Ring Fencing Matters

[jack2016]

Hi with the ring fencing law being passed, is this the same law that if you claim home office expenses your primary house is liable for CGT when you sell it?

[Perry]

Did you not hear that the CGT shenanigans has been buried for a while?

[Learning]

Hi with the ring fencing law being passed, is this the same law that if you claim home office expenses your primary house is liable for CGT when you sell it?

Do you mean GST?

[jack2016]

Did you not hear that the CGT shenanigans has been buried for a while?

sorry i think i have but cannot remember! but thanks ... so no CGT

[Chris W]

But many will still buy these because of the attractiveness of CG, if your properties increase by 50% in say 5 years, you are a lot ahead then buying a cash neutral property somewhere in a small town.

Many property investors (such as Ron Hoy Fong & Ashley Church) believe that property prices in certain locations in New Zealand double every 10 years (based on historical price increases for the last 40 years or so). So based on that key underlying assumption, many are willing to go into negative gearing, especially if the capital gain is not taxable after 5 years (the 5 year brightline test).

[Rosco]

Portfolio or Property by property?

This blogg might help

https://www.cswaikato.co.nz/index.php/latest-news-accounting-hamilton/accountants-hamilton-auckland/243

[Bluecoat]

Rosco I think he means purely for capital gains not ring fencing.
i know someone you advised to sell his built brand new house as yield was 5.5 not 7.5 that you suggested.
Based on this he missed out on capital appreciation of 400k over 7 yrs.

[Keys]

^^^^^ Hindsight 20/20

[Anthonyacat]

Rosco I think he means purely for capital gains not ring fencing.
i know someone you advised to sell his built brand new house as yield was 5.5 not 7.5 that you suggested.
Based on this he missed out on capital appreciation of 400k over 7 yrs.

Only missed out on of the didnt invest the funds elsewhere. If put into just about any property (preferably higher yield) he would have got some, all, or more than that gain.

[Rosco]

Rosco I think he means purely for capital gains not ring fencing.
i know someone you advised to sell his built brand new house as yield was 5.5 not 7.5 that you suggested.
Based on this he missed out on capital appreciation of 400k over 7 yrs.

Hi Bluecoat,

1) This is a ring fencing thread, so hence the post about ring fencing! ie there has been little or no discussion on the two options if making a loss, which the blogg covers.

2) property investment
- there is no perfect answer
- It depends a lot on the individual investor, their circumstances, income, risk levels, goals
- Some people want to take the risk and gamble on capital gains, and some don't . In the past taking this gamble has worked extremely well, but none of us can predict the future.
- for some people, selling down one property, reducing their risk and cashflow loss is what they want and makes sense. They sleep better with less risk and debt. In this situation, 5 years later you would often kick yourself, but that doesn't mean it wasn't the right option for them to sell at that time. For some people if they don't sell, they might have been forced to sell later

As mentioned above, if reinvested into other property with better yields, they wouldn't have missed out. Or if they already had several other properties, they would have gained well on these, plus had better cashflow and an easier ride

Ross

[jack2016]

a ring fencing thought/question came to my head -

if you have a property that makes a loss year after year, can/how long can the losses be brought forward to the future to balance any gains in the future? it's not unlimited years is it? or it depends if you have a trust/company vs private name?

[Rosco]

a ring fencing thought/question came to my head -

if you have a property that makes a loss year after year, can/how long can the losses be brought forward to the future to balance any gains in the future? it's not unlimited years is it? or it depends if you have a trust/company vs private name?

Why are you looking to make a loss year after year?

Main question - are you really a trader / speculator and therefore your gains should be taxed? (possibly the only reason for you to do this!)


Losses would carry forward forever, unless you lost them somehow (ie change in shareholding in a company can trigger this)

[jack2016]

Why are you looking to make a loss year after year?

Main question - are you really a trader / speculator and therefore your gains should be taxed? (possibly the only reason for you to do this!)


Losses would carry forward forever, unless you lost them somehow (ie change in shareholding in a company can trigger this)

That's a good question. Wanting to buy a house for land banking. The land is worth a lot. The house is pretty old. I'm guessing the rental will unlikely cover the outgoings.

[Perry]

Also, losses carried forward are voided by bankruptcy. So I've heard.

[flyernzl]

That's a good question. Wanting to buy a house for land banking. The land is worth a lot. The house is pretty old. I'm guessing the rental will unlikely cover the outgoings.

So on that basis any profit on resale will be taxable as income, anyway.