Capital Gains vs Interest deductibility

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification

Forums › Politics › Capital Gains vs Interest deductibility

1 | 2 | 3 | 4 | 5

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3083803 2-Jun-2023 12:20

GV27:

ockel:

Isnt this just a failure by IRD to enforce? It doesnt take a reasonable person to sniff the property investment and not smell a rat. I absolutely agree that if yields are inconsistent with what should be a risky asset investment (single heterogeneous asset with moral hazard) then the purpose of investment is not for income. As such any transaction should be subject to capital gains/losses (irrespective of whether its housing, art, antiques, gold or even non-dividend paying businesses [especially if there is no foreseeable dividend horizon].

The tools are there for enforcement but there is no directive - either politically or within IRD.

The IRD generally rely on a pattern of buying or selling, which is pretty difficult to prove/disprove. We ended up here because so many people got in on it, either renovating and flipping family homes in the 1990s (can't buy a do-up if the housing stock is already done-up) or leveraging of the unrealised gains in one property to finance your next two or even three. Throw in a building crisis, a finance collapse and huge restrictive land policies (with little ability to service greenfield areas) and for a little spice, have the taxpayers underwriting the finance costs for investors. It's not a mystery how this happened.

There's nothing in the tax toolkit to deal with this though. Someone can go through an awful lot of houses before they get flagged as potentially holding them 'on revenue' as opposed to for property investment, and on the scale that people got in on it, it just gets out of hand very quickly.

The real kicker is credit availability. Revoking LVRs for investors was basically pouring gasoline on an already out-of-control fire.

All conspiracy. That is NOT how it worked.

ockel

2031 posts

Uber Geek
+1 received by user: 545

#3083862 2-Jun-2023 12:56

GV27:

The IRD generally rely on a pattern of buying or selling, which is pretty difficult to prove/disprove. We ended up here because so many people got in on it, either renovating and flipping family homes in the 1990s (can't buy a do-up if the housing stock is already done-up) or leveraging of the unrealised gains in one property to finance your next two or even three. Throw in a building crisis, a finance collapse and huge restrictive land policies (with little ability to service greenfield areas) and for a little spice, have the taxpayers underwriting the finance costs for investors. It's not a mystery how this happened.

There's nothing in the tax toolkit to deal with this though. Someone can go through an awful lot of houses before they get flagged as potentially holding them 'on revenue' as opposed to for property investment, and on the scale that people got in on it, it just gets out of hand very quickly.

The real kicker is credit availability. Revoking LVRs for investors was basically pouring gasoline on an already out-of-control fire.

Agree to disagree. Relying on a pattern of buying/selling is like waiting for a repeat speeder before issuing a ticket rather than road enforcement and catching them in the act (or having speed cameras as they pass by).

If it walks like a duck and sounds like a duck. If you buy an asset (just once - and you're not the owner occupier) - and the financials when scrutinised dont indicate that it was bought for the purposes of income then it can only be for capital gain. It just takes basic forensic accounting (and not even forensic given IRD powers of audit) to determine.

Relying on a pattern of behavior is lazy.

Sixth Labour Government - "Vision without Execution is just Hallucination"

Kyanar

4089 posts

Uber Geek
+1 received by user: 1684

ID Verified

Trusted

#3083864 2-Jun-2023 12:58

sir1963:

All conspiracy. That is NOT how it worked.

Doesn't sound like a conspiracy, sounds like a documentary. Can't fault people for doing it, but it really shouldn't have happened either way.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3083866 2-Jun-2023 13:11

ockel:

GV27:

The IRD generally rely on a pattern of buying or selling, which is pretty difficult to prove/disprove. We ended up here because so many people got in on it, either renovating and flipping family homes in the 1990s (can't buy a do-up if the housing stock is already done-up) or leveraging of the unrealised gains in one property to finance your next two or even three. Throw in a building crisis, a finance collapse and huge restrictive land policies (with little ability to service greenfield areas) and for a little spice, have the taxpayers underwriting the finance costs for investors. It's not a mystery how this happened.

There's nothing in the tax toolkit to deal with this though. Someone can go through an awful lot of houses before they get flagged as potentially holding them 'on revenue' as opposed to for property investment, and on the scale that people got in on it, it just gets out of hand very quickly.

The real kicker is credit availability. Revoking LVRs for investors was basically pouring gasoline on an already out-of-control fire.

Agree to disagree. Relying on a pattern of buying/selling is like waiting for a repeat speeder before issuing a ticket rather than road enforcement and catching them in the act (or having speed cameras as they pass by).

If it walks like a duck and sounds like a duck. If you buy an asset (just once - and you're not the owner occupier) - and the financials when scrutinised dont indicate that it was bought for the purposes of income then it can only be for capital gain. It just takes basic forensic accounting (and not even forensic given IRD powers of audit) to determine.

Relying on a pattern of behavior is lazy.

A pattern of buying and selling shows you are a speculator/developer and so you will be taxed accordingly

This is no different from how someone can own shares and not pay capital gains, but if the are acting in the capacity of a trader, they do pay tax on the profits.

Your ideology would stop businesses from expanding, buying in expensive equipment that has a 10+ year payback period etc.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3083920 2-Jun-2023 13:15

Kyanar:

sir1963:

All conspiracy. That is NOT how it worked.

Doesn't sound like a conspiracy, sounds like a documentary. Can't fault people for doing it, but it really shouldn't have happened either way.

Only to someone who does not actually understand the reality.

Ask an anti-vaxxer , their idea of reality is was out of kilter with the whole medical profession, but they believe they are right.

Well I am a landlord, I have been one for 20 years, I do my taxes, I have bought new properties, I have spent time with my accountant and lawyer, I have talked to other business people and landlords.

So I will take my knowledge over your conspiracy because I have 20 years of experience being right by asking the right people.... not anti-vaxxer type people who want their reality instead of truth.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3083939 2-Jun-2023 13:35

Kyanar:

sir1963:

All conspiracy. That is NOT how it worked.

Doesn't sound like a conspiracy, sounds like a documentary. Can't fault people for doing it, but it really shouldn't have happened either way.

https://www.business.govt.nz/how-to-grow/planning-to-exit/what-to-do-when-selling-your-business/#:~:text=New%20Zealand%20has%20no%20capital,you%20make%20selling%20a%20business.

New Zealand has no capital gains tax, so you won’t be taxed on profits you make selling a business. However, there are other taxes and obligations that may apply. Your options when selling can also differ depending on the business structure you have. It’s worth speaking to a professional advisor for specialist help.

Sole traders

Selling your assets may result in GST to pay if buyer and seller are both GST registered. It’s best to talk to an accountant about GST and income tax before you sell your assets.

Selling shares

If you hold all shares in your company, you may want to sell the business as a going concern. When selling shares, it’s your responsibility to update shareholder details with the Companies Office. You can also ask a director with company authority to this on your behalf."

Dell

Shop now for Dell laptops and other devices (affiliate link).

GV27

5977 posts

Uber Geek
+1 received by user: 4212

#3083950 2-Jun-2023 14:00

sir1963:

A pattern of buying and selling shows you are a speculator/developer and so you will be taxed accordingly

Read it again. Ask six different accountants to tell you what a 'pattern' is. You will get six different answers.

It's hard to enforce, and IRD were nowhere near well-enough resourced to enforce it in such black and white terms.

GV27

5977 posts

Uber Geek
+1 received by user: 4212

#3083951 2-Jun-2023 14:02

ockel:

Relying on a pattern of behavior is lazy.

Again, proving it was hard, hence why the Brightline exists. It takes that burden away.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3083952 2-Jun-2023 14:04

GV27:

sir1963:

A pattern of buying and selling shows you are a speculator/developer and so you will be taxed accordingly

Read it again. Ask six different accountants to tell you what a 'pattern' is. You will get six different answers.

It's hard to enforce, and IRD were nowhere near well-enough resourced to enforce it in such black and white terms.

And again, that was the reasoning behind National bringing in the bright line test in 2017, it made it MUCH simpler to know who the speculator was.

Speculators are NOT landlords.

GV27

5977 posts

Uber Geek
+1 received by user: 4212

#3083954 2-Jun-2023 14:06

sir1963:

Only to someone who does not actually understand the reality.

Might be time to clue us in on what formal training you have in this matter other than being a landlord if you're going to question everyone else's understanding then.

I own a house but that doesn't mean I know how to build one.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3083964 2-Jun-2023 14:32

GV27:

sir1963:

Only to someone who does not actually understand the reality.

Might be time to clue us in on what formal training you have in this matter other than being a landlord if you're going to question everyone else's understanding then.

I own a house but that doesn't mean I know how to build one.

Training, none.

Experience 20 years. Doing my business taxes, having an accountant, talking to my accountant, talking to my lawyer, talking to other landlords and business people for 20 years

Actually involved doing the business for 20 years.

I am not a builder, buy I can putty a window, replaced doors, fitted new locks, gibbed walls, gib stopped a ceiling

I am not a painter, but I have done a LOT of painting

I am not a plumber, but I have replaced taps, washers, etc

There are lots of things I do, because I bothered to learn how to do them.

Samsung

Shop now on Samsung phones, tablets, TVs and more (affiliate link).

GV27

5977 posts

Uber Geek
+1 received by user: 4212

#3084395 3-Jun-2023 13:13

sir1963:

Training, none.

Experience 20 years. Doing my business taxes, having an accountant, talking to my accountant, talking to my lawyer, talking to other landlords and business people for 20 years

Maybe keep this in mind next time you are trying to dismiss people who don't share your views of the world as spouting 'conspiracy theories'.

I have a doctor, but talking to them doesn't make me a medical expert by proxy.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3084404 3-Jun-2023 14:11

GV27:

sir1963:

Training, none.

Experience 20 years. Doing my business taxes, having an accountant, talking to my accountant, talking to my lawyer, talking to other landlords and business people for 20 years

Maybe keep this in mind next time you are trying to dismiss people who don't share your views of the world as spouting 'conspiracy theories'.

I have a doctor, but talking to them doesn't make me a medical expert by proxy.

Wondered how long it would take to attack the messenger when you can not attack the message.

The "Your views" is also fun, nice try at trying to paint an "alternative truth" scenario and "see not qualified...he must be wrong"

I too have a doctor, and when the doctor tells me I have diabetes , guess what, I am the one who takes bloods, gives insulin, etc, not a doctor or a nurse.

I agree I am not an accountant, but me knowing enough of what they do that still enables me to do what I do properly, I don't need to be qualified for that, and I still use an accountant.

I can also not design and build a Mass Spectrometer , but I have repaired them.

GV27

5977 posts

Uber Geek
+1 received by user: 4212

#3084712 4-Jun-2023 12:06

sir1963:

Wondered how long it would take to attack the messenger when you can not attack the message.

The "Your views" is also fun, nice try at trying to paint an "alternative truth" scenario and "see not qualified...he must be wrong"

You are name-calling and calling people conspiracy theorists only a few posts up.

When you are challenged to put-up or shut-up as to your credibility or authority to speak or label others as such, it turns out all you have is reckons to fall back on.

And then you want to bleat that others are 'attacking the messenger'.

I'd say you couldn't make this up, but it's getting kind of predictable at this point.

sir1963

3428 posts

Uber Geek
+1 received by user: 3756

Subscriber

#3084765 4-Jun-2023 13:28

GV27:

sir1963:

Wondered how long it would take to attack the messenger when you can not attack the message.

The "Your views" is also fun, nice try at trying to paint an "alternative truth" scenario and "see not qualified...he must be wrong"

You are name-calling and calling people conspiracy theorists only a few posts up.

When you are challenged to put-up or shut-up as to your credibility or authority to speak or label others as such, it turns out all you have is reckons to fall back on.

And then you want to bleat that others are 'attacking the messenger'.

I'd say you couldn't make this up, but it's getting kind of predictable at this point.

And what is YOUR credibility ?

What is YOUR experience ?

Please provide references for anything you have claimed, because you have never supplied any.

I am sure that you will be able to give me the IRD page showing how businesses have to pay capital gains when they sell

Are there taxes, potentially yes

Repayment of depreciation (maybe if items are sold for a higher price than their depreciated value)

GST (if gst registered and gst claimed), domestic landlords are NOT gst registered, do not claim gst and therefore do not have to pay gst

The "bright line" applies if the business is in the development/land sales/etc business...and residential , farms no, commercial property no , other businesses NO.

and some others, but NO capital gains taxes.

https://www.ird.govt.nz/property/commercial-property-renting-out-buying-and-selling/selling-commercial-property

Buying and selling of shares

https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/buying-or-selling-a-business/tax-on-share-sales

So I have shares fro 20 years, I have paid taxes on dividends, but when I sell them there is no tax on the "capital gain"

And then you have "intent"

"It’s also possible that if you buy and develop an asset, intending to make money by reselling it (for example, restoring a car or a vintage guitar) then your profit may also be taxable income."

In this case the "capital gains" is considered business profits, but then deductions for costs will also be permitted.

So people who buy stuff from garage sales to sell on trademe are "in trade" and must declare the profits for tax purposes.

Home office expenses

https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/using-your-home-for-your-business

Interest as an expense

https://www.ird.govt.nz/property/renting-out-residential-property/residential-rental-income-and-paying-tax-on-it/property-interest-rules/how-properties-are-affected-by-the-interest-limitation-rules

Boarders and flatmates

https://www.ird.govt.nz/property/renting-out-residential-property/tax-by-rental-property-type/renting-out-a-room-in-my-main-home

And as I have said multiple times, I talk to my accountant and my lawyer who BOTH have formal qualifications, I also read a LOT as well as talk to other businessmen and landlords.

I also have 20 years of actual experience in doing what I do, I have never claimed to be an accountant or a lawyer.

And in SPITE of me not having any qualifications, please let me know what I have got wrong (with references) with reality.

1 | 2 | 3 | 4 | 5