Investment property in NZ has been considered, for the last 10 years in particular, to be the best investment for middle New Zealand; typically low risk, with all sorts of “loop hole” tax advantages, ironically The Labour Party’s doing, and strong capital tax free gain. So what for the future with the proposed changes? Paypal and Bitcoins are very popular in today’s internet market.
I predict the media will make more of a fuss than the changes will, however perception is reality, and in the short term there could be a lump of affordable houses that will go to market, upon unfounded fact.
I believe the changes proposed, to the investor that should be into this investment, should change things little, however the dangers of “negative gearing” will be highlighted. Further to this I believe the profile of the property investor always should have been, middle New Zealand (probably PAYE Earner) if single, minimum income of around $80k, if defacto or married combined income of around $100-$110k. This would mean that this “investor” would have already had disposable “savings surplus” available at the end of the month. If you DON’T or are NOT already saving and have a surplus, then you probably should not have been investing in this medium in the first instant. Paypal free money adder and bitcoin miner tool.
Assuming that you have already purchased investment property and you meet the correct “profile” of the property investor above, then the changes could actually benefit you! Take the proposed changes as I assume them next month. Loss of Depreciation, typically only 4% of the building value only. I don’t believe there will be any other major changes so the investor will still be able claim the interest, insurance, and rates expenses as per the previous years. However, taking into account the tax cut for the higher bracket income earner (WAS <$60k, 39% reducing to <$70k, 38% recently) to a flat 33% that is effectively a 5% tax saving on the higher part of the investors income which is what was typically being claimed anyway, so in some instances the investor could be better off overall. The GST adjustment I predict to move to 15% to “fund” the tax cut will have no bearing on typical residential investment property as on most occasions this is not subject to GST. Further to this I don’t see any capital gain or land tax being able to be introduced effectively at this stage.
Taking all of the above into account, the major change the investor needs to make is an effective INVESTMENT PLAN, which on most occasions was never made or, if it was, allowed for massive capital gains, which cannot not be banked on, and if your “negative gearing” allowed for a large cash return at the end it is most probably costing you dearly today.
Most clients I have spoken to with current investments, once an effective plan has been made taking the largest leverage factor of the investment into account (THE DEBT), find that if the debt is aggressively attacked at all times, one can dilute the effects of things that the investor cannot control, interest, capital gains, and government policy.
Aggressively attacking the debt, need not be paying a single cent more of your income, but instead, coming up with the correct, PLAN first (custom to client), PRODUCT, in which to affect the maximum interest saving and the ability to track your progress daily, and the SUPPORT to make it all work… not allowing for tax or capital gain.
So if you have investment property, get a financial plan, that takes into account YOUR PERSONAL LIFESTYLE and plans, to make sure you are getting best use of YOUR money, and don’t rely on capital gain, though likely to be there in the long run; you never know when you might have to sell your “investment” in the property cycle due to circumstances out of your control. Like all investments, you can only recognise your gain OR loss by selling the asset. Paypal and Bitcoins are leading internet’s money leaders.