NZ Herald 29 November 2014

AOn behalf of all the landlords out there, ouch!

There are several counter arguments:

• At different stages in people’s lives they either take care of their own needs or they buy products and services from others. Some own a car or bike while others use taxis or public transport. Some grow lots of their own food while others buy it all. Some entertain themselves with friends and family while others spend hundreds of dollars on nights out. Similarly, some own their own homes while others rent.

  In all these situations, someone makes money out of providing the product or service. Are they all baddies? Nobody forces anyone to buy from them.

  And while some landlords are undoubtedly exploitative, others are reasonable. It’s not uncommon to hear a tenant say they have a good landlord.

• If we banned people from buying houses to rent out, at first glance it seems that would reduce demand for houses and push down prices, so more people could buy their own home. But how would we accommodate people who still couldn’t afford to buy? Should the government house all of them?

  If it did, it would have to buy up many houses, so total demand wouldn’t fall after all. And there would have to be a huge hike in taxes to cover the costs — which in turn would hurt people’s ability to buy their own home.

• Not all tenants are poor. Some just expect to move elsewhere soon. And these days, an increasing number of people who could afford a home have chosen instead to rent. As long as they reach retirement with enough savings to cover their accommodation for life, this is a perfectly reasonable thing to do. They couldn’t do this without landlords.

Having said all this, accommodation is hugely important to people’s happiness and security. And if a landlord turns out to be unreasonable, or if he or she kicks out perfectly good tenants because the landlord wants to move in or sell the property, it’s often not easy for the tenants to move — especially if they have children in local schools.

Every landlord should keep in mind the power they have to affect their tenants’ lives. The disruption to tenants who have to move is far more than any other withdrawal of a service I can think of. I suppose that’s why we have the Tenancy Tribunal, which I understand gives a fair bit of protection to tenants. But still, tenants are sometimes treated shabbily.

You also make a good point about tax. It’s fair that mortgage interest, rates, insurance and so on are tax deductible for landlords. They need to be subtracted from income earned, just as in any other business. But capital gains — whether on property or shares or anything else — should be taxable.

New Zealanders had the chance to introduce a capital gains tax by voting Labour in the last election, but look what happened. I hope that’s not the end of that idea.

In the end, it’s each person’s choice as to whether they admire those who get wealthy through rental property. Clearly they’re not on your list of heroes. And I can’t say anyone makes it onto my list by being a landlord.

AQuite a lot.

“There are a number of legal protections KiwiSaver investors have against managers or trustees (supervisors) taking scheme members’ money for their own personal use or benefit,” says a Financial Markets Authority (FMA) spokesman. “These are set out in the KiwiSaver Act and the trust deed governing the KiwiSaver scheme.”

The first protection concerns the trustee, which will be known as the supervisor from this coming Monday, December 1 — so we’ll use “supervisor” here. The supervisor is a separate firm from the KiwiSaver scheme. It must be licensed by the FMA and “has first responsibility for oversight and monitoring of the manager,” says the spokesman.

“A KiwiSaver scheme is also required to be audited by an independent and licensed auditor. In addition, the FMA has regulatory oversight of all KiwiSaver schemes.”

What’s more, under the Financial Markets Conduct Act, which comes fully into effect on Monday, “the accountability and duty that managers owe scheme members is increased, as well as the supervisory responsibilities of the supervisor. Both the manager and supervisor have overarching duties to act in the best interests of scheme members and to act with a professional standard of care.”

Also from Monday, the manager will be licensed by the FMA.

The spokesman adds, “Custody of the scheme assets must also be held by a party independent of the manager (which can either be the supervisor or an appointed custodian) who will hold the assets in a trust.”

Finally, “If there is any misuse or misappropriation of scheme members’ funds by managers or supervisors, this can be pursued under the law.”

In other words, it’s the job of quite a few different people — coming from different angles — to keep a close watch on your KiwiSaver money and the people handling it. There are no guarantees, but lots would have to go wrong for your savings to end up in South America.

AThanks for writing — to you and another reader. You’re quite right.

We’re talking here about a parent adding to their mortgage in order to lend to their student child, and charging the child interest.

It’s not disputed that the parent should declare the interest they receive from their child as income. The issue is whether the parent can then deduct the interest they pay on the addition to their mortgage.

Last week Inland Revenue said that usually “interest on money borrowed in deriving assessable income is deductible”. But you can’t deduct it “if the money is borrowed for private purposes,” which would include lending to a child.

This week, though, an Inland Revenue spokeswoman apologises and says that was not correct. “Even if the money is lent to a family member or friend, the interest will generally be deductible if it is incurred in deriving income from that loan. The private limitation will usually not apply if the money is lent at interest.”

She adds that “there will be some circumstances with such loans where the interest will not be deductible.” One consideration “may be the level of interest rates on the funds borrowed and lent”.

Then there’s the usual comment: “We strongly recommend that a person should seek professional tax advice if they are unsure whether a deduction for expenditure is allowed in their circumstances, as each individual’s case is different.”