Hard News by Russell Brown

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Hard News: Budget 2011: While you wait

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  • Terry Baucher, in reply to Geoff Lealand,

    Speaking as a tax practitioner family trusts aren’t really the issue in this instance. The low tax bill stems from high interest payments because many farmers are very highly leveraged and also some farming specific tax rules (not my area of expertise but see below for moer). I’ve heard a whisper that changes to those valuation methods are on the way.

    Cactus Kate has a very good post on this topic http://asianinvasion2006.blogspot.com/2011/05/rooter-turns-straight-shooter.html

    Stargazer at the Hand Mirror also has some good comments on the topic. http://thehandmirror.blogspot.com/2011/05/standing-up-to-banks.html

    In the comments section she has this to say about farmers tax planning

    <i> the biggest way farmers get out of paying tax is by switching between livestock valuation schemes. it takes a bit of accurate forecasting and any half-decent accountant will have good contacts with farm advisors and be keeping up-to-date with market values for stock. but i know that heaps of farmers around the country paid a bit of extra tax in 2008/09 to switch schemes, and have had massive losses in the 2009/10 year. this means they’ve paid no tax as well as claiming the maximum in working for families payments.

    yes, i think it’s appalling, but also totally legal and totally unfair on all other taxpayers. i expect that many will benefit in the current financial year as well. </q>

    Devonport • Since Nov 2008 • 88 posts Report Reply

  • Andrew E,

    Just back from the demonstration outside Parliament. Decent turnout to protest against the expected cuts to public services in the Budget. But I have to say that Phil Goff's speech was absolutely woeful. If that's the best he can do in front of a favourably disposed audience then heaven help us come November. I don't recall him stating a single specific policy that Labour would introduce to help fix the problems caused by the current government. Metiria Turei spoke about 5 minutes later and proceeded to give two specific policy changes that would boost the incomes of the low-paid and reduce the gaping holes in government coffers: an increase in the minimum wage and cutting ETS subsidies to polluters. Big cheers from the crowd.

    The point at which Labour stops keeping its powder dry (assuming that's their excuse at the moment) better be immediately after Bill English sits down this afternoon. Otherwise, I dread to think what the state of this country will be at the end of the next 3 years.

    174.77 x 41.28 • Since Sep 2008 • 199 posts Report Reply

  • BenWilson, in reply to Andrew E,

    The point at which Labour stops keeping its powder dry (assuming that's their excuse at the moment) better be immediately after Bill English sits down this afternoon.

    Well it would make good sense. National looks likely to finally be playing their long awaited card, so yes, this could be the turning of Labour's tide, finally something to sink their teeth into.

    Auckland • Since Nov 2006 • 8737 posts Report Reply

  • linger, in reply to BenWilson,

    - or their gums, anyway.
    Even that would make a change from simply tonguing Nat policy.

    Tokyo • Since Apr 2007 • 931 posts Report Reply

  • Hilary Stace, in reply to Andrew E,

    I disagree Andrew - I was surprised by the fire of Phil Goff's speech, especially his commitment to a Labour/Green government. It was that values stuff about fairness and justice and I thought he got a very warm response. Then he came and chatted to people in the crowd which seemed to be appreciated by those near me. Metiria's speech great too. Good diversity of people there. I'm always impressed by those staunch and colourful members of the Service and Food Workers Union, and some of those women probably gave up their precious daytime sleep to come out and protest on behalf of their colleagues who have some of the poorest wages and conditions.

    Wgtn • Since Jun 2008 • 2171 posts Report Reply

  • David Clark,

    I'm interested to see what will be pushed beyond the election. Fixed nominal baselines anyone?

    Dunedin • Since May 2011 • 1 posts Report Reply

  • Rich Lock,

    Cactus Kate has a very good post on this topic

    Gotta say, if Cactus Kate is posting this sort of comment:

    Farmers do not pay their fair share of tax. It doesn't matter how you spin it.

    Then I think we can confidently say that the truthiness of the matter has been decided beyond all doubt.

    back in the mother countr… • Since Feb 2007 • 2401 posts Report Reply

  • Che Tibby, in reply to linger,

    LOL

    the back of an envelope • Since Nov 2006 • 2026 posts Report Reply

  • Terry Baucher,

    What was interesting about Cactus Kate's comments is that they were very studiously ignored in the Kiwiblog thread. Truthiness has its limits eh?

    Devonport • Since Nov 2008 • 88 posts Report Reply

  • BlairMacca, in reply to Rich Lock,

    Not to mention how many sons and daughters of farmers can claim full student allowances. It really used to grind my gears when friends of mine whose parents had multi million dollar farms would be getting full student allowances, while I would have to borrow, because my parents owned a business AND played by the rules.

    Wellington • Since Apr 2007 • 201 posts Report Reply

  • Jimmy Southgate, in reply to BlairMacca,

    It really used to grind my gears when friends of mine whose parents had multi million dollar farms would be getting full student allowances,

    Except that student allowance eligibility was calculated on parental income, not value of assets held by your parents (or more likely the bank).

    Wellingtown • Since Nov 2006 • 100 posts Report Reply

  • BlairMacca, in reply to Jimmy Southgate,

    Except that student allowance eligibility was calculated on parental income, not value of assets held by your parents (or more likely the bank).

    Well thats my point exactly, because those farmers would divert their income to make a loss on paper, while still raking it in.

    Wellington • Since Apr 2007 • 201 posts Report Reply

  • Robert Urquhart,

    Except that student allowance eligibility was calculated on parental income, not value of assets held by your parents (or more likely the bank).

    And was of course gross income, which as we've seen is very high for farmers, which meant that, since my folks played it straight and didn't have the station's assets hidden away, that I could never get an allowance.

    But really it's a bit like Kiwisaver - if you're self/not employed it makes sense to put just enough in to get the maximum top up, and it made sense to use the trusts loophole to cut the amount of tax you were paying. I can see why so many people did it.

    See also 0 interest student loans, which came in just as I had to return to study. Borrow off the mortgage at whatever % it was then - or interest free. It didn't take very long to come to a decision.

    That said if I'd put it on the mortgage I might have paid it off by now. Might not have a few other things.

    Christchurch • Since Mar 2009 • 142 posts Report Reply

  • Rex Widerstrom,

    Meanwhile in the far west of the West Island, another budget is being delivered...

    WA has a Treasurer with all the human warmth of Don Brash, the political instincts of Chris Carter and the same attitude toward wealth distribution as Pansy Wong. Yet not only are they tipped to hand over $600 million to social welfare organisations, they're also going to end the concession on iron ore fines (small bits, as opposed to monetary penalties. Though they were monetary penalties... oh, never mind. They're making mining companies pay more).

    Yes I know Western Australia has a lot of wealth buried under ground which (usually) is of no environmental or cultural significance. But it's ruled by a government which is generally appalling in every respect but which faces an Opposition so hopeless everyone agrees they won't see power for at least another 8 years. In other words, they don't have to scrape some off the top and hand it out at the bottom but they have found it in their cold, dead hearts to do so.

    Given the same set of circumstances I don't believe Key, English, Bennett, Tolley et al would do the same, as they seem to see those most in need not just as less worthy but somehow un worthy.

    Perth, Western Australia • Since Nov 2006 • 157 posts Report Reply

  • Matthew Poole, in reply to Geoff Lealand,

    Interesting too, to see the information that came out this week about the low rates of taxation asked of NZ dairy farmers. They probably have family trusts for each cow.

    But I doubt that National would have the courage to tackle this

    I'm quite happy to buy the retort from Federated Farmers that farmers do actually have low net incomes once debt servicing is taken into account. They're running a business (a proper business, not just being residential landlords), and I have no problem with them deducting mortgage interest against income as an expense.

    However, they then get to sell the farm and pocket all of the increased value. That is the problem I have with taxation of landowners. And National are sure as hell not going to close that particular loophole. If we ever get a CGT, it won't be under B'linglish's watch. He's got too much to lose if they ever sell Dipton Manor.

    The pit from whence crawl… • Since Mar 2007 • 3934 posts Report Reply

  • Graeme Edgeler,

    Oh, but primary school teachers can top out (after 7 years) at $71,000. And the net ffect of Labour's top tax-rate on them was about $60 a year. Quelle horreur!

    My calculation would have that at $660pa (i.e. 6% of $11,000).

    Wellington, New Zealand • Since Nov 2006 • 3012 posts Report Reply

  • Terry Baucher,

    I’m quite happy to buy the retort from Federated Farmers that farmers do actually have low net incomes once debt servicing is taken into account. They’re running a business (a proper business, not just being residential landlords), and I have no problem with them deducting mortgage interest against income as an expense.

    As I write B'linglish has been trumpeting the need to reduce debt - funny that he hasn't tackled the point you make. I favour expanding the current thin capitalisation rules across ALL taxpayers not just those which are foreign controlled. Combined with imposing limits on the amounts which banks can lend to say 85% of valuation that might do more to reduce debt than the fiddling in the margins he proposes.

    Devonport • Since Nov 2008 • 88 posts Report Reply

  • Idiot Savant, in reply to Graeme Edgeler,

    My calculation would have that at $660pa (i.e. 6% of $11,000).

    I'm working on the new threshold, just as I'm working on the new salary.

    Palmerston North • Since Nov 2006 • 1668 posts Report Reply

  • giovanni tiso,

    I agree with Hilary, Goff didn't speak too badly (now that's not something you hear me say very often). And it wasn't the day for offering concrete policy alternatives - sometimes you just have to make the point that the government's recipe is bankrupt and leave it there.

    However the best speaker by far was Alan Johnson of the Child Poverty Action Group. Can we get him to write Goff's speeches from now on? It was rhetorically excellent.

    Wellington • Since Jun 2007 • 7412 posts Report Reply

  • Sue,

    if anyone applying for anything from winz has to declare interests in 'family trusts' and has their benefit docked according, i'm all for opening a big can of whop arse on them for everyone. Same rules all round is only fair?

    Wellington • Since Nov 2006 • 498 posts Report Reply

  • Mark Hansen,

    I made a new visualisation of the 2011 Budget, breaking it all down by departments.

    http://wheresmytaxes.co.nz/

    Should be a lot easier to understand than the spreadsheets they give out.

    Hamilton • Since May 2011 • 3 posts Report Reply

  • Sacha, in reply to Mark Hansen,

    Ta. And Keith's visualisation is over here.

    Ak • Since May 2008 • 16996 posts Report Reply

  • George Darroch,

    Fascinating. Can anyone explain how NZ spent $23 billion on transport in 2009?

    The People's Republic of … • Since Nov 2006 • 2137 posts Report Reply

  • Che Tibby, in reply to George Darroch,

    Can anyone explain how NZ spent $23 billion on transport in 2009?

    AFAIK it was committed funding to the roads of national sigificance.

    including the one to john and stephen's holiday homes at matakana beach.

    the back of an envelope • Since Nov 2006 • 2026 posts Report Reply

  • Yamis, in reply to Matthew Poole,

    I'm quite happy to buy the retort from Federated Farmers that farmers do actually have low net incomes once debt servicing is taken into account. They're running a business (a proper business, not just being residential landlords), and I have no problem with them deducting mortgage interest against income as an expense.

    I'm going to deduct my mortgage interest against my income as an expense too. I'm also going to deduct my petrol bill as I drive to and from work as expenses, along with the clothes I have to purchase for work, and food I need to eat in order to be able to carry out the functions of my job.

    Unless of course I'm not allowed to live by the same rules of others.

    Since Nov 2006 • 881 posts Report Reply

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