This article was published on 21 July 2012. Some information may be out of date.


  • Repeated property do-ups unlikely to bring tax-free gains
  • Are shares really better in the long term than property or bank deposits?
  • Reader is confused over KiwiSaver first home subsidy price limits
  • Sleepless nights over a charity donation

QLast Saturday’s Herald featured a story about an Auckland couple who purchased a two-bedroom townhouse and “embarked on a do-up”. They bought in January and sold five months later “making around $100,000 tax-free”. They are now looking for another do-up to live in, and presumably sell again in a few months for a large profit.

Surely their gain cannot possibly be considered tax-free. They are obviously in business buying houses to renovate and sell. Just because they live there during the work does not mean they can avoid tax. Am I right?

AYou’re right that living in the place doesn’t let them off the hook. And I’ve certainly heard of people who made money through a series of do-ups having to pay tax on those gains. But I can’t say whether that particular couple would be taxed.

And nor will Inland Revenue. “We cannot comment on specific taxpayers due to customer confidentiality,” says a spokesman.

He adds that “as a general rule, buying and selling a family/private home usually has no tax consequences. However, if a property is purchased with the intention of resale, or there is a regular pattern of buying and selling homes, then this may be considered property speculation or dealing for tax purposes.”

For info from Inland Revenue on residential property and tax, see And for more detail, go to This is an easy-to-read guide about tax on property sales, with lots of examples.

QRecently I heard your comments about KiwiSaver maturing for some investors and that they should be cautious about their next step. Being in the share market is a good position to take.


I have a KiwiSaver account, which must be five years old now. I also have an earlier retirement fund started in 1996. In both cases the contributions made are more than the funds are worth. To make things worse the retirement fund is a locked one, which I haven’t been able to find a way out of to get what money there is back.

If I had kept those funds in the bank I would have paid my mortgage off several years ago. If I had “speculated” on property like everyone else did I would be a wealthy man.

Can you imagine how soul destroying it is to have listened to the so-called economically educated who said you must start saving as early as possible for retirement and watch out for property bubbles.

Yet yourself and others repeat the same myths.

AFirstly, let’s clarify my views. Yes, it’s a good idea for most newly retired people to have some money in shares — but only money they plan to spend 10 to 12 or more years away.

Money to be spent in the next couple of years is best invested in cash, which includes short-term bank deposits. And money to be spent in about two to 12 years is probably best invested in high-quality bonds. You don’t want the value of your investments to be in a downturn when you cash them in.

But it’s usually good to put long-term money in shares and/or property, because they tend to have higher long-term returns, and also offer protection against unexpected inflation.

The idea is that over the years you move your share and property money into bonds, and your bond money into cash.

Clearly, though, you’ve had a bad run with shares. That’s partly bad luck with timing. The last decade has not been a good one for international or New Zealand shares. But even so, your accounts should have grown. I can only conclude that you’ve chosen funds with unusually high fees, which can make a huge difference over longer periods.

What to do now? On the retirement fund, it might be worth making an appointment at the company’s offices to discuss how you could withdraw your money. But maybe you’ll have to live with it.

However, you’re not stuck in KiwiSaver. Check out fees on the KiwiSaver fees calculator on or and consider switching to a fund that charges less.

While you’re at it, you could move to a KiwiSaver fund that doesn’t invest in shares. But if you have a decade or two before retirement, that might not be clever. The very fact that shares haven’t done well in recent times makes it more likely they will do well over the next few decades.

As for wishing you had been in property, don’t overlook all those mortgagee sales in the last few years. And there’s more to come. Terralink recently predicted this might be New Zealand’s worst ever year for foreclosures, and most now involve property investors.

It’s the winners — like the couple in our first Q&A — who make noise. But there are others who have lost all their assets and still owe the bank. Share investing doesn’t do that to you — unless you borrow to buy shares, and I hope nobody’s suggesting that to you.

Sure, parts of the Auckland property market seem to be booming again. But it makes me uneasy. I’m sticking with shares for my long-term savings. Since the 1980s, they’ve served me well.

QI hope you can help!

With the KiwiSaver first home buyer withdrawal, my understanding has always been that if I buy a house in Auckland I can withdraw my KiwiSaver contributions and my employer contributions to put towards buying my first home, providing that home costs no more than $400,000 (the cap in Auckland).

As I’ve been contributing 4 per cent to KiwiSaver since its inception, I am eligible, and my provider advised all I am to do is supply them with the Sale and Purchase agreement.

I’ve always considered it marginally unfair that the eligibility to withdraw in Auckland is based on buying a house less than $400,000.

That seems unfair given REINZ reported Auckland’s median house price as $495,500 in May 2012 — after increasing steadily over the past 12 months, and the same cap applies to Wellington, where a median house price was $380,000 in May 2012. I’m happy to have these figures refuted but stand by the fact that Auckland homes are significantly more costly than the rest of New Zealand, including Wellington.

Whilst moaning to a colleague about this, it was revealed to me that her KiwiSaver provider allowed her and her partner to withdraw their KiwiSaver contributions for their house, which cost close to $500,000 in West Auckland.

Is this correct and possible, and if so, how?

Do you think there will be any review of these regional caps in the future?

AYou’re confusing the two types of KiwiSaver first home help. Firstly, anyone on any income can withdraw their and their employers’ KiwiSaver contributions, plus all returns earned in their account, to buy a first home of any price.

That’s how your colleague made her withdrawal, and you can do the same.

However, if you want to get the first home subsidy of $3000 to $5000, there are contributions requirements and limits on your income and house price. For details, see

The maximum house prices are set at about one quarter of the way up the house price scale — called the lower quartile price.

As you say, in Auckland and Wellington Cities — and also Selwyn District (near Christchurch) and Queenstown Lake District — the maximum is $400,000. Elsewhere, it’s $300,000.

While your numbers suggest Auckland is much more expensive than Wellington, house sale numbers for the last three months from Jonno Ingerson, research director at, tell a different story, as follows:

  • Auckland (supercity): median price $502,000; first quartile price $382,000.
  • Wellington City: $481,500 and $410,000.
  • Selwyn District: $400,000 and $342,000.
  • Queenstown Lakes District: $512,000 and $404,000.

Ingerson adds that for the old, smaller Auckland City, the median is $652,000 and the lower quartile price is $490,000. But that’s not the area used for the KiwiSaver subsidy.

You could complain about that. But if you look at only certain parts of Wellington, the prices would also be higher. What it comes down to is: How much should the government segment the housing market? And how confusing might it end up being for first home buyers?

What they do seems reasonable to me. After all, first home buyers are given thousands of taxpayers’ dollars. I don’t mind helping you into a home, but not something flash. If you have to start out in a less desirable suburb, accept that — or skip the subsidy.

In answer to your question about reviews, “The regional house price caps are assessed annually to ensure they reflect market conditions ” says a spokesperson for the Building and Housing Group, Ministry of Business, Innovation and Employment.

“The last review was undertaken in 2011, and will be repeated later in 2012.”

But looking at the numbers, a change for Auckland doesn’t look likely.

QYour recent comments on the letter about refunds on charity donations brought back an uncomfortable memory. Last year we received a request from a charity that we donate our refund to them, bank account number supplied.

Being a bird of very little brain, I went along with the idea, thinking the refund request was in connection with this particular charity. Wake-up call! The IRD give one, and one only, refund per donor — an all-or-nothing at-all attitude. If I had stopped to think it through it would have been obvious.

We donate to 45 charities and rely on our refund to kick-start the next year’s donations.

The charity involved was very understanding, and very gracious about repaying most of the money, but I lost several night’s sleep while the negotiations were going on. You may be a meanie, but I’m dumb with it!

AYou are far too tough on yourself. Any charity that suggests you donate your rebate to them should make it crystal clear that they will get the lot.

Generous people like you — 45 charities is an impressive number! — shouldn’t be put through sleepless nights. I’m glad the charity coughed up, and I hope they learnt a lesson.

A suggestion for charities: Many people would probably appreciate your sending them an IRD tax rebate form with your year-end receipt. Apparently less than half the people who can claim rebates for donations do so. So a reminder might be welcome.

But how about not filling out your charity as the recipient? You could always say, “if you would like to give the money to us, here’s how.” But point out it’s all or nothing. And don’t manipulate!

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.