How about profits are ring- fenced as well- pay no tax until losses occur.
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Ring Fencing Matters
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What I don't understand is why aren't the tenants up in arms?
What happens when yet another rent subsidy is removed?
Rents go up.
Guess they just aren't too bright.Last edited by PC; 09-12-2018, 04:33 PM.The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.
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Originally posted by Nick G View PostSell the entity not the asset.
- doesn't get around brightline
- general loss limitation rule, if you sell over 51%, then the entity forfeits the losses carried forward
Also no lawyer or accountant will like a client buying an entity!
Lastly - why would a new buyer, get the old buyers losses from a rental? Nothing to do with the new buyer!
RossBook a free chat here
Ross Barnett - Property Accountant
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In general I don't like ring fencing, and think any business should be claim losses, especially in the first few years.
But as I put above claiming losses for years and years and years, and then selling for a capital gain, no tax, without ever making a profit, or even getting close, isn't right either.
Like most things under Labour, it is rushed and poorly thought through, but its still coming.
RossBook a free chat here
Ross Barnett - Property Accountant
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Most new build rental properties are negative (particularly with chattels depr) for the first few years, the refund helps you get started.
We are working with a client now who was originally proposed a new build by one of the usual suspects, it might have been OPES or PRE, and they were trying to justify making a $10K annual cashflow loss with no tax relief because the property would appreciate 6% PA in value. That was literally the proposal. Dear lord.
So if investors are not incentivized to build and as Kiwibuild shows home owners aren't all that keen either, who is going to fund 'ze housing we need?Free online Property Investment Course from iFindProperty, a residential investment property agency.
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Originally posted by Nick G View PostMost new build rental properties are negative (particularly with chattels depr) for the first few years, the refund helps you get started.
We are working with a client now who was originally proposed a new build by one of the usual suspects, it might have been OPES or PRE, and they were trying to justify making a $10K annual cashflow loss with no tax relief because the property would appreciate 6% PA in value. That was literally the proposal. Dear lord.
So if investors are not incentivized to build and as Kiwibuild shows home owners aren't all that keen either, who is going to fund 'ze housing we need?
year 1 $10k loss, no capital gain
Year 2 $10k loss, no capital gain
year 3 $10k loss, no capital gain
then get sick of it. Sick of putting in money. Sick of being a flat market and no capital gain
So lose $30k cashflow, plus sell at a loss as market hasn't moved over the 3 years and not many buyers, so might lose another $50k.
Overall lose $80k and never ever buy again.
I suppose what I'm getting at is 6.3% might be average growth, but it is often 5-7 years of flat, and then 2-3 years of boom. So if you hold for 3-5 years over the flat period, you might gain $0
RossBook a free chat here
Ross Barnett - Property Accountant
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Originally posted by Nick G View PostMost new build rental properties are negative (particularly with chattels depr) for the first few years, the refund helps you get started.
We are working with a client now who was originally proposed a new build by one of the usual suspects, it might have been OPES or PRE, and they were trying to justify making a $10K annual cashflow loss with no tax relief because the property would appreciate 6% PA in value. That was literally the proposal. Dear lord.
So if investors are not incentivized to build and as Kiwibuild shows home owners aren't all that keen either, who is going to fund 'ze housing we need?
Other business' have losses ring fenced yet they still invest at the startup stage.
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Originally posted by Don't believe the Hype View PostWhat other businesses have losses ring fenced?
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Originally posted by Wayne View PostXero
Tradme (when they were starting out).
Any LTD company that hasn't elected to be a LTC really.
The difference is property is being legislated to not allow the same.
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Originally posted by Don't believe the Hype View PostThose losses are not ring fenced. If the owner had a profitable tax paying business these losses could have been off set.
The difference is property is being legislated to not allow the same.
Xero can't offset their losses against PAYE or some other company (in a simple sence).
I see the difference as being 'irrespective of entity type' really. Changes the argument for LTC a bit - doesn't negate the usefulness but changes it a bit (I'm not an accountant).
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