A client came to us to see if we were able to provide alternatives to the situation she was in with her bank. She had tied everything together with one bank and had circa $3m of lending against 5 properties, including her own home.

This month’s article is a continuation of last month’s on associated persons “traps”. Last month I highlighted two traps that can catch the unwary when moving property between associated entities. This month I have another two traps that readers should be aware of. 


Trap 3 – Tainting for Life
Friends, Jesse and Skylar, are 50% shareholders in a property development company called...

 

This blog is Part 1 of 2 on traps that arise when land transactions involve “associated persons”. By way of background, both the Income Tax Act and the Goods and Services Tax Act have definitions of associated persons and special rules that apply to transactions between associates. 

Property dealers, developers and investors are often party to transactions with associated persons (e.g. restructuring ownership of existing property). 

 

As mortgage advisers we often see clients in situations where they have gotten themselves into debt and aren’t always managing things in the most effective ways, and this includes first-home buyers and also property investors.

 

The most common mortgage mistakes we see are as follows:
 

It has been another month of rate competition with arguably the largest attention going to Kiwisaver provider Simplicity’s entry into the mortgage industry with a market leading 2.95% rate. What was of particular interest with this was that unlike other leading rates which were fixed rates, Simplicity has an offer which is based on a floating rate. With an initial plan of $50m to be lent over the......
 

Financing renovations by topping up on your home loan can be the easiest and cheapest way to get the job done if you don’t have access to the cash. ‘Topping up’ means increasing your existing lending with your existing bank. In some cases, if it makes more sense economically speaking, it could even be worthwhile refinancing (moving to another bank) for a better deal on your existing mortgage AND the new funds being requested......

 

I wrote about loss ring-fencing in my December article, and it is still a hot topic. With the rules to take effect from 1 April 2019, and the legislation still not finalised, there are a number of questions that remain. I address some of these using case studies, which could well apply to you.  

But first, in case you missed my last blog, the main points from the draft ring-fencing of losses bill are.....

 

On 5 December 2018, the Government released the first draft of legislation dealing with the proposed ring-fencing of tax losses from rental properties. First impression on reading the Bill is that it is extraordinarily complicated and leaves questions unanswered. Here is a quick summary of the key points........

 

There is a reasonable chance you have already heard about the phenomenal rates being offered almost across the board now with most banks having rate specials down into the 3%'s.

What you may not be aware of is that you don’t necessarily need to wait until your current fixed rates expire in order to take advantage of these very low rates.

There is no doubt the Tax Working Group’s recently released interim report is the topic du jour. Accordingly, it is only appropriate that I offer my two cents’ worth, particularly in relation to the comments on a possible capital gains tax. 
 

• The Tax Working Group (TWG) has ruled out a land tax or an inheritance tax, but appears to me to clearly be pushing towards implementation of CGT. They have noted that it is premature to form a view without firstly determining exactly how the tax may apply, but I would be highly surprised if their final report did not support implementation of CGT.
• The TWG is of the view that CGT should apply across assets broadly, so not restricted solely to real estate. It would also apply to shares, intellectual property, goodwill, business assets etc. The one exception to this will be the family home.  

Can you borrow money to renovate?
The short answer – is yes. There are two key ways of borrowing for renovations (large, or small).

If you’re looking at purchasing your first home, using your KiwiSaver fund is a fantastic way to get a head start toward your deposit. I thought it may be worthwhile just covering some of the rules for individuals who are struggling to keep up with some of the changes as they happen. 

Buying off the plan can be an exciting proposal, it has many benefits which can be capitalized on if purchasing correctly and with enough due diligence put into practice, however every rose has its thorns, and it is important to be aware of the risks that can be associated to this method of purchasing property.