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16356 posts

Uber Geek

  #1480975 29-Jan-2016 00:02
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hashbrown: Financial planning 101: Any surplus income should be used to pay down debt before starting savings. The interest savings on the debt are entirely tax free.

The issue is we've normalised lifelong mortgages to fund lifestyles we can't afford.

The govt providing tax incentives on savings, just so the Aussie banks can continue to suck us dry is not the solution.

There is no one way. I know someone first hand who bought property with money she didn't have and by 30 she is now a multi millionaire thanks to house price capital gains.




That maybe true, but can be a gamble. House prices don't always go up, and picking the market is a mugs game. Many people think that capital gains are tax free. But if you are buying and selling houses with the intention of making a capital gain, then you usually have to pay tax on the gain. The government have now got a bright line test to pick up more people not paying tax.

16356 posts

Uber Geek

  #1480977 29-Jan-2016 00:06
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So does anyone think such a scheme (and I include ISAs as well - some people made £1 million tax free out of those!) would assist NZ to move from a dependency on housing as the only available tax free gain there is?





The trick is to make saving more attractive than housing. But with them reducing the interest rates so much, where savers are getting less and less, and it is now so cheaper to borrow, so many people are now borrowing so much money. If they make kiwisaver compulsory, then people have no choice, and they don't need to make it more attractive. They will make people put in 8% of their income and it will eventually replace the super (which will become means / income tested). We have been chipped away and conditioned by the media for this to happen. It was only about 20 years ago when Winston (I think it was him) tried to bring in a compulsory saving scheme. But it was voted out at a referendum, as people feared it would replace the super. So instead they have brought in kiwisaver which essentially is going to become that scheme over time as it is eroded down. They managed to get it in by initially making it really attractive, and then chipping away the benefits. 





Surely if the salary you put in was free of tax, that would make it more attractive?





The government then gets less revenue coming in. The governments though don't think long term, they are really only looking at it in 3 year intervals between elections. Kiwisaver is also a Labour policy, and National have eroded it. National also stopped making payment into the Cullen fund after they got in. I wonder how much richer NZ would be if we had continued putting money in. The media though these days don't investigate that sort of thing.



656 posts

Ultimate Geek
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  #1481051 29-Jan-2016 09:10
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I'm not sure about the veracity of the claims that the US and UK schemes are tax free as most people understand that statement to mean. Both countries will tax you either before or after meaning there is not a lot of advantage over Kiwisaver. I have to say, however, that I have no problem with property as an investment vehicle here. What we could encourage more of perhaps is diversification by making ownership of more than a certain number of properties less advantageous.

1149 posts

Uber Geek

  #1481102 29-Jan-2016 10:49
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From collating many reports over a long while I have concluded that a fair few NZers treat houses as their retirement savings.




Do you think the time has come for that kind of savings product to be made available in order to provide an alternative place for funds to be put, hopefully contributing to a reduction in house prices via reduced demand?...



- Trusting some one else's "retirement saving product" you have no or little control over - is not that smart


- Houses in NZ are not good investments long term (i.e. for your retirement), it is speculative short term investment IMO


Small Sustainable Business which adds value to people now and in the future - is the best possible investment (mostly your time) you can make today. Especially if you are a Geek.


Remember that quote from The Social Network:


"Everyone at Harvard's inventing something. Harvard undergraduates believe that inventing a job is better than finding a job. So, I'll suggest again that the two of you come up with a new new project."


Invent something today and it will pay you at your retirement.

925 posts

Ultimate Geek

  #1481179 29-Jan-2016 12:41
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Why should savings/investment be tax-free? The Govt can only pay for things from tax revenue; it has no other income stream.



458 posts

Ultimate Geek


  #1481184 29-Jan-2016 12:48
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BlinkyBill: Why should savings/investment be tax-free? The Govt can only pay for things from tax revenue; it has no other income stream.




It's an incentive to save.  If you want the population to invest in a retirement plan you have to provide an incentive, either in the form of tax perks or top ups.

1015 posts

Uber Geek


  #1481243 29-Jan-2016 14:24
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Kiwisaver just keeps being diluted, and eventually it will become compulsory, and the government won't give any tax credits at all.  It also should not be used as away to buy a first home, because all that has really done is help increase house prices. Also why can you withdraw your kiwisaver investment, to buy a house as an investment, over other forms of investment which may out perform a house. They also keep changing that, and now you can withdraw it all, apart from the kickstart. Then you can also get all sorts of other additional grants to buy a house, but you are restricted to buying one under a certain amount, where there are very few houses, or you can only buy in bad areas. 





I don't think the problem with housing prices in NZ is  caused by kiwisaver. How many people have actually taken up the kiwisaver withdrawal to buy a house (Outside of Auckland). It could be a contributing factor. But I think you will find there are so many other factors. And yes i think it is silly not to diversify over other investments when talking about retirement (business/property/stocks/commodities & cash in the bank).


Based on my experience in Auckland I have found.


1) Auckland council are very slow and everything is beauracratic and in some cases extremely stupid. It is SOO damn hard to build a house. I am building my second house since 2013. No wonder we cant keep up with demand. (we need 13,000 houses a year in auckland, and currently they are only processing 9000). And they are VERY VERY VERY slow. If they decide you are missing any info they will knock the process back another month and you have to go to the back of the queue.


2) When I was 16  Auckland had reached a milestone, 1 million people. I am now 32 and we have 1.6~1.7 million people in Auckland. So essentially the biggest city in the country has grown by about 60% -> 70% in 16 years. So the migration tap has not been turned off and i looked at the statistics NZ figures and there is a LOT of people coming in, this is not necessarily a bad thing for the country but we are struggling to house them and hence puts massive demand on the housing stock.


3) There is an awful lot of money laundering going on in the form of overseas money being pumped into NZ and Australia & Canada. I read through the report on income to house pricing affordability and it seems as if people around the globe perceive these places to be a reasonably safe and desirable place to live.


4) Returns on bonds/deposits/property around the world is very low, and NZ and Australia have recently had a good run (it doesn't mean that they are still a good investment) but the sharemarkets are very volatile and no one wants a crappy bank return. In Japan people have been paying the banks to look after cash deposits as a result of deflation. 


5) I am currently building and man the cost of building is rocketing up each month. The place I am building has gone up almost 10% since 12 months ago when i originally enquired about it. 


It is clear the Regions are suffering an overflow effect from both migration the ridiculous prices being paid in Auckland and Christchurch. 

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