NZ Herald 26 October 2024

AThe idea behind self insurance is that, instead of paying premiums to an insurance company, you put the money into an interest-paying bank account or a low-risk cash fund or similar. Whenever something goes wrong, use that money to fix it.

It can work brilliantly if — and it’s a big “if” — you don’t need the money early on, when you haven’t yet built up large savings. That’s a pretty big risk for most people.

I recommend insuring against big losses, such as your house burning down. But it can make sense to reduce your premiums by choosing high excesses or longer standdown periods and saving the difference to cover the extra payments you have to make when you claim.

However, there’s another important point here. If you have enough money to replace the burnt house — or in your case to cover expenses if you can no longer work, or to leave dependants financially strong if you die — that insurance is not essential.

That certainly seems to apply to you. So I would cancel the policy — while being thankful it gave you peace of mind back when you started out.

AWomen tend to have lower KiwiSaver balances than men. That’s partly because they are more likely to take time out from work to raise children — although lower average pay and a tendency to save in lower-risk funds with usually lower returns also contribute.

So I would really like to see you putting $1,042 a year into KiwiSaver to get the maximum $521 government contribution. It won’t nearly match your husband’s contributions, but it all helps.

However, your idea isn’t a great way to do it. For every dollar your husband puts into KiwiSaver, his employer puts in either 70 cents (if he earns $57,600 to $84,000) or 67 cents (if he earns $84,000 to $216,000), because employer contributions are taxed.

Meanwhile, for every dollar you put in, the government will put in 50 cents. So your family’s total KiwiSaver contributions would be lower.

Can I suggest — without you getting cross! — that perhaps you can actually manage to do both? Set up an automatic transfer from your bank account to KiwiSaver of $30 a week. You probably won’t miss it. And if you do it now, your contributions should total about $1,042 by next June 30.

After that, you can switch to $20 a week and still reach $1,042 by June 30 the following year — although I would love to see you continue at $30.

If you really can’t afford $30, start with $20 a week, or even less. The government will still put in 50 cents for every dollar you put in. But do try to inch the amount upwards each month.

AThat would be really mean if the government withheld its contribution to people who had made hardship withdrawals. And it doesn’t.

As mentioned above, $20 a week is actually enough to get you the government’s $521, but if you can manage $25, that’s all the better.

Good on you for continuing with your contributions. They do add up. And here’s to a good health outcome for you!

AIt didn’t change mine! Steven Joyce — who is a former National Minister of Finance — made two main arguments:

• A CGT shouldn’t apply to a family home. But what about a bach, family farm, small businesses and so on? If those are also exempt, there might not be much left to tax.

  My reply is that the exemption should stop with one family home. We’re not talking about taxing away all the gain on these other assets, just a portion of the gain. People will keep most of it. And at the same time, their income tax will be reduced.

• “The more you tax, the more you stifle economic prosperity… the solution is not more tax”.

  My reply: We’re not talking about increasing total tax, but moving some of the tax burden from people who work for their income to people whose income comes from their asset values growing — ideally only if they grow by more than inflation. Total tax need not be higher.

While I agree that we don’t want to discourage people from starting a business, it’s hard to imagine someone saying, “I would like to go into business, but if I do well, somewhere down the line some of my gain will be taxed, so I’m not going to bother.” Look around the world. The presence of a CGT in every country we compare ourselves with doesn’t seem to stop business development.

I also agree with Joyce that New Zealand needs to improve productivity. But I can’t see how the introduction of a well designed broader CGT would affect that. You can read Joyce’s article here.

While we’re on articles about CGT, I was just rereading one by my colleague Liam Dann. On October 6 he wrote that 77% of NZ business leaders said in the Mood of the Boardroom Survey that we need to have a debate about CGT, and that “a lot of senior financial market and business leaders support the idea.”

But the part of the article that really caught my eye was this: “I’m not especially passionate about [CGT]. There’s no chance of one being implemented by the current Government.

“I’m about as emotionally invested in it as I am in the upcoming Black Caps cricket tests with India. Hoping we win the series is a waste of energy. But let’s see if we can make some small steps in the right direction and build the strength of the team.”

His article concluded, “Small steps … one day we’ll win that test in India.”

Since then, of course, the New Zealand cricket team did beat India. This country can do anything — even introduce a good comprehensive capital gains tax — or land tax or estate tax, or…. Let’s work on it.

AMany of us know people who trade homes in the way you describe. And whether or not they pay tax on their gains, legally they should.

It’s true that, if you’re buying and selling a family home that you have occupied, usually there are no tax consequences.

But Inland Revenue confirms that if you buy a home with the intention of selling it again — even if it’s not the only reason for the purchase — and you have established a regular pattern of buying and selling houses, your gain is taxable.

This applies no matter how long you keep the property. It has nothing to do with the bright line test. For more info go here.

AThat’s sad to read, but still it’s a problem that needs to be addressed. If someone doesn’t write a will, under the Administration Act 1969 their assets are likely to end up with relatives, whether they want that to happen or not.

So I strongly recommend they do draw up a will. If they don’t have the money or inclination to hire a lawyer, perhaps you could help them write a simple will online.

They could leave their assets to a friend or someone who has helped them, or to a charity. If they can’t name a charity, talk about what matters to them — such as the welfare of people in poorer countries, or New Zealanders with particular challenges, or animals, or the environment — and then help them find a suitable charity.

P.S. Good on you for the work you do.

AWhen you put it like that…

But I’m not sure the entitlement is quite so clear for a student who doesn’t need the loan money.

Studylink says: “A Student Loan helps to pay for your course fees, study materials (e.g. books or a computer) and weekly living costs.”

Still, the government doesn’t ask students to prove their need — which would be a time-consuming and expensive exercise. So I suppose it’s true that anyone who can get a loan is entitled to it. And you make an important point about loan repayment.

Remember, though, that this series of Q&As started with a parent writing about their daughter using unneeded student loan money to save for a house deposit. It’s not clear that that’s fair while a young non-student doesn’t receive interest-free government money.

Gosh, this fairness stuff can get complicated!