Ring Fencing Matters

[Perry]

Ahhhh, the nasty "intention" aspect, despite the statutory sale period, after purchase?

Talk about sauce the goose and the gander! (No relationship to Gandalf)

Mind you, jack2016 may elect to tear it down and build three townhouses thereon.

What then?

Have their cake and eat it, too?

[artemis]

National's Economy discussion document and survey -

National will return the bright line test to two years and remove ring-fencing of losses.

The document also asks for input on other rental issues, including regulation, costs, the Tenancy Tribunal and the balance of rights and responsibilities between landlords and tenants.

Have your say at the below link - there's a reasonable chance National will form the next government, though also a reasonable chance of a Labour/Greens government.

https://www.national.org.nz/economy

[Perry]

Beware of promises made while in opposition.

[PC]

I very much doubt National will do anything.
They are almost as big a bunch of communists as Labour.
Plus National are lousy at pushing rents up - unlike Cindy & the Greens.

[Bob Kane]

National will return the bright line test to two years and remove ring-fencing of losses.

Sounds good to me.
I'll vote for them.

[Perry]

I wonder if Labour supporters said the same thing when promised 10,000 affordable houses-per-year?

[Wayne]

I wonder if Labour supporters said the same thing when promised 10,000 affordable houses-per-year?

Probably not - they probably didn't vote on just one thing!

[Perry]

Did all of this happen as suggested? Or was it a little teacup storm?

Wonder if they have extrapolated the fiscal impact as rentals reach break even with a massive tax credit. Or how trust and company ownership structures will avoid the ringfencing by tax effective distributions. Or what the impact will be on rents when landlords have to reach even further into their own pockets every week.

Little unveiled the latest plank in Labour's housing policy at the party's election year Congress in Wellington today.

He said Labour will:

• Ring-fence losses on rental properties so they can no longer be used for tax breaks on other income. It will mean losses can only be applied to income from housing.

• Use the estimated $150 million in increased taxes for $2000 grants toward insulation and heating.

• Negative gearing will be phased out over five years.

http://www.nzherald.co.nz/politics/n...ectid=11855870

[Rosco]

Over 5 years would have been nice!

There is also a lot of unintended consequences!

1) Rental in personal name with loss. Huge profit in Trust from rentals, allocates to individual = Can't offset profit and loss :-(
2) Rental in personal name with loss. Huge profit in normal company, allocated as dividends or shareholder salary to individual = Can't offset profit and loss :-(


Ross

[flyernzl]

The grants disappeared onto the never-never as well.

[Perry]

More Stuff & Nonsense?

I'm hoping Tony Alexander will give his thoughts in his next newsletter.

Do you subscribe?

Here's the aforesaid pundit's latest nostrum edict.

Independent economist Tony Alexander said the virus, [corona] of which there have so far been more than 6165 confirmed cases and more than 130 deaths, could have an impact on house prices.

So could the moon. (Don't the sun and moon have coronas?)

Independent econ-o-mist?

Or independent-of-reality econ-o-mist?

Maybe Tonyeo and Shammy should join forces?

[Wayne]

Do you subscribe?

Here's the aforesaid pundit's latest nostrum edict.


So could the moon. (Don't the sun and moon have coronas?)

Independent econ-o-mist?

Or independent-of-reality econ-o-mist?

Maybe Tonyeo and Shammy should join forces?

With Tony it is far better to read the whole thing, his reasoning included, than just a headline.
The good thing with Tony is he includes his reasoning - if you don't agree with the reasoning then discount the message.

[orig]

Ring Fencing: LTC or Company

With the latest ring fencing, will that make more sense to form a company for property investment rather than LTC?


Here are the main points:

Assuming you are a PAYE under the top tax bracket of 33%.


losses will be ring fenced under LTC & Company entities,.


While profits under LTC must be distributed to the directors and taxed at the individual tax rate (33%), profits will be taxed at 28% under a company.
Under LTC when selling, capital gain is distributed to the directors without TAX, and the same applies under company if shareholders pass a resolution and liquidate the company (Better to hold a single property under a company)

Everything changes if your tax rate is 17.5% or under or you hold multiple properties that can offset each other under LTC.

Any Idea?

[Anthonyacat]

With the latest ring fencing, will that make more sense to form a company for property investment rather than LTC?


Here are the main points:

Assuming you are a PAYE under the top tax bracket of 33%.


losses will be ring fenced under LTC & Company entities,.


While profits under LTC must be distributed to the directors and taxed at the individual tax rate (33%), profits will be taxed at 28% under a company.
Under LTC when selling, capital gain is distributed to the directors without TAX, and the same applies under company if shareholders pass a resolution and liquidate the company (Better to hold a single property under a company)

Everything changes if your tax rate is 17.5% or under or you hold multiple properties that can offset each other under LTC.

Any Idea?

The main issue with a company is the difficulty getting capital gains out (assuming it holds more than one thing, so you don't want to liquidate it).

Otherwise I really like ordinary companies. They provide significant tax planning benefits in terms of deferring income. If you are in the 17.5% bracket you can distribute the income right away, if you're in the 30-33% range you leave it in the company taxed at 28%, and declare it as a dividend later in the future - if planned well with a parental leave or sabbatical you can utilise low tax rates for income earned years previously.

But the lack of getting capital gains out can be a real big downside for many people.

[artemis]

On Q&A today Mr Bridges said a National government will reverse ring fencing of rental losses, keep new insulation standards and reverse the other Healthy Homes standards 'by and large'.

Also said he will be making a big economic speech tomorrow, Monday.