OnPoint: Election 2011: GO!
848 Responses
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Steve Parks, in reply to
You made me read it, you nasty man.
Mawh hah hah!
Well, I found it so infuriating that I wanted others to share my infuriation.
I mentioned already how he claimed Huang and ... (checking carefully) ..Elliffe were 'emotive', but then writes a lot of stuff that was very emotive, near hysterical even. He also disingenuously suggests they forgot that the debt was mainly private, not government, and plays down the problem of government debt (he calls us outstanding performers in regards controlling this). Then, he proceeds to make a number of calls for debt reduction by cutting government spending - justified by the problem of government debt! -
DexterX said:
IMHO the three term Labour govt squandered its time in office and the lost opportunity will be all they will be remembered for as the coming crisis hits home very hard.
I found it hard to follow your arguments supporting this conclusion, particularly the argument that many business required local/state subsidies. However, I do understand that you think WfF made people "welfare dependent". Matthew's largely run the response I'd have made and the debate has moved on. I will say though, that NZ wages are notoriously sticky, a point I think George also made, which is in part why Labour introduced WfF. Also, and Cullen made this point at the time WfF was introduced, delivering the kind of support he wanted to was just too difficult through the tax system.
I'm not sure it was the right approach, I only mentioned it because you ignored it when you criticised Labour's record on my words income equality instead focusing only on mimimum wages which is, IMO, wrong.
Matthew Poole said:
And decrease tertiary education funding? Way to ensure the population gets stupid, stays stupid, and anyone with any desire to get educated leaves: and likely never returns.
NZ has very high tertiary participation rates and currently also loses alot of people to overseas. I don't advocate decreasing tertiary education funding but we might want to acknowledge that, for the moment at least, we're not capturing the value of the investment and might need to do some rethinking.
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Dexter, it sounds like you got royally screwed, perhaps you got bad tax advice to become a dealer. You may have paid a lot more tax than you were required to. Or it could simply be the very peculiar situation you put yourself in by buying an investment property and then moving into it caused this. I don't know, but it's irrelevant, your example is atypical. Most people don't pay tax on capital gains, because they don't say making those gains is their purpose in buying the property. But it is. Everyone knows it, the IRD just can't prove it. That's why it's called a loophole, and that's why CGT gets around the whole problem.
Indeed I can't see what you have against it, since you claim to have done the equivalent of paying it. If it was at a lesser rate than your marginal tax rate, you could have saved money.
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DexterX, in reply to
No, i paid waht was required to be paid and had an accountant do the return.
Where is the proof re
"In this country it was a field day, because all those capital gains were tax free".
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Matthew Poole, in reply to
NZ has very high tertiary participation rates and currently also loses alot of people to overseas. I don’t advocate decreasing tertiary education funding but we might want to acknowledge that, for the moment at least, we’re not capturing the value of the investment and might need to do some rethinking.
I support bonding, and this is being done with doctors in hard-to-fill rural vacancies. Much else, however, has all kinds of potential to go horribly wrong, especially since few other educational pathways have nearly-guaranteed demand on graduation.
As for decreasing funding, we already spend less on tertiary education than a lot of the OECD. Remove student loans from the funding calculations, which is a truthful representation since loans aren't funding, and the national tertiary education spend is quite pathetic.
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DexterX, in reply to
They present food for thought - thanks.
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Matthew Poole, in reply to
Where is the proof re
“In this country it was a field day, because all those capital gains were tax free”.
You mean proof other than the University of Auckland Business School’s Professor of Taxation Studies saying that a CGT would be beneficial? Which then, if you are correct, raises the question: why do we need a CGT if capital gains are not tax-free?
Or proof other than the myriad of OpEd pieces and general news articles talking about how the lack of capital gains tax puts NZ out of step with most of the rest of the world?
Or maybe even proof in the form of the Income Tax Act 2007, which provides that gains in the value of an asset that was not bought with the “intent or purpose” of resale are not taxed when realised at time of sale? Is that sufficient proof? Because it’s right there in the legislation, which I’m not going to quote since it’s probably time you familiarised yourself with the law.
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Paul Williams, in reply to
As for decreasing funding, we already spend less on tertiary education than a lot of the OECD. Remove student loans from the funding calculations, which is a truthful representation since loans aren't funding, and the national tertiary education spend is quite pathetic.
Actually, the position of the Vice Chancellors and others is that we need to shift some of the funding currently provided to students back into funding direct to institutions.
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DexterX, in reply to
Ben posted:
Yes, and what were they doing that was so nuts? Lending shitloads to property speculators. In this country it was a field day, because all those capital gains were tax free
So what is the figure here.
The IRD are applying the Act the "intent and purpose" and collecting the increase in values on the sale of rentals property.
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BenWilson, in reply to
No, i paid waht was required to be paid and had an accountant do the return.
Just because you had an accountant doesn't mean you understood what was going on. The problem may have gone right back to when you got your investment property in the first place. If you said your purpose was to be a dealer, then yes, you have to pay income tax on capital gains. But why on earth would you do this if you aren't a dealer?
In this country it was a field day, because all those capital gains were tax free
Yes, OK, this overstates the case. Not ALL those gains were tax free, just a massive proportion of them. Anyone who wasn't a property dealer, like you, for some strange reason, opted to be.
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Steve Parks, in reply to
NZ has very high tertiary participation rates and currently also loses alot of people to overseas. I don’t advocate decreasing tertiary education funding but we might want to acknowledge that, for the moment at least, we’re not capturing the value of the investment and might need to do some rethinking.
Sure, but I don't consider "Don’t let people leave NZ until they have paid off their student loan" as serious rethinking. Or thinking.
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DexterX, in reply to
After noting that you overstated the case you then move onto say
“Not ALL those gains were tax free, just a massive proportion of them. Anyone who wasn't a property dealer, like you, for some strange reason, opted to be.”
What was the massive proportion of them??
In response to Matthew and Ben,
The IRD Tax guide on rental property provides that if you sell an asset for more than its adjusted tax value the difference between the sale price and the adjusted tax value is to be included in your taxable income.
The IRD with regard to intent and purpose take the default position that the purpose was eventually to sell particularly if the ppty was negatively geared and deprecation and interest were offset against rent. It is up to you to prove the intent and purpose was otherwise – to hold onto the ppty indefinitely – if you are selling a rental ppty where you have claimed mtge interest and depreciation then it is hard to prove don’t you think??
I read somewhere in the press that one year it may have been 2010 or 2009 that the IRD nationally investigated over 6,000 cases of rental property sales to see that the sums were done right.
Ben also states
"Just because you had an accountant doesn't mean you understood what was going on"
Dude I am a finance graduate and have worked in ppty management - both commercial and residential - I know my shit.
To help you know yours I would like to send you a prototype of the SCT Mach II you really, really need one - you can make your own perfumed candle.
Off to the throne room.
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I'm enjoying the creativity of the trolling at least, if not the content. Carry on
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I think calling ‘trolling’ is unfair.
Anyway, at the risk of being told to “just fucking google it” (I just fucking couldn’t be bothered, okay?)
I have to ask: SCT?
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DexterX, in reply to
Self Composting Toilet
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Steve Parks, in reply to
What was the massive proportion of them??
He doesn't need to research this, anymore than he needs to research that the sun comes up in the morning.
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Matthew Poole, in reply to
The IRD Tax guide on rental property provides that if you sell an asset for more than its adjusted tax value the difference between the sale price and the adjusted tax value is to be included in your taxable income.
The IRD with regard to intent and purpose take the default position that the purpose was eventually to sell particularly if the ppty was negatively geared and deprecation and interest were offset against rent. It is up to you to prove the intent and purpose was otherwise – to hold onto the ppty indefinitely – if you are selling a rental ppty where you have claimed mtge interest and depreciation then it is hard to prove don’t you think??
I read somewhere in the press that one year it may have been 2010 or 2009 that the IRD nationally investigated over 6,000 cases of rental property sales to see that the sums were done right.
Wooo. 6000 cases in a year. That’s gotta be, like, a vanshingly tiny percentage of the total number of transactions. No possible way people could get away with anything with that intense scrutiny going on, oh no siree.
There’s also the loophole in the law that provides that if the purpose of purchasing the property was for generation of income, you’re free on the capital gains. Buy a property, rent it out for a couple of years, flog it, voila, tax-free capital gain. Of course you meant to use it for income, and you did, look, two whole years, but then your car broke down and you needed a new oven and your wife really wanted a holiday in Hawaii and, well, you had all this money available to you in that house.What the law says and what IRD has the resources to enforce are quite different things. Because the law lacks a bright line test on what constitutes “purpose or intent”, all a taxpayer has to do is dispute the assessment and it drags on through the TRA and then, potentially, into the courts. That ties up IRD resources, and uses enforcement funds that then can’t be used to investigate other potential tax dodgers. Accountants don’t even have to be very creative in finding ways to avoid the limited taxes that exist on capital gains when the holes in the law would accommodate a 747 with room to fit a couple of T 282B dump trucks on the sides.
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Paul Williams, in reply to
Sure, but I don’t consider “Don’t let people leave NZ until they have paid off their student loan” as serious rethinking. Or thinking.
No, that's way too superficial I agree (bonding being a sensible variation I think we agree). I don't have the answer but I do think the discussion is worth having and I'm not sure it will be. Labour's long been committed to restoring a level of student support slashed by the Nats in the early '90s and National's now locked in too. I don't advocate students living an impoverished existence but I do wonder about the risk that resources are being over allocated to a group that mightn't need them at the expense of a group that does.
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DexterX, in reply to
You may wish to refer to this from 2006 - so in 2006 the IRD looked at approx 6,000 transactions.
http://www.guide2.co.nz/money/guides/tax/guide-to-taxation-of-rental-properties/6/601
In 2008 there was a case that gave some clarity to the interpretation of "intent and purpose" and it went in favour of the IRD's position.As I mentioned earlier:
“If the ppty was negatively geared and deprecation and interest were offset against rent. It is up to you to prove the intent and purpose was otherwise – to hold onto the ppty indefinitely – if you are selling a rental ppty where you have claimed mtge interest and depreciation then it is hard to prove.”
Taxpayers involved in rental can also expect to be audited at least once every 7 years where all their returns are reviewed.
Also the penalties for furnishing incorrect returns even inadvertently or making an honest mistake are horrendous and compound monthly. The majority of taxpayers involved in activities that have a high incidence of audits – rentals, running your own business have to file returns correctly and pay tax and that includes paying tax on the gains from the sale of rental ppty.
The penalty regime is so harsh it bankrupts people who make honest mistakes or run into difficulty with the cash flow of their business because some one doesn’t pay them or rips them off – the IRD is a substantial petitioner in bankruptcies.
When Ben says “Not ALL those gains were tax free, just a massive proportion of them”
What is that massive portion – and how much is it. I would have to say it was fabrication.
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What is that massive portion – and how much is it. I would have to say it was fabrication.
Do you actually know the answer?
Definitely they're hard figures to work out, how much capital gain was made in NZ, and how much of it was taxed. My "massive proportion" comes mostly from the observation that most landlords are not dealers, and are not required to pay income tax on capital gains. But it's hard to work out because sensible people who are mostly in it for the gain don't sell. What need is there when the bank will give you easy credit for the capital growth? There's no need to tangle with the IRD, unless you decide to buy your own investment property off yourself.
Dude I am a finance graduate and have worked in ppty management - both commercial and residential - I know my shit.
Well it's good to hear that years of training in finance can enable you to be the first person I've spoken to who has managed to pay tax on unrealized capital gains. Well done. I hope your property management has given a good appreciation of what's involved in showing prospective renters around flats, taught you the ropes of collecting rents, and got you in touch with some cheap plumbers, because it sure hasn't taught you how to do what most of the other half million investment property owners have worked out, how to avoid paying tax on property.
Just as a basic guess on what tax gain there could be, here's a little snippet from the Herald article on it.
Revenue
Capital gains tax delivers tax revenues collected on capital gains. Less obviously, it increases revenues from the ordinary income tax. This is because many taxpayers who would have otherwise tried to convert or characterise taxable income as non-taxable capital gains no longer do so.
The papers provided to the Tax Working Group indicated that a capital gains tax could raise $3.8 billion per year. But in most other countries that have moved to a capital gains tax, the income turned out to be far higher than predicted (almost tenfold over a short period in Australia).
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Steve Parks, in reply to
…the penalties for furnishing incorrect returns even inadvertently or making an honest mistake are horrendous and compound monthly. ...
The penalty regime is so harsh it bankrupts people who make honest mistakes or run into difficulty with the cash flow …
If true, that sounds like a ligit cause for complaint, and I’m not in favour the the IRD applying harsh penalties for honest mistakes. But it is a separate issue to the one at hand.
Also, you seem to be saying that we have in effect a type of gains tax: “taxpayers involved in activities that have a high incidence of audits [including] rentals … have to file returns correctly and pay tax and that includes paying tax on the gains from the sale of rental ppty.” If some are paying it anyway, why not support a proper all encompassing capital gains tax regime instead of this adhoc collection?
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Lucy Stewart, in reply to
No, that's way too superficial I agree (bonding being a sensible variation I think we agree). I don't have the answer but I do think the discussion is worth having and I'm not sure it will be. Labour's long been committed to restoring a level of student support slashed by the Nats in the early '90s and National's now locked in too. I don't advocate students living an impoverished existence but I do wonder about the risk that resources are being over allocated to a group that mightn't need them at the expense of a group that does.
Which resources - are we talking about the student allowance? Because that's the only direct non-loan funding to students I can think of, bar one or two scholarship programs. At it maxes out, for those with the poorest parents or who are over twenty-four, at around $180/week. You're just not going to save very much money there.
The real question in keeping the investment in tertiary students in NZ is, of course, jobs - especially in the sciences and engineering. It's getting the first job right out of university that will keep people here - there is nothing more demoralising than spending several years and a lot of money on a field-specific degree to find that your best offer is barely above minimum wage working a helpdesk. I can't tell you the number of job ads I've seen that say things like "graduate position, two years experience required". It's a joke.
Part of that is about educating students that they can't expect to just walk into a job even with a supposedly "in-demand" degree - they need to start looking well before they graduate, and treat finding a job as a serious, time-consuming thing, not something that happens magically. Part of it is about persuading companies to offer more lead-in programmes for graduates, and to be willing to train people up. But it starts with acknowledging that what we're doing right now is telling people "get educated and you can get a great job building our knowledge economy", and focusing only on the "education" part.
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DexterX, in reply to
The point I am making is that penalites are harsh and as a result tax payers don't go out of there way to take the risk to be subject to the penalty regime.
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Your sarcastic "Well it's good to hear” and "the other half million investment property owners have worked out, how to avoid paying tax on property" to me show that you don't have the wit to understand the present position, you also make stuff up..
The present tax position in NZ is that where one owns an asset (nvestment/ppty) from which you earn and income and claim expenses if you sell or convert it (move in/or tsfr it to a company) then if at the time of the transaction the value of the asset is more than its adjusted tax value the difference between the sale price and the adjusted tax value is to be included in your taxable income.
Australia that has CGT allows 2.5% depreciation on buildings, in NZ they removed the depreciation on assets - the effect has been a reduction of the rental stock, particularly in Auckland, and a rise in rents.
If you introduce a CGT on unrealised capital, which is then paid annually, and is in effect a land tax, that tax will get passed onto tenants.
In my view the accommodation crisis in Auckland is acute now - the apartment block where I live which has 29 studio apartments has 4 families of 4, and one family of five renting – A CGT will worsen the accommodation crisis and in my view be paid for by tenants.
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nzlemming, in reply to
A CGT will worsen the accommodation crisis and in my view be paid for by tenants.
Why?
What is your evidence for this belief?
How will a CGT "worsen the accommodation crisis"?
Why will a CGT raise rents?You keep on making sweeping statements but you never justify them with evidence, while demanding numbers and percentages from people who criticize your arguments.
Post your response…
This topic is closed.