomes," English said this morning.

    "Just because things are a bit tough hasn't diminished our confidence, and we think that reflects the resilience of New Zealanders.


    They adapted pretty well to difficult times, and I think we continue to show that confidence that we are going to see results," English said.

    The Budget would be a sensible one, not an austerity budget, which would show steps to stop the Government's debt rising while improving New Zealand's longer term growth prospects.

    English said he expected the credit ratings agencies to respond "pretty positively" to the Budget.

    "What's important there is, we're a small, highly indebted nation, and foreign lenders are getting pretty uneasy about who they can lend money to, because they need to know they're going to get it back," he said.

    "The Budget will show a credible path to surplus, and that it's achievable and under control. I think that will be pretty well received."
    Patience is a virtue.

  3. #3
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    I fail to see how targeting mixed-use baches could raise more than a little less than bugger all. If it's available to let for 50 weeks of the year and you use it for 2 weeks yourself, then 1/26th of the years expenses are non-claimable, no?

  4. #4
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    I think it'll look like - you actually only used this asset to generate income for the 4 weeks it was actually let. So you can claim 1/13th of the costs involved with providing it.

    Which is a lot less of claimable expenses, and a lot more tax...

    If this is the proposed change it might cause a flurry of raised eyebrows in your Ponsonby coffee shop TLL?
    Last edited by kyotolaw; 23-05-2012 at 03:39 PM. Reason: to get a dig in at The Liberal Left :)

  5. #5
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    Help out my small brain What does this actually mean?

    The Budget, Mr English's fourth, will forecast a surplus in the 2014 - 15 year.
    I think it means for that financial year more $$ are left in the coffers after all expenses - but what happens to the surplus? Does it automatically reduce our long term debt? Or have I interpreted it wrong?

    cheers,

    Donna
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  6. #6
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    Any surplus will reduce our total borrowing amount, because the government will need to borrow less over the next year. Every year (almost every week!) the government has debt become due, and borrows money to repay it, or to fund new spending. If there is a surplus, the left over amount means that the government will need to borrow less to fund repayments and spending in the coming year.

    So yes, you are right, but the mechanics are only slightly more complicated.

  7. #7
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    Well that would be rather unreasonable, KL. I mean, I pay for advertising for all 52 weeks. I also pay for power supply, rates and all manner of expenses 52 weeks a year, on the off chance that someone might want it at short notice.

    I wonder how they will distinguish between that scenario and a break between tenants in a regular let? When is the break deemed too long (or tenancy too short)?

  8. #8
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    Your wee dig sailed right over my head, KL, I'm sad to say. I don't go anywhere near Ponsonby. I got laughed at last time I tried to order a cup of chino.

  9. #9
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    Unreasonable has not stopped the govt before when trying to increase the tax base!

    I understand why they would do it. It soaks those perceived to be rich, they can point to it when they increase student loan repayments and other unfriendly things. Also those who have holiday homes don't have any other place to go for help - Labour is going to tax capital gains and the Greens are going to probably do something like limit housing to 25m^2 per person so as to reduce the country's carbon footprint or something similarly economically illiterate.

    Also, it's a very effective way of making sure that people don't pay more than the real value of these houses. If you have to pay the real cost of carrying the investment then you are unlikely to see the prices zoom up so much.

    TLL - you may advertise the house all year but what is the utilization rate? If you lowered the asking price, would it be higher? How many people in Parnell and Ponsonby advertise the houses at unrealistic rates just so they can claim the deductions?

    Also just had another thought. Those poor people in Kaipara. Rates go up by 100% but now they won't be deductible unless they have paying guests. Ouch ouch ouch!

    Sorry for the cheap dig TLL. But I have often imagined you in a ponsonby coffee shop writing these posts on your iPad...

  10. #10
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    Well, after tomorrow I'll be letting out a sigh or saying WTF!!!???

    I can't figure out how they can define a bach in any case. What if your business model is strictly short-term lets? Short term might be an apartment in the city, or it might be a coastal holiday location. If that's your business model and you don't use the place yourself, the Govt has no right to impact your business by increasing your tax reqm away from other people in the same business (with a different model).

    And how would they know whether you use the place or not? It makes no sense.


 

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