06
Oct

3 minutes of your life to get your Will sorted out…

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This question has come up quite a bit lately:  “Do I really need a will?”.

Of course you do.  And if you haven’t got one, here is a very simple template provided courtesy of Megan Williams, Steindle Williams Legal. http://www.swlegal.co.nz/ to get you started:

1. Please provide your full names and any previous names (e.g. maiden name)?

2. What are your current occupations?

3. Where were you born?

4. Please advise your address and brief description of your assets.

5. Who do you want to be the executor(s) of your Will? This is the person or persons who ensure the wishes of your Will are carried out. We will need full names and relationship to you. If you have a spouse you usually appoint each other for this role and then another person or perms if you died together. A partner of this firm can act in this role if you wish too.

6. Do you have children, if so, can I have their ages and full names please? Do you wish to appoint a guardian or guardians of any children below 18 years of age if they were ever without legal guardian?

7. Are there any specific gifts you wish to make to anyone? (e.g. jewellery, art, furniture, money?)

8. Do you have any burial or cremation wishes?

9. Your estate usually passes to your partner/spouse then to any children, then to any grandchildren. Please advise if this is not what you intend or if there are any “blended” family issues.

10. At what age should your beneficiaries/children receive – 25 years?

11. Do you have a family trust? Please provide a copy of the Trust Deed and any variations (including any Deed recording a change in Trustees)

Please also advise:

1. Do you have an earlier Will you would like use to collect?

2. Are you/ your partner/spouse and any ex-partner formally divorced and/or a Separation Agreement entered into? It is important to be aware that until you formalise your division of property, even if he is not included in your Will, s/he may be able to make an estate claim upon your death under the Property (Relationships) Act.
If there is any other information you think relevant please advise.

 

Hey, it wasn’t that hard was it!

 

11
Sep

Politics and Property tax here we go again. From Withers Tsang September 2017

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September 2017
Withers Tsang & Co Ltd.
Politics and Property tax here we go again
Dear Clients

Politics and Property, both start with P and have eight letters but why do they get so joined at the hip ?

Many of our clients at Withers Tsang are property investors, and our specialist topic is navigating the tax laws that affect our clients.

This election campaign though has been challenging. On the one hand we have the government effectively offering the status quo with respect to tax on property but we have the opposition offering significant change.

The only problem is, they won’t tell us exactly what those changes might be.

This newsletter seeks to cast some light on the proposed changes that are most likely to be implemented if we have a change in government. The commentary is my own thoughts on what the changes could mean and how they might impact individuals.

So what are the most likely changes under labour ?

  1. Ring Fencing tax Losses. This proposal is in my view the most likely change option that has received the least air time during the campaign. Ring Fencing of tax losses has certainly been labour party tax policy under previous leaders and it was one of the options considered but rejected when the existing government looked at changes to property tax policy that lead to the removal of depreciation on buildings. Ring fencing is also already a feature of losses on mixed use assets like holiday homes, this crept back in under National when they tightened the rules for rented holiday homes. Ring fencing simply prevents legitimate cash losses from a rental property from being offset against other personal income to derive a tax refund. Typically the losses must be tracked into the future and carried forward to be offset only when and if the properties can produce a taxable profit. Ring fencing then artificially inflates the taxable income one must declare by denying an offset for the activity that causes a loss. Ring fencing would therefore put those that are negatively geared on their properties under significant extra pressure but would have virtually no impact on property investors that are profitable. Is it fair that within the property investment community those that are less profitable pay more tax but those that are profitable pay nothing more ?The number of property investors though that would be directly impacted by ring fencing is much smaller now than the days when losses were higher due to depreciation. Lower interest rates have also meant that those with some equity in their investments are typically profitable and paying tax. Consider though the plight of investors hit hard by an adverse event, like discovering that a property is leaky and requiring huge remedial costs or discovering that a tenant has smoked P and a significant remediation is required before the property can be re let. These events almost always lead investors to record losses in years where money is spent to address repairs to properties. Ring fencing these losses rather than allowing them to be utilized immediately to reduce a tax burden strikes me as particularly harsh.
  2. Increasing the bright line test from 2 years to 5. No doubt here, this measure has been announced and is definitely on its way under labour. This measure is capital gains tax by another name, but, its capital gains tax at the income tax rate of 33% ! Previous proposals to introduce a standalone capital gains have not suggested the rate of tax would be set at the income tax level so this one would have a real impact. The bright line test legislation is already in law so it would be the easiest thing in the world to simply set a date where the test moved from 2 years to 5. Now the bright line test applies to all residential land including vacant land with an exclusion for the family home and the exclusion of sales of inherited land. So if this change comes in, effectively any gain on disposal becomes taxable at the full income tax rate if the property is not retained for 5 years. The main impact of pushing the bright line test out to 5 years is that most investors would simply mark their diary 5 years from acquisition and not contemplate a sale until the tax could be avoided. This would of course limit the supply of rental properties coming to the market, the very same houses that are often purchased by first home buyers. A limit on supply, as we have seen, always results in price increases. This also sets up a situation where genuine investors, those who invest for rental return, don’t take decisions to sell low yielding property simply because they are focused on avoiding the bright line tax. If these properties did come to market and investors could increase their profitability as a result, more taxes are then collected by the government on the higher net rental incomes. The bright line test therefore creates an artificial distortion in an otherwise free market that could have unintended consequences. Consider also that the Brightline test only applies to residential property not commercial property. This may well suit a political agenda aimed at helping first home buyers into property but it also creates a significant distortion between the tax impacts felt by residential investors when compared to their commercial cousins.
  3. Capital Gains tax – Looks also to be likely this time round. It’s the old chestnut and again no detail is being offered on how it would work or what it would be applied to except that the family home would be excluded. Whether capital gains on the family bach, farm or business though would be included is anyone’s guess. Something that should be understood about capital against tax though is that it would be unlikely to be retrospectively applied. To introduce a capital gains tax step one is to establish a market value for all properties at the date the tax is introduced. This in itself would be no mean feat but the tax would operate to tax gains relative to the value at this date in time. The tax would not be applied to historic gains on properties that are long held. The opposition has not ruled out applying capital gains tax to inherited property which creates a further contrast with the bright line test. The irony of introducing a capital gains tax now though is that the property market is now flat to declining. It would therefore be a very expensive tax to introduce that would be unlikely to actually yield much revenue from the property sector until such time as the market turns around. In comparison with the ease with which the bright line test could be extended the problems with a capital gains tax makes it look like a real dinosaur by comparison. But the oppositions political view does seem to be that the tax is needed to arrest growth in the housing market so you would seemingly have a tax being introduced, that if it works as intended to reduce property values, actually won’t function to increase government revenue. How ironic.
  4. Land tax – A blast from the past, back to the future, however you like to term it, land tax was a hated wealth tax that we enjoyed back in the early nineties. It was imposed at a rate of 2% annually on the government valuation of land owned other than ones family home. A straight out tax on wealth held in property regardless of the income that the land produced and in addition to income tax on the rental income. The opposition have ruled out a land tax being applied to a personal home but have not ruled this type of wealth tax out altogether. It was a compliance nightmare as it required the annual filing of stand-alone land tax returns. My days as a junior accounting clerk tasked with completing these hated returns sends a particular cold shiver up my spine at the thought they could be back. Let’s hope not.
  5. Whilst not tax policy, the opposition also has big plans to strengthen tenant rights under the residential tenancies act. The planned changes include:
    – Extending notice periods from 42 to 90 days
    – Abolishing no cause terminations
    – Restricting rent increases from 6 monthly to yearly
    – Forcing landlords to include a formulae in tenancy agreements to set rent increases. This is very worrying when you consider that the bundle of policies seems set to drive up rental costs to tenants.
    – Abolishing letting fees
    – Passing the Healthy Homes bill that will impose minimum standards on rental housing and force landlords to make upgrades.
    Landlords though are promised nothing more than extra resourcing of the tenancies tribunal so that they can have their grievances dealt with more efficiently which would seem like something of a two edged sword when the RTA is already so tenant right dominant. Nothing substantial at all there to assist landlords to deal with the scourge of the P problem or coping with leaky building problems.

And there you have it, some thoughts  on the measures that we may be facing in the property sector if we have a change in government.

All will be revealed after September 23

Withers Tsang & Co Ltd.
This email has been authorised by:
Withers Tsang & Co Ltd
24-26 Pollen Street
PO Box 47-145
Ponsonby
Aucklandphone: 64 9 376 8860
fax: 64 9 376 8861
email: reception@wt.co.nz
web: www.wt.co.nz
This publication has been carefully prepared, but it has been written in general terms and should be read as broad guidance only. This publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact us to discuss these matters in the context of your particular circumstances. Withers Tsang & Co Ltd, its directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
Copyright ©2017 Withers Tsang & Co Ltd. All Rights Reserved.
24-26 Pollen Street | Ponsonby | Auckland 1021 
07
Aug

Be in to win a $3000 Travel gift card with Sovereign

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Every eligible new Sovereign Risk or Health policy submitted between Monday 14 August and Friday 6 October 2017, and the resulting policy issued by 3 November 2017, will go in the draw to win a $3k Flight Centre gift card.

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*Terms and conditions apply.  Enquire at support@stml.co.nz

09
Jun

Finding gold when it’s dark and cold.

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The midwinter blues are real. The calendar confirms it.

We’re now well into June, and Kiwis have returned to work after the last long weekend until October. Unless you’re lucky enough to be planning some fun in the snow or a break somewhere tropical, for most of us, the next four months of winter are often a grind.

It can be hard keeping your spirits up – and focusing on achieving your long-term goals – when the days are wet, dark and cold. So how do you hang onto your passion for life and stay in the best mental shape? Here’s a tip from my mentor Dr Fred Grosse.

Dr Fred tells us to focus on our ‘10s.’ That’s shorthand for the little things we can do to make every day a ‘10 out of 10 day.’

It’s about making time for the simple, life-giving activities that provide pleasure every day. If you love animals, make sure you play with your cat or take the dog for a walk. If you need the endorphin boost of exercise, make the gym a regular habit. Love music? Pick up that guitar, lift the lid on the piano or make sure you get your daily dose via Spotify.

Don’t let anything get in the way. Find time for life’s simple pleasures – whether it’s the humorous tweets from a comedian who makes you smile or a great coffee from your favourite barista.

Your daily 10s shouldn’t cost a lot – in fact they can be free. Most of all, they should be things that are special to you. I personally love cleaning my mountain bike after a muddy weekend ride. (That reminds me – time I got back on it!)

So what are your 10s? Why not write out a list of 10 things you can do on a daily basis?

By making each day a ’10 out of 10 day’ you’ll be building up a store of positive energy to help you find gold in the dark winter months and stay on track to achieving your life goals.

Once your 10s are part of your daily routine it’s time to go to the next level, with fortnightly, six-monthly and annual treats and targets. These can really unlock the magic. I’ll share these insights with you next time.

Would you like to find out more or work with Sue as a mentor to help achieve your goals?  Get in touch.

09
Apr

3 ways to help your kids into property (and 1 mistake to avoid)

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It’s natural to want your children to do well in life, and that could mean helping them onto the first rung of the property ladder. I see this with many of my clients. So what are the best ways you can give them a leg up?

1. Start a secret savings account in their name.

It doesn’t have to be totally secret but it should be an account they have no access to. The earlier you start, the better.

When my nephews and nieces were babies I opened accounts in their names and – here’s the kicker – set up Automatic Payments of $1 per week into each account. On birthdays and Christmases I added another $100. It doesn’t seem much but over the decades compound interest works its magic. The goal is to have a lump sum ready by the time they’re thinking about buying a home.

It takes a bit of discipline but if you use APs, as I suggest, you’ll never have to give it a moment’s thought. If you worry it might be used as a slush fund, simply set up the account in joint names with someone you trust, such as a grandparent. You will keep each other honest.

On a side note, I am saddened when I see young children given large sums of cash for birthdays or Christmas with no guidance on managing it. They don’t understand money so it will likely be frittered on a whim. Why not give them a bank account and teach them effective saving habits?

2. Be smart with student loans.

Student loans are totally interest-free. This tempts some young people to load up with debt on the never-never. Well-meaning parents may offer to pay off the loan on graduation. My advice is simple – don’t.

Instead, encourage them to make regular payments off their interest-free loan. While they’re doing it, you should set aside the same amount of money in an interest-earning account. After graduation you can gift them this sum as a first home deposit.

The student is still incentivised to pass exams but not to go overboard with student debt. Meanwhile you’re earning interest on their behalf, which should result in a larger sum when it’s needed for a first home.

3. Let them inherit early.

If you’ve done well in life you might want to provide your children with an ‘early inheritance.’ Instead of waiting until you pass away and leave an estate, they can access some capital now to buy a first home.

This can be a great way to help the next generation, and it’s something I see many of my Asian clients doing. They often have an inter-generational view of wealth, and the idea of ‘paying it forward’ can make all the difference.

The caveat is obvious – don’t strain your own finances. ‘Inheriting early’ should be for families that already have a significant capital base. If you’re still paying off your own home, don’t dip into the equity or load yourself up with a bigger mortgage just yet.

4. Don’t be lax – see a lawyer.

Finally, a mistake to avoid at all costs. If you decide to release capital or guarantee a loan for your son or daughter, make sure you sign a binding legal agreement. Pay a lawyer to draft something that protects your child if things go pear-shaped.

Sadly, relationships break up and bankruptcies happen. You need peace of mind that the money you provided won’t disappear into the back pocket of the soon-to-be ex.

We all want the next generation to do well. We just have to be smart about how we help them.
Want to help your kids get on the property ladder, or get onto it yourself? Get in touch.

09
Mar

Ignore the media. They’re in the entertainment business

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Oh dear. The Generation Wars have started up again. A few weeks ago we read about Gary Lin and his opinion that young would-be property purchasers should stop moaning, join the army and knuckle down.

Then a chorus of opposing voices jumped in, explaining why Gary was wrong. This futile argy-bargy only proves that first-time buyers have become a political punching bag.

It’s time to put away the boxing gloves. The newspapers, TV stations and social media sites are only interested in controversy. If you’re a 20-something looking to get on the property ladder – or if you’re the parent of one – it’s not helpful. Here’s what you should do instead.

First of all, ignore the media. They use property stories as sensationalist click-bait. They are not particularly interested in giving you insights on the best route to home ownership in today’s climate.

Secondly, focus on your own goals. If your vision includes property ownership, there are some smart steps you can take.

I advise first-time buyers to break down their goal into achievable chunks. Let’s say you want to live on the North Shore. Don’t set your sights on Takapuna as your first goal. Look at the other Shore suburbs that might be within your reach. What about Glenfield or Birkdale?

Then look at the kind of property that’s right for you. Are you someone who loves wielding a drill and paintbrush? Look for a do-up. If you’re not that handy, don’t despair. Your route to home ownership may involve a unit or flat.

Could you go halves with a sibling, another relative or a BFF? Consider it. You already know each other well, which reduces the risk of a wealth-endangering personality clash.

Next, you’ll probably need a 20% deposit. The key to this is the same as it’s always been: focus. You have a KiwiSaver account (of course), so that will help. But don’t stop there – set up a separate savings account. Calculate how much you will need for a deposit, and then pay a fixed sum into savings each month. Set up an Automatic Payment from your bank.

My advice is to direct these savings into a different bank from your usual one, to give yourself more options. When funding is tight banks prefer to look after existing customers, so be one of those.

Saving that 20% deposit may take seven to ten years. That is exactly how long it took when I started saving for my first property. I hate to use the phrase “back in my day”, but back in my day, that’s how it worked. The good news is that it still works.

Last but not least – let’s all encourage first time buyers!

Every generation has faced challenges, so let’s lay off the millennials. If you’re the parent of a 20-something, perhaps you could add $10 on top of every $50 they save. I have some more suggestions for parents who want to help their offspring into property ownership, which I will share with you next month.

Want to help your kids get on the property ladder, or get onto it yourself? Get in touch.

09
Feb

Silicon Valley, here I come.

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When this email hits your inbox I will be getting ready to network with some of San Francisco’s brainiest inventors and investors. I have been invited to take part in Google’s Cloud Next conference.

It’s exciting, and more than a little bit surreal. And it all started when I had a Eureka moment a few months ago.

I shared my bright idea with a friend who happens to be a strategist. He then talked to someone who knows the ins and outs of technology. Connections were activated, and all of a sudden we’re heading to California to meet some big names in the digital world.

Who knows – we could be sitting on the next Xero or Uber. Or perhaps nothing will come of it. But right now we have the opportunity to get Silicon Valley on board with our venture, and that’s exciting.

As well as being an incredible adventure, this episode has reminded me of the importance of acting on ideas.

How many time have you had an intriguing idea, and then the voice in your head pipes up and says, “Don’t be silly!” That’s one way to guarantee it will come to nothing.

Or perhaps you’ve hugged your ideas to yourself, afraid to share them with others? That can be a big mistake. As someone once told me, it’s better to have 50% of something than 100% of nothing.

Interestingly enough, I find young people understand this. They think in terms of collaboration and start-ups. They’re energised by the possibility of changing the world, and they embrace its possibilities with an open mind and open heart.

I hope you feel inspired to act on your own ideas and share them with the talented people around you. Who knows what great things you might achieve?

10
Jan

You’ve achieved your goal. Now what?

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How was your Christmas? Mine was a bit dull.

I could blame the December weather, which certainly wasn’t anything to get excited about. But the truth is I found myself feeling a bit deflated after the thrill of trekking to Base Camp at Mt Everest in October.

I’d achieved my 2017 travel goal, and the aftermath was an anticlimax.

Reflecting on this, I remembered something our expedition leader Mike Allsop had mentioned. He said the slopes of Everest are littered with the bodies of those who reached the peak – but then either died at the summit or on the way back down. All their efforts had been focused on reaching the summit. They forgot to plan for what came next.

This applies to much of life, not just lofty things like mountain climbing. I know someone who has had the goal of completing a leaky building remediation project. This horribly expensive process took 10 years but he eventually reached a successful outcome. Now he’s relieved to have completed the project, but not quite sure what to do next.

The ‘what comes next syndrome’ can apply to anything that consumes our attention and efforts. It might be raising children, completing a university degree, creating and selling a business, or even paying off your mortgage. It’s one reason the All Blacks are now encouraged to build skills and gain qualifications for life after rugby. Your current passion may be incredibly exciting and worthwhile, but the nature of goals is that they’re eventually achieved. You need a plan for the next stage.

Have you made the same mistake as me? Putting so much effort into an exciting short-term objective that you neglected to build a vision beyond it? There can be only one solution: go back to fundamentals, and ask yourself what is really important to you now. Then set some new goals.

Thank goodness I’m off to Sydney soon for one of my regular catch-ups with my mentor, Dr Fred Grosse. We’ll be focusing on what to do after you achieve your goals. I’ll let you know what comes next.

10
Dec

The most exhilarating thing I discovered at Mt. Everest? Kindness.

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Last time I wrote to you I was shivering at Base Camp, 5,364 metres above sea level. I was expecting some discomfort at this altitude. What I wasn’t expecting was the extreme, bone-penetrating cold.

Temperatures sank to minus 14 degrees at night, and we were sleeping in unheated lodges and tents. I learned to stow the next day’s clothes in my sleeping bag at night where they would be warmed by body heat, so getting dressed in the morning was slightly less of an ordeal.

Everything is harder and takes longer in these conditions. You become much more vulnerable and dependent on others. That’s why I was warmed and cheered beyond belief by the happy, caring attitude of the Nepalese Sherpas who were such an integral part of our expedition.

Their practical help, always delivered with a smile, reminded me that positivity is the best way of coping with harsh conditions. Every night they would hand out drinking bottles filled with hot water so we didn’t have to drink icy cold water in the freezing night. And this attitude was not just limited to the employees – it’s woven throughout the Sherpa culture.

I learned that even under extreme conditions there’s always something you can do to make things a little better. One highlight was handing out woollen New Zealand beanies, complete with silver fern, to 36 kids at Pangbouche School. It felt good to give something back to this community, which lives permanently in the extreme Himalayan conditions. I brought 50 beanies in my baggage – thank goodness for compression packs – and was pleased to see them worn with such pride and appreciation.

Back home in Auckland, I find that just about any problem is a ‘first world problem’ by comparison. We are so lucky, and have so much. It’s something I’ll remember long after my memories of Himalayan ice have faded.

Something else that takes the chill away is the advent of summer. I don’t know about you, but I’m looking forward to a relaxing Christmas in Auckland, with some mountain biking treks around Woodhill Forest. Bevan and his family will be enjoying a well-earned break at Whangamata so say ‘Gidday’ if you see them at the beach.

This time of year is also a great time to set new goals for 2017.

What is it that you want to achieve next year? I encourage you to come up with a stretch goal, whether it’s getting back into education, training for a sports event or learning to play the harp. Do that thing you’ve always wanted to do – and do it for yourself. You’ll find that everyone around you benefits when you are happy and fulfilled in a project.

Do share your goals too – I’d love to hear what you’re up to.

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10
Nov

Greetings from Base Camp, Mt Everest

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When this email lands in your inbox, I will be 5,360 metres above sea level, breathing the thin air at Base Camp in Nepal.

‘Peak experiences’ aren’t always metaphorical.  In my case I’ve had a passion for far away places since my childhood growing up in Christchurch with no extended family.  A friend’s grandmother took an interest in me and gave me an atlas – perhaps she had noticed my curiosity about geography.  I don’t recall why but I’ve never looked back.

At 15 I booked my first solo holiday, flying to Australia on a three week holiday that I had saved up and paid for.  Since then my travels have just grown more and more adventurous.  I’ve been mountain biking in Mongolia, skiing in Norway and now, trekking in the Himalayas.

I set this trip as my goal when I heard Mike Allsop (Google him) give a TED talk in Auckland two years ago.  He has climbed Everest and regularly returns there.  He mentioned that he had taken his children to Base Camp – one of his kids was just seven years old at the time.  “Well,” I thought, ” if a seven year old can do it, so can I!”

In July this year I saw Mike speak again, this time at a conference.  At the end of the presentation he mentioned he had one space left on his next Himalayan trip.  As he left the stage I was mentally packing my bags and the vacancy was filled that night.  I won’t be tackling the peak, but just making it to Base Camp feels amazing in itself.

To my mind, this proves that opportunities present themselves all the time.  As we’ve explored in previous editions of this newsletter, there’s a simple process to making the most of them:

  • Ask yourself what kind of life you want?  Focusing on this will help you work out what your goals should be.
  • Write down your goals and check them regularly.
  • Be open to opportunity (as I was when Mike spoke about his forthcoming Himalayan trip).
  • Just do it!

If you believe that ‘yes is more fun than no’, ask yourself what opportunity are you going to grab with both hands?
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