The other problem is that we now have a mindset that we are over taxed and any further tinkering or change will not have the expected reduction in tax avoidence for the current batch of taxpayers, non avoidence will filter through slowly.

If you tax me fairly, i.e. reduce 38% rate and I won't think of any new means to avoid taxes, but the current tax avoidence structures stand.

But given the government still wants to levy the same amount of tax, my tax rates may fall, but the incidence of tax I pay will probably not change so technically I am still paying tax at the higher rate, but by different means.

So I will pay the same amount of tax. This being the same amount of tax that caused me to start avoiding tax. Tax me fairly!!!

We need to grow the pie not cut it up differently.

So would land taxes be able to be written off as part of your loss on your rental property?, the same way rates can be (which is the case whether you have an LAQC or not)

Prediction: Introducing a land tax will not reduce property prices at all.

When GST came in, did prices go down? No. They went up.

Why would a new tax mean that sellers will accept less profit than they require? Even if there was a reduction in supply, due to a short term, knee-jerk reaction to a land tax, the resulting shortage would increase prices beyond the effect of a new tax.

Land taxes will merely be absorbed as a cost and the required rate of return won't change one bit.

Agree withe Miles - Drop the tax personal tax rate to 30%, close the loopholes for property investment (i.e. ring-fencing losses or dropping LAQC's). Increase GST to 15%. And manage govt expendture much more efficiently. An increase in GST is probably the most effective measure as our GST system is the most efficient indirect tax in the OECD. It is hard to avoid and fair. Look at what is happening globally - Govt's are increasing looking at indirect taxes.
Introducing new taxes creates significant admin costs and is politically hard.

More uninformed calls to dump LAQC's. I've decided whenever this issue comes up I shall simply copy and paste the post I made here in response to Mark Weldon's dumbarse call for same between Xmas and New Year. It appears the only way to fight ignorance is repetition.

/Copy and paste ...

While I think the coming tax attack on property is abhorrent, and it doesn't solve NZ's true problem being intrusive government in the business sector (and our lives), I am becoming disheartened by the dearth of analysis and knowledge from our supposed business leaders and politicians (although I would expect it of the latter and their bureaucratic cronies).

The latest offender: Mark Weldon, whom I shall, for the reasons given below, refer to heretoforward as the Buffoon.

In today's Press, the Buffon has launched an attack on LAQC's (Loss Attributing Qualifying Companies), which he calls a joke, and all the while thinking he is launching an attack on property investment, the argument being that Kiwis are over-invested in property, to the detriment of our productive sector. But the joke is not LAQC's, it is the Buffoon. An attack on LAQC's is not an attack on property investment. I simply make two points:

1) The government attacks LAQC's. This is no issue for property investors, they simply buy investment properties through sole traders, partnerships, special partnerships or joint ventures, and losses can be offset against an individuals other income regardless. That is, the LAQC is simply a business structure, attacking that structure will make no difference to property investment.

2) I don't know how many, but I have a number of client LAQC's on my books, quite a few in fact, but not one, repeat, not one of those is a property investment company. It just happens to be that LAQC's are a very useful structure for small close knit groups of people, often families, to run just about any sort of business you can imagine. That was how QC's and LAQC's came about: it was simply the - unusual - government acknowledgment that a small family company should not be weighed down by the bureaucracy and red tape of a Fletcher Challenge or a Telecom, thus could elect into the QC regime and have IRD treat them in many 'simplified' ways as much like a partnership as a corporate.

The shame of this shameless attack on LAQC's by people who should know much better "“ and it is alarming they do not "“ is that politicians and bureaucrats are just stupid enough to take this nonsense to heart and actually attack LAQC's which will achieve nothing they think it will vis a vis property investment, but deny many small businesses a perfect structure to operate under.

Given the above, I end this post with a question. New Zealands stock exchange is being run by a man that seemingly does not understand the difference between a business structure and a business operation, and is prepared to look like a fool in the MSM, and is happy using the force of government, advocating the demise of a structure to correct a perceived imbalance of business/investment types in our economy, when I have just shown the first has no affect on the second as they are two different issues. How well is the NZX served by this man?

If the Buffoon wants money invested in the NZX, that being the purpose of his attack on property investment "“ one might fairly assume "“ then he needs to advocate the business environment which encourages a wide range of lower risk established operations through to innovative higher risk start up operations to be listed on the NZX to be invested in. That environment is one where big government, and its taxes, red tape and regulation, are taken out of the market to allow business to get on with the business of wealth creation (acknowledging every government transfer of business funds from that sector to the public and welfare sectors, is a destruction of wealth). The Buffoon should concentrate on only that.

Just as in the past individual freedom from tyranny was hugely boosted by separating government from religion, so now we must separate government from the economy.

Mark...
Great to read this again.
Is it possible that whilst your clients are using the LACQ structure 'as intended',
others are not?

Does the LACQ structure open the opportunities that the 'uninformed' allude to?

That's fair - that's not - too many corrupt, greedy people - the system is rotten to the core that's the problem. Western societies need revolutionary events to change, before it is too late.

A Swiss court has slapped a wealthy speeder with a chalet-sized fine "” a full $290,000 (NZ$396,435).

But in case RT or MH drive too fast $ 100 or $ 200.- just not fair isn't ?

Amen !
Walter

Glad your back Walter.

I wish to opt out of state funded services, please.

Tax minimisation / LAQC's : Did these suddenly come into existence in 1999 ? I think not . They were there , but little utilised . So why the sudden focus on tax avoidance ? Was it coincidence that when Noddy Cullen took the reins , and began a campaign of raising income tax levels / fuel excise ( under the guise of a motorway in Auckland ............. did that thing ever get started ? ) , etc ; that Joe-6-pack Kiwi started getting shitty about paying more than his/her fair share .

Noddy C. has alot to answer for . The consequence of his actions are a woefully unbalanced economy today . $ 200 billion in rental properties , yet only $ 14 billion in the stockmarket . That is so far out of kilter .

Crikey WALTER : They charged that guy 1.45 % of his net wealth for the speeding offence ............Wish they'd bring that in , here . My fines would drop from $ 80 to $ 52 ! Yippeeeee . More left over for gummy bears ........Ever tried to bribe a cop with sweeties , ooooooh , not a good idea ! Open to mis-understandings that one .

Why does everyone think the govt will reduce the top personal tax rate from 38% to 30% when they have already reneged on an election promise to reduce it to 37%?

People talk about that as a given, but they have been clear. Any changes must AT LEAST be revenue neutral.

ktz, ktz - "Chinese Calculator" - times here (for the last 4 days) - I crack up again! Hubu, hubu -heu, heu, heu!

@WALTER:

I'll start

1) a prefab home factory like SWEDEN, GERMANY, USA. Like HUF HAUS maybe.
We could even use some of our own timber. (don't have the expertise myself though)

@MARK HUBBARD

My query
"Is it possible that whilst your clients are using the LACQ structure "˜as intended',
others are not?

"Does the LACQ structure open the opportunities that the "˜uninformed' allude to?"

was quite genuine.

@Wally

Have you resolved the evil name nicker issue yet?

Bit naughty.

Mark, as libertarian you shouldn't twist my words (philosophy/ comments). Actually the reason why I'm not debating with you.

Cheers Walter

I said: Walter, you don't have to worry about "˜what we make'.

Walter said: you shouldn't twist my words (philosophy/ comments).

Just before this, Walter had said: "Office Coffee- sippers" what can, should, must we produce here in NZ ?????????

Another contradiction Walter. Was 'must' a bad choice of words?

John John John.
Tax neutral changes do not mean you will necessarily pay the same amount of tax. It simply means that it will be paid in different ways. In this case more by property owners, less by wage earners.
House prices will change little, most so called investors take little notice of their outgoings when making their investment. In any case rates, which are a land tax by any other name, have by going up markedly in the past few years with little affect on land prices.
Ultimately, its about fairness.
Those that own property paying their fair share of the tax take, which currently they don't.
I have no issue paying a land tax if it decreases taxes on my income. More incentive for me to earn more.
Good for the country through increased productivity.

Mark:

I decided I'd better do a little bit of reading on LACQs after your detailed response.
I could quibble with you as to whether or not you answered the 'as intended'
portion of my question as unequivocally as I'd hoped, but it is probably enough for me to note that the IRD clearly does not agree that "where people have their private family homes in a LACQ and rent the property back to themselves" is a correct use of a LACQ.

Someone somewhere has been ill advising their clients I guess. Better read up on Family Trusts before I show my ignorance further.

Thank you.

Personally I still have a 'gut feeling' that in NZ the main systemic problem is a ridiculously 'overvalued' housing stock - almost to the point where a new currency should be used to denote it(loose use of language!) .

I doubt this is any conspiracy - its just that we've all been 'porking' it senselessly (banks, estate agents, councils, investors, home owners) and it no longer bears any relationship to the $. It feels very artificial. Maybe its great if you want to sell up and migrate. Everything else stems from this.

I got some advise yrs ago from an accountant. Never invest or attempt growth because of the extra's you'l get from a tax break. This mean that the risk that I hold in real and any benefits from tax outcomes are a bonus to be re-invested. So from this my debt is low and assets are have real worth, calucuable worth, not just an extra few % from a tax break. Once CGT or value added is a go, lenders will pull the carpet back a bit and those with debt will lose out

KW: your own house in a LAQC is a completely different matter. That was a rort; any accountant allowing that was just plain stupid, as it was self evidently foul of the anti-avoidance provisions of the Income Tax Act, but the number of people doing that was absolutely insignificant compared to 'third party' investment owning property LAQC's which were and are a legitimate use of the LAQC structure.

land tax will hit the rich hardest,so why are all the rich expats coming home?doug myers may have come home for his knighthood ,that he should have got sooner if it hadnt been for those awful labour people,but a cynic would say that his business is smart meters and all the govt controlled power cos are hard out installing those.

Robert....
Surely you recover all of these 'costs' from the tenant by increasing the rent?
Tough being a landlord is it?
Never tried it - please explain the difficulty.

LAQC's and trusts also allow for limited liability which is equally if not more important then any tax effects. Ideally you will have your low risk assets in a trust and your high risk assets in a company. For a property investor that means your family home is owned by a trust and your rental properties by a company. If the equity in the family home is needed as security for the rental properties then it's best to use a diffent bank then the one you a using to fund the rest of your properties and only secure the bare minimum required. If things do go tits up then you only need to worry about servicing the debt secured against the family home.

@28_year_old - you crack me up.

Why do we come here? Its such a baby-boomer hangout.

Hating on politicians and reveling in taxing the 'evil' rich.

SO like, 20th Century man.

:D

Babyboomers are the evil rich you fools.

John - Productivty increases by doing the same thing more efficiently.

At a country level if highly productive activity displaced less productive activity then overall a country's productivity increases. Which is good because more productive work tends to be more highly paid.

I'm not sure how investing in property can generally increase productivty as it tends to be a passive investment. The money just sits there doing not much.
Sure you have been more productive at an individual level, but no more efficient activity has taken place so the country is no better off.