Ring Fencing Matters

[Bob Kane]

What's needed is something akin to a jury of ordinary citizens to which the experts all get to make their submissions.

That way, the removal of bias and the chances of a more balanced outcome are improved.

That's my understanding of what will happen.
The panel of experts on the tax working group will come up with recommendations.
Labour will review that and decide what they want to do.
In 2020 Labour goes into the election with that tax approach and we vote for the party we want.
In simple terms - the tax working group suggest a CGT.
Labour agrees and goes into the 2020 election proposing to introduce a CGT if they win.
We vote Labour out and there goes the CGT threat.
It would seem if the tax working party goes nuts and suggests heaps of new taxes then Labour will be voted out.
If the tax working party suggest a mild tax reform then Labour may swing enough votes to stay in.

[artemis]

The terms of reference for the working group will be heavily scrutinised, not least by the proposed expert members.
who BTW will also be under intense scrutiny. (Why would they accept the appointment I wonder, unless they are already ideologically committed to the government's direction.)

If too wide, then it opens the door for a complete, bold, politically 'correct' and impractical revamp of the tax system. If too narrow, so that only tweaks are recommended it will be seen to be directive and political.

[PartyLegeto]

I'd trust experts over 'lay people' any day. Surely the people with the actual experience / knowledge are best placed to make those decisions, no? The Pauline Hanson example is kinda case in point: she's a lay person who just somehow (thanks, Australia) managed to stumble into parliament, and the video linked earlier speaks for itself re: what can happen when you put people who think they know what they're talking about in positions of power. Not really sure they're thje people we want giving the green (or red) light to proposed tax changes...

[Perry]

I'd trust experts over 'lay people' any day. Surely the people with the actual experience / knowledge are best placed to make those decisions, no?

So you'd prefer a jury in a murder trial to all be expert murderers?

What you assert unwisely presumes that experts like economists, IRD officials, share market staff, university airheads, bankers and political/party apparatchiks have some sort of real world experience. That's not the same as knowledge. The group may well include one or two people with practical, real-world experience, but they will be tokens who will be outvoted by the ivory tower brigade.

Plus, as others have observed / implied, there will be a lot of pressure to come out with the result the government wants.

It matters not that all the lay people (here and elsewhere) can accurately point out that in every country where a CGT has been introduced on the politically expedient sophistry that it will reduce house prices, it has abysmally failed, every where, every time.

But never let the facts get in the way of an expert panel's findings and a new tax revenue stream, eh what?

[Perry]

Start With An Ex-Labour Gummint Hack, add mystery and . . .

Sir Michael Cullen to head tax working group
23 Nov 2017

The Government has announced it will have a "wide mandate" to look at New Zealand's whole tax system, but has been directed to look at some specific areas including GST and measures to cool the housing market. The group will be allowed to consider the issue of GST on low value purchases, but will have no mandate to consider the GST rate. It could recommend that GST be added or removed from some products.

National finance spokesman Steven Joyce has suggested the terms were so narrow it was designed to result in one thing - a Capital Gains Tax. Unions have moved to swiftly criticise the announcement from Finance Minister Grant Robertson and Revenue Minister Stuart Nash, calling it "disappointing" that inheritance tax and an increase in income taxes had been ruled "out of scope".

The government would not pre-empt the recommendations of the group, which were due to be reported back to the Government by February 2019. He reiterated a promise that no tax changes would come into force before the next election.

Oh, well. A year to sit around a table and try to second guess what it was that the gummint wants. Or will accept. With a budgeted cost of $4M, that should keep them in the style to which they've become accustomed, too.

[Chris W]

"Rationing credit would solve the problem, I am pretty sure of that," he says.
"But the politicians are terrified of it because they worry that it could bring the whole thing down; the banks don't like it either."

so don't be surprised if bank financing gets worse

Bank financing from the Australian owned NZ banks is getting tougher - https://www.propertytalk.com/forum/s...055#post427055

[Keys]

I want razors and electric shavers exempt from GST.

OH! And mustache trimmers.

[richard56]

Ring Fencing Matters

Hi
The latest NZ Property Investor mag has an article about Ring Fencing.

They state "Every other industry sector out there is allowed to offset legitimate losses against other income."

I have an LTC so I understand how you "offset legitimate losses against other income" using the LTC.

But if I worked for wages and also ran a "normal" limited liability company...lets say it made and sold plastic yellow ducks...how do you
"offset legitimate losses against other income" in the limited liability company ?

Is there somewhere on a tax form where you show any tax paid from your waged job so it can be included in the tax owing
on the limited liability company ?

Or is it done differently or is the article wrong ?

Thanks
Richard

[Wayne]

I don't think you can - that's why we have LTC's.
I suspect there is more to the context of the article but maybe not.
The quality of some of those articles is little better than the newpapers these days.

[richard56]

Yes I also thought that was why LTC's were created...not the only reason but one of them.

Maybe the writer of the article Mark Withers might be kind enough to come on here and explain what he
meant ?

Thanks
Richard

[Wayne]

OK - I had to go and read the article.
The analogy is odd. Seems he started with a view and formed the article around it.
I have an LTC and a normal company.
The normal company has commercial property - it accumulated some losses and next year I might finally have used them all up.
Just the senario he suggests is unfair!
Hello - it happens now.

Look at Xero - huge accumulated losses. The shareholders don't get to use these!

[Anthonyacat]

Haven't yet read this month's magazine, it's still possible to "offset legitimate losses against other income" in the limited liability company

Just not your personal income.

Consider if your company holds a loss-making long-term-hold rental property, and also operates a profitable property trading business - or a profitable fruit stall, for all it matters. You can claim the rental losses against the fruit profits, and only pay tax on the net result.

[Wayne]

Haven't yet read this month's magazine, it's still possible to "offset legitimate losses against other income" in the limited liability company

Just not your personal income.

Consider if your company holds a loss-making long-term-hold rental property, and also operates a profitable property trading business - or a profitable fruit stall, for all it matters. You can claim the rental losses against the fruit profits, and only pay tax on the net result.

Given that the details of the proposed ring fencing isn't out it would be hard for Mark to have commented wouldn't it?
Or maybe there are details and I've missed them (quite possible).

[richard56]

Hi
Thanks Anthonyacat.
Your explanation makes sense.

Yes your company can offset losses but you cannot offset those losses against your personal income.

That is the way I thought Ring Fencing worked.

Maybe the articles author should have said...."Every other industry sector out there is allowed to offset legitimate losses against other income.AS LONG AS IT IS NOT PERSONAL INCOME "

Thanks
Richard

[Anthonyacat]

Maybe the articles author should have said...."Every other industry sector out there is allowed to offset legitimate losses against other income.AS LONG AS IT IS NOT PERSONAL INCOME "

Well, that comment isn't about structure so much. Every other industry sector is allowed to offset losses against their personal income, if the business is in an LTC, Partnership, or Sole Trader structure.