So, you are all sorted, retirement plan underway, Kiwisaver, managed funds, even a bit of crypto... but wait? Schools aren't set up to teach financial literacy, so how and when should you do that? Is there a better way than just giving the kids pocket money and telling them "spend it wisely"? (Yes) Do you want your kids to be great with money? (yes) We chat to a couple of Kiwi dads (Jamie and Jovan) about the free app SquareOne, curated right here in lil' ole' NZ to help parents teach their kids about financial literacy and wellbeing.
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Money vs Your Emotions: What You Need to Know! Amazing insights from Lynda the Money Mentalist! What does Money have to do with Your Emotions? A lot! We discuss with Lynda Moore* how our relationship with money can lead us to make dysfunctional decisions, and how to address that. What things do first home buyers and property investors need to have in order before they approach the bank? Or the broker? There is loads of great advice in this excellent interview. And, look out for the financial reason why you and your significant other need regular date nights!
*Lynda is an accountant and has studied psychology. Contact Lynda via lynda@moneymentalist.com or at moneymentalist.com What investors need to know about cryptocurrencies: Risk and Taxes? We discuss the big questions that investors need to know: Should your investment portfolio include cryptocurrency? Why? What are the risks? What about tax? If you trade one currency for another, is it taxable? What about if you mine? Is there any way to sell crypto and it not be taxable? And lastly, what about the accusation that cryptocurrencies are not eco-friendly? We find out the answers to all these questions, and more. Visit Goodlife Financial Advice www.goodlifeadvice.co.nz
Buy #bitcoin at EasyCrypto https://easycrypto.com/?ref=73913 With the government's shock introduction of laws slashing interest deductions on existing rental properties, where can you as an investor put your money? What will get you the best return while still maximizing tax deductions? We present 9 strategies:
WHAT CAN YOU DO?![]() 1. MORTAGE HOLIDAY: In other news, with the OCR dropping to (and staying at) 0.25%, your bank should be passing on rate cuts for any floating loans, and it is worth looking at existing loans to see if you should break and re-fix or extend the term. Break fees are tax-deductible. Ask the bank or your mortgage advisor to do the calculations for you, or use this tool here. You might also want to look at a mortgage holiday, but just be aware that this will increase the loan,^ but it will buy you some time, so in the big picture, may be worth it. We suggest you only do this if you really need to. Please see this detailed page with info about mortgage holidays, including links for all the major banks to apply for one. See also our blog post with 4 options for your mortgage to improve cash-flow right now 2. INTEREST RATES: Check with your bank re break fees on your loans, and look at whether the math adds up to break and renegotiate one or some loans at lower interest rates. 3. RENTS: Rent increases are worth considering, as you can now only increase the rent once a year. 4. PAYMENTS: Of course, cash-flow is king, and in this environment, we suggest asking your suppliers if you can start paying in smaller regular installments, rather than bigger sums. This will help reduce the impact of having less cash coming in. EpsomTax.com group offer interest-free time payment plans to all customers as a matter of course; please contact us to arrange this now. 5. INVESTING: This might also be the time to look out for housing bargains - see this article about timing and buying. If you can get a good deal on a cash-flow positive rental, that's going to introduce some $ into your portfolio. Heads-up: Banks are deluged with lending applications, so getting mortgage approval is slow 6. OTHER RESOURCES: Xero.com have provided a page with links to educational content. You don't have to be a Xero user to access all of it. Webinars include managing stress, resilience, business continuity and so on. What good news is there for the coming weeks and months, in view of the COVID-19 pandemic and its effects on the economy? Government policy changes include:
* The wage subsidy and leave payments are NOT subject to GST - an Order in Council was passed to treat it as exempt (Section 5(6E)(B)(iii GST Act). The wage subsidy paid to the employer is not taxable; it is excluded income under section CX 47 of the Income Tax Act 2007; it is also therefore not deductible when paid by the employer as part of wages to employees. The payments made to employees are taxable for the employee and subject to PAYE, KiwiSaver deductions, Student loan etc in normal way. The same is true for self-employed persons: it is taxable income. NB: you only need to show a 30% revenue reduction for a single 4-week period to receive the full 12-week lump sum; you should be able to show that you took active steps to mitigate the financial impact of COVID-19, which could include drawing from your cash reserves (as appropriate), activating your business continuity plan, making an insurance claim, proactively engaging with your bank or seeking advice and support from either the Chamber of Commerce, a relevant industry association or the Regional Business Partner programme. ^ How it works is that the principal payments temporarily stop and the interest is added to the mortgage ![]() Are you thinking about buying a rental property but not sure if now is the right time to dive in? There’s nothing like a worldwide pandemic to give you wobbly legs at the thought of making a big financial investment! It may seem like a precarious time to buy a rental property due to Covid-19 and political uncertainty around landlord requirements. However, there are other drivers which may indicate that it is a good time to enter the property market or expand your portfolio. Let’s take a closer look! The Housing MarketDespite the economic uncertainty caused by Covid-19, the New Zealand property market is still growing. International migration has decreased, however Kiwis are returning to and staying in Aotearoa in record numbers. According to the REINZ, in August median house prices across New Zealand increased by 16.4 percent. Furthermore, every region in the country has experienced an annual increase in median house prices. There are still housing supply issues which is hot on the political agenda and demand for rentals are said to be strong. Interest RatesThe amount at which home loan interest rates are set is influenced by the Reserve Bank of New Zealand’s Official Cash Rate. As of September 2020, the Official Cash Rate was held at an all-time low of 0.25 percent. These modest home loan interest rates make it a more affordable time to borrow funds. Consequently, term deposit rates are decidedly slim… LVR Ratio Restrictions In addition to low-interest rates, you currently will need to use less of your hard-earned savings to buy an investment property. Pre-Covid-19, the loan-to-value ratio (LVR), or the size of the deposit that lenders require you to provide in order to buy an investment property, sat at around 30 percent. In response to Covid-19, these LVR restrictions have been removed for one year in an attempt to make it easier for households and businesses to buy property Legal Requirements for LandlordsSomething to keep in mind when thinking about purchasing an investment property is any new and ongoing legal requirements on landlords. For example, the new healthy homes standards have been introduced for rental properties in New Zealand, to ensure tenants have access to warm, dry and safe homes. These standards set specific and minimum requirements, including heating and insulation for rental properties. This means any property you purchase will either need to be up to specification when you buy it, or investment will need to be made to get it ready for tenants. Final ThoughtsIn reality, the decision on whether now is the right time to buy is always going to be ‘as long as a piece of string’. There are always going to be risks and potential threats.
However, lower interest rates, the temporary removal of LVR restrictions and ongoing demand in the housing market make it an attractive time to buy a rental property. Ultimately, the decision of buying a rental property needs to be right for your situation. Doing your research and seeking expert advice is going to help you make informed, long-term financial decisions that are right for you. Engage with us at EpsomTax.com to learn more about how you can minimise tax when investing in a rental property. In addition to the measures announced (see this article and this article), the government recently announced several new measures (this article was updated 22/05/20:
![]() TAX LOSS CARRY-BACK SCHEME IRD say "Businesses expecting to make a loss in either the 2019/20 year or the 2020/21 year would be able to estimate the loss and use it to offset profits in the past year. In other words, they could carry the loss back one year. This change means we could refund some or all the tax already paid for the year they were in profit. It means firms could cash out all or some of their losses in 2019/20 or 2020/21. Without this change, firms would have to carry forward any loss to a year when they make a profit." Points to note:
Some caveats: If you are unable to pay this tax on time because of the effect of COVID-19 on your business, IRD expect that you will pay this tax as soon as practicable. In such cases our recommendation is that you contact IRD now to let them know you can’t pay the tax on time and negotiate a payment plan. That will typically be an arrangement to pay the tax over a number of months (or fortnightly or even weekly), and possibly with a deferred payment start date. As part of that process, although this is not specifically mentioned on the IRD website, a pre-requisite may be that you have applied to your bank for some help under the business finance support package underwritten by Government. The advantage of talking to IRD as soon as possible is that you will most likely qualify for remission of late payment penalties and interest. If you would like us to talk to IRD on your behalf, please let us know at your convenience. We will then contact you to discuss the best approach, and whether or not to use this or tax pooling. * IRD can remit Use of Money Interest (UOMI) and penalties; criteria are:
To prove you've been "significantly affected", you'll likely need to provide at least three months’ banks statements and/or credit card statements, a list of aged creditors and debtors and probably profit and loss statements and/or balance sheet from your business. Alternatively, you might also be able to apply to
According to Wikipedia*, "phishing is the attempt to obtain sensitive information such as usernames, passwords, and credit card details (and money), often for malicious reasons, by disguising as a trustworthy entity in an electronic communication.[1][2]" What Do Phishing Emails Look Like?Quite often they look like a legitimate email from IRD (about a tax refund, or warning of tax owing), or an email from a provider like Office365 or Apple. More info here at netsafe.org.nz*. How Do You Know If It Is A Phishing Email?There are often several clues; please see the copy of example emails below.
What Does a Phishing Email Look Like?Here is one phishing email we received recently. It looks rather convincing, but there are a couple of clues in the email that it is not from a legitimate source
Here is another example of a phishing email. Note again the clues that it is not "legit":
How Can I Keep Myself Safe?
See more tips on this page at netsafe.org.nz What should I do if I need help or advice? You can contact Netsafe:
* We have quoted information from Wikipedia (licence terms) and Netsafe (licence terms). Use of this information does not constitute an endorsement of EpsomTax.com by either organisation. This information is not provided for commercial purposes, but strictly in an attempt to help promote community awareness of fraud and how to prevent it and protect yourself.
How to View DocumentsYou will be sent an email with a link. Click on the link to view the document. This will open in a web browser on your device. To view the document, click on it. How to Approve DocumentsClick on the email link once again, scroll to the bottom of the page and click on the green approve button if you are happy with the contents.
From the 2018 income year (that is, 1 April 2017 onwards), the safe harbour threshold has been increased! Hooray, I hear you say. It's gone from $50,000 to $60,000. It has also been extended to non-individual taxpayers e.g. companies. What does this mean? Use of Money Interest (UOMI) will only be payable from terminal tax date* for natural persons and non-individuals where their residual income tax liability is less than $60,000 and the following requirements have been met: The taxpayer must have:
There are a couple of other points: The requirement that they must not have held an RWT exemption certificate at any time during the year has been removed. Oh, and there is an anti-avoidance rule as well, so that you can't manipulate your incomes to fall within the safe harbour provisions. See this article for the 2020 changes to provisional tax. Basically, you'll have to pay provisional tax if you had to pay more than $5,000 tax at the end of the year from your last return. $2,500 was the threshold for years before the 2020 return * Terminal tax date is either 7th February if you do not have an accountant or tax agent OR 7th April if you have an accountant or tax agent who has an extension of time on your behalf.... more info
# Standard method is last years residual income tax + 5%, OR your residual income from two years ago + 10% (only if you haven't filed last year's return yet)... more info |
Garreth CollardAccounting for your rental residential investment property; specialised property tax advice. Buy me a coffee! Archives
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