Ring Fencing Matters

[PTWhatAGreatForum]

I support this because noone should be setting up businesses intending to make a loss, but apparently property sorts bizarrely see it as a virtue.

[Perry]

I support this because noone should be setting up businesses intending to make a loss, but apparently property sorts bizarrely see it as a virtue.

I suspect it's a vice that most endure, grudgingly.
Short term pain in exchange for long term gain.

[elguapo]

Look at Xero.
Substantial losses for many years.

Don't forget there are the FIF rules for international shares than tax you at a deemed rate regardless of the actual income. I wouldn't put it past them to try and impose those rules on property.

[PTWhatAGreatForum]

I suspect it's a vice that most endure, grudgingly.
Short term pain in exchange for long term gain.

"Long term gain" sounds like the justification of someone who has a dud. It's a waste of time now, but in some distant future...

[PTWhatAGreatForum]

Look at Xero.
Substantial losses for many years.

And a piece of crap which doesn't work properly.

My business bailed from them and went to Zoho Books. As an added benefit now spending US$29 per month instead of NZ$80.50.

[Perry]

Not Really

I suspect it's a vice that most endure, grudgingly.
Short term pain in exchange for long term gain.

"Long term gain" sounds like the justification of someone who has a dud. It's a waste of time now, but in some distant future...

"Long term" was the wrong choice of words. "Mid-term" would have been better.

I've had my ups and downs over the years. But it's more taxing, now. No complaints - that's as it should be.

No pain - no gain.

The Little man and his ilk always want to deflect the voters' gaze from their rapacious political thirst for more money. Mainly to give a pittance back as bribes to get re-elected; more importantly, to pay for their wives' taxpayer-subsidised domestic air travel, their taxpayer-funded o'seas junkets, taxpayer-funded gold plated superannuation, taxpayer-funded chauffeur-driven BMWs, and so on.

[Nick G]

Ugh. Zoho.

And a piece of crap which doesn't work properly.

My business bailed from them and went to Zoho Books. As an added benefit now spending US$29 per month instead of NZ$80.50.

[PTWhatAGreatForum]

Ugh. Zoho.

Do you have a better alternative? If so I am all ears.

[Beano]

Do you have a better alternative? If so I am all ears.

Moneyworks

[artemis]

You're making a mistake in your thinking.
You are ignoring time.
The rental income may be less than the expenses this year.
But what happens in 10 years time? Or maybe 20 years?
The rental income may exceed expenses then.
That's what us long term investors are looking at.
We don't like selling and don't want to sell.
Steady increases in rent is all we need.

Agree, and also paying down principal which, on a table mortgage, steadily reduces deductible interest.

Under Labour's proposal, insofar as we actually know what it is, tax losses in the sector will grow exponentially. There will be an unintended consequence that owners will hold properties until tax losses are eliminated, rather than sell up and lose them.

[Anthonyacat]

You're describing a mortgage taken out to purchase a property.
But what happens when you take out a mortgage without purchasing a property?
Which property will the ring fencing calculation use?
I hope you can follow what I mean - hint: current account.
Another example:
You own 4 properties with 4 mortgages - traditional situation.
You get fed up with your current bank and move to another.
You decide to simplify the mortgages by merging them into one large mortgage.
New situation is 4 properties with one mortgage.
How will you select which property to use for the ring-fencing calculation?
After a year you decide to split up the one large mortgage into 5 smaller mortgages of different amounts and different interest rates.
How will you select which mortgages to use for each property ring-fencing calculation?
It seems like you can't ring-fence per property as mortgages don't map onto properties directly.
I think this is the fatal flaw in the Labour party suggestion.
There may be others.

Sorry posting on phone so may be brief, but all debt has an original purpose, and that purpose carries through until repaid.

This includes debt to the shareholder (the current account) which in property is usually raised as a method of meeting mortgage and other payments - each of these payments is linked to a property (for the mortgages it's the property the loan was raised to purchase/renovate/improve, not necessarily the one(s) secured against).

The only time a loan purpose truly goes away is when it is paid off not by new debt, but by earnings of the company.

This is why I am saying how horrible this would be to track!

[Wayne]

I suspect it's a vice that most endure, grudgingly.
Short term pain in exchange for long term gain.

So the short term pain will be a little greater as the losses are locked up.
The long term gain then will be a little longer as they use up those losses when they come into profit.

As for it driving rents up - bullshit!
Do the people who have no mortgage on a rental property charge less rent because they have less costs? No!

If your business model is so reliant on the tax break then it might not be such a sustainable business model.

[Wayne]

The Little man and his ilk always want to deflect the voters' gaze from their rapacious political thirst for more money. Mainly to give a pittance back as bribes to get re-elected; more importantly, to pay for their wives' taxpayer-subsidised domestic air travel, their taxpayer-funded o'seas junkets, taxpayer-funded gold plated superannuation, taxpayer-funded chauffeur-driven BMWs, and so on.

Just to be clear you are referring to Little and English and their respective cohorts here aren't you?
National is just as good, if not better, at this as Labour.

[Perry]

"and his ilk" was intended to cover them all.

The problem is, I can't really be sure if it is actually totally the woodenheads' fault or that of the stupid, apathetic, self-interested voters? Or some diabolical mix.

[Wayne]

The problem is, I can't really be sure if it is actually totally the woodenheads' fault or that of the stupid, apathetic, self-interested voters? Or some diabolical mix.

Without the stupid, apathetic, self-interested voters bribes wouldn't work.