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Topic # 23151 20-Jun-2008 09:38
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Hi, got the statement for the 1st period from ASB bank, investment loss is $50, plus $11.50 administration fee and $8.38 tax, total lost is almost $70.  Frown What is it? Yell

Accountants, do I have to pay a tax if I got the loss?

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  Reply # 139316 20-Jun-2008 09:44
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Your post makes no sense to me, could you perhaps tidy it up a bit and give some more background/detail?

thanks

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Reply # 139318 20-Jun-2008 09:47
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While Kiwisaver is a great thing for companies who can apparently claim tax back on contributions, it doesn't mean the money under your name will actually be worth anything when you retire - if the money is invested in something that doesn't provide a good return you may end up with less than the contributions.

Or am I wrong in thinking this way?




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  Reply # 139322 20-Jun-2008 10:09
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freitasm: While Kiwisaver is a great thing for companies who can apparently claim tax back on contributions, it doesn't mean the money under your name will actually be worth anything when you retire - if the money is invested in something that doesn't provide a good return you may end up with less than the contributions.

Or am I wrong in thinking this way?


Like any investment that isn't based on a fixed interest % there is always that risk. It's highly possible that anybody who's currently investing in Kiwi Saver (or infact any other superannuation or invesment fund) could see negative returns over the next few years. You have to remember that a fund is based over it's life - it's highly unlike it would lose money overall in the next 30-40 years.

One other thing to remember is that the higher risk profile your investment is the greater your potential return but you also risk losing money very quickly in bad economic times.



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  Reply # 139324 20-Jun-2008 10:31
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My point is that I trusted my money to the bank and asked to invest it with a good return. When I saying I trust meaning I don't understand in the investments anything so I trusted it to my bank. I expected a gain, may be nothing, but not a loss. If the bank can't make, don't do it then. And I still not clear what kind of tax I paid. I had the loss not a gain. I think, you guys mixed up with a private investment and goverment, then the goverment says do it and you will have the money in your retire. But what I see, that, at the end, I will have nothing.

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  Reply # 139325 20-Jun-2008 10:40
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Yes, sbiddle I understand that. But people on the street don't - as 01EG shows.

01EG, when you enroll you select one type of investment. There's a conservative one with lower returns but safer. Then there's one that's almost everything going into futures or shares. Lots of risk - even of losing money. Which one you selected?

Banks cn't promise what an investment fund return will be unless it is fixed as noted by sbiddle. And this is not the case.




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  Reply # 139329 20-Jun-2008 10:45
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ASB invest in shares of a company on your behalf, that company makes a profit and pays a dividend to shareholders , this is income so ASB(you) pay tax on this income,

This income is added to the total value of the fund, but at the end of the period the share price has fallen by X% more than the dividend was worth so  you end up paying tax and making a loss.

Welcome to investing in Recession 101



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  Reply # 139331 20-Jun-2008 10:47
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freitasm: Yes, sbiddle I understand that. But people on the street don't - as 01EG shows.

01EG, when you enroll you select one type of investment. There's a conservative one with lower returns but safer. Then there's one that's almost everything going into futures or shares. Lots of risk - even of losing money. Which one you selected?

Banks cn't promise what an investment fund return will be unless it is fixed as noted by sbiddle. And this is not the case.

Nope, I understand, but once again, this is a different between business and goverment program. Explain me my loss in the goverment game. :)



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  Reply # 139334 20-Jun-2008 10:49
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wellygary: .. this is income so ASB(you) pay tax on this income ...

Then show me where is my income :) I see only loss.

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  Reply # 139335 20-Jun-2008 10:50
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01EG: My point is that I trusted my money to the bank and asked to invest it with a good return.


The bank's stategy was probably based on the assumption that this was a long term investment. You only make a real loss if you want to cash in your investment now. Go out and spend $10 on Mary Holm's book, probably some of the best advice on Kiwi Saver.

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  Reply # 139345 20-Jun-2008 11:22
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01EG: My point is that I trusted my money to the bank and asked to invest it with a good return.

What you have to understand, as has been explained, is that it is an investment.  It is not a fixed % return in the way that a savings account or term deposit is.

With an investment comes risk - and not even banks are able to avoid losses.  Rest assured they will be investing your money (as part of a pool) as prudently as possible, but as there is a recession starting to bloom there will be losses no matter how careful they are.  It's just one of those things.

The other thing you can be assured of is your investment agency (in this case ASB) will still take their management fees, no matter how much money they lose for you.  This is counterbalanced by the fact that they do not increase these these fees no matter how much money they make for you.

01EG: Then show me where is my income :) I see only loss.

As for your tax, remember that you have a 1st period (3 or 4 months?) statement.  I question the months because I don't have Kiwisaver (which is a whole different subject) so don't know what the reporting cycles are.

Anyway, it's entirely possible that in month 1 (perhaps 2 as well) your investments made a profit, hence you pay tax, as you would at the end of each month with a savings account or term deposit.  Subsequent downturns may mean your final loss is greater than your initial profit - and you won't have paid tax on the month(s) of your loss... Also, as an individual (rather than a company) a loss does not entitle you to a tax refund.  Doesn't that suck!!

This whole situation is really something you need to clear up with ASB.  They're the ones who actually know what has occurred, not the posters here.

@Bung: Great suggestion!

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  Reply # 140789 26-Jun-2008 21:48
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01EG: Hi, got the statement for the 1st period from ASB bank, investment loss is $50, plus $11.50 administration fee and $8.38 tax, total lost is almost $70.  Frown What is it? Yell

Accountants, do I have to pay a tax if I got the loss?


Short answer; no you don't have to pay tax personally.

There are two tax values shown on the ASB statement.

First one: Tax in period; probably should be 'positive' which is actually a credit against future tax - its a tax loss (note it reduces your 'total withdrawals.' This will be offset against future tax payments on investment gains.

Second one: Tax (payable)/redundable; this only applies if you were to take your total funds out now. Based on your tax rate (PIR).

Obviously, this is a retirement fund, so anyone with a decent number of years to retirement should be looking outside of conservative investment/cashfunds. You're in it for the long run, and eventually the economy will rebound (may take several years though Undecided
All the tax losses you're raking up will come in handy when these funds end up making money :)
Obviously, also, these funds are invested in multiple shares, companies, bonds and all sorts of complimicated financial stuff, so the risk is diversified, just the overall world economies are in a downturn (*cough* recession *cough*), so overall returns are likely to be negative at the moment.
Just remember though, by low, sell high Cool

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