Comments on: More on the Domestic Purposes Benefit http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/ hopping along the corridors of power Fri, 09 Jan 2009 02:41:57 +0000 http://wordpress.org/?v=2.3.3 By: andrew http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38778 andrew Tue, 04 Mar 2008 02:22:18 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38778 o.k. it's as i expected - there's no way to reduce your taxable/levyable income without reducing your actual income, & this laqc thing is a red herring. the deadbeat dad will still need to somehow pay for his own food & board while waiting for that capital gain to mature! in the original discussion i had with bjchip (here http://blog.greens.org.nz/index.php/2008/01/24/how-to-deal-with-a-recession/ and here http://blog.greens.org.nz/index.php/2008/02/07/tv3-poll-3/) about this i predicted that in the end we'd be left with the conclusion that the lack of a capital gains tax would be the only part of the tax code we could point to as unfairly advantageous to the property investor, & i think we're all pretty much ready to concede this point? certainly in bjchip's post on this thread he seems to be focussing on the capital gain issue & de-emphasizing the other thing. o.k. it’s as i expected - there’s no way to reduce your taxable/levyable income without reducing your actual income, & this laqc thing is a red herring.
the deadbeat dad will still need to somehow pay for his own food & board while waiting for that capital gain to mature!
in the original discussion i had with bjchip (here http://blog.greens.org.nz/index.php/2008/01/24/how-to-deal-with-a-rece ssion/ and here http://blog.greens.org.nz/index.php/2008/02/07/tv3-poll-3/) about this i predicted that in the end we’d be left with the conclusion that the lack of a capital gains tax would be the only part of the tax code we could point to as unfairly advantageous to the property investor, & i think we’re all pretty much ready to concede this point? certainly in bjchip’s post on this thread he seems to be focussing on the capital gain issue & de-emphasizing the other thing.

]]> By: toad http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38773 toad Tue, 04 Mar 2008 01:58:31 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38773 Yep, in a year you earn $70K from your job, but pay $70K in excess of what you collect from rent in interest and expenses on your property investments. So these effectively cancel each other out. As long as you can make a $70K capital gain on those property investments, you've got the same amount net as you earned gross from your job, and pay minimum child support and no tax. Yep, in a year you earn $70K from your job, but pay $70K in excess of what you collect from rent in interest and expenses on your property investments. So these effectively cancel each other out. As long as you can make a $70K capital gain on those property investments, you’ve got the same amount net as you earned gross from your job, and pay minimum child support and no tax.

]]> By: andrew http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38768 andrew Tue, 04 Mar 2008 01:38:56 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38768 hey toad, while you're up & about, perhaps you could have a crack at this? hey toad, while you’re up & about, perhaps you could have a crack at this?

]]> By: Wandering http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38641 Wandering Sat, 01 Mar 2008 21:42:55 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38641 Here goes... I am a woman on the DPB (are any of the above?) and it has been instrumental in helping me get through the past couple of years. When I got married, I thought I had an egalitarian partner, a Green supporter, blah, blah, blah. When we chose to have children, we thought it 'good' that I would stay at home to do the major job of raising them. At the same time, my husband would be supported in going out to work to provide the income for that. At this time, I had a university degree, but chose to put outside work on hold while I did the job of raising our children and supporting my husbands career. It was mutually beneficial at the beginning. I liked being a parent and his income increased to support our little unit. I also did a small amount of outside work in my friend's business (taking my children with me!) and later, within my home and providing child care for other friends. I had very little time away from my children, unlike my husband who was free to be away for work and personal reasons. It was only after I had been away to attend my father's funeral that I decided that the children could handle me not being available 24/7 (they were all in full time school) and I wanted to go back to university to get a new career direction going. My husband didn't support this (didn't agree with my career choice!) and our marriage quickly deteriorated. I add here that it was tough going before this, but my focus was to support the children and the family base. I was in my third year of study when I realised that I could save the student loan money that I was entitled to and work toward leaving my marriage. I started my forth year as a single mother of three children on the DPB. After two years, I am now about to start a part time job and with my spare days working to develop my studied profession. I am still the full care parent of my two youngest children (14 and 16). I will add that my ex provides child support which goes to inland revenue to offset the DPB. My ex has a high paying job and very little responsibility for the day to day care of our children. I have a large student loan, full care of the two youngest children, and now a part time job and I need to continue to work independently to further my 'career'. I have been a hard worker over the years and have raised (with the financial support of my husband) 3 great children who will be great citizens for this planet. I believe I deserved the DPB support that I have received over the past two years and would hate to think of what life would have been like if it wasn't available. I would probably have 'cracked' and my great children would have been the victims. This was not the egalitarian family life that I envisioned at the beginning. I am grateful for the government support that I receive now and don't think that I should be shamed for accepting it. Cheers Here goes… I am a woman on the DPB (are any of the above?) and it has been instrumental in helping me get through the past couple of years. When I got married, I thought I had an egalitarian partner, a Green supporter, blah, blah, blah. When we chose to have children, we thought it ‘good’ that I would stay at home to do the major job of raising them. At the same time, my husband would be supported in going out to work to provide the income for that. At this time, I had a university degree, but chose to put outside work on hold while I did the job of raising our children and supporting my husbands career. It was mutually beneficial at the beginning. I liked being a parent and his income increased to support our little unit. I also did a small amount of outside work in my friend’s business (taking my children with me!) and later, within my home and providing child care for other friends. I had very little time away from my children, unlike my husband who was free to be away for work and personal reasons. It was only after I had been away to attend my father’s funeral that I decided that the children could handle me not being available 24/7 (they were all in full time school) and I wanted to go back to university to get a new career direction going. My husband didn’t support this (didn’t agree with my career choice!) and our marriage quickly deteriorated. I add here that it was tough going before this, but my focus was to support the children and the family base. I was in my third year of study when I realised that I could save the student loan money that I was entitled to and work toward leaving my marriage. I started my forth year as a single mother of three children on the DPB.
After two years, I am now about to start a part time job and with my spare days working to develop my studied profession. I am still the full care parent of my two youngest children (14 and 16). I will add that my ex provides child support which goes to inland revenue to offset the DPB. My ex has a high paying job and very little responsibility for the day to day care of our children. I have a large student loan, full care of the two youngest children, and now a part time job and I need to continue to work independently to further my ‘career’. I have been a hard worker over the years and have raised (with the financial support of my husband) 3 great children who will be great citizens for this planet. I believe I deserved the DPB support that I have received over the past two years and would hate to think of what life would have been like if it wasn’t available. I would probably have ‘cracked’ and my great children would have been the victims. This was not the egalitarian family life that I envisioned at the beginning. I am grateful for the government support that I receive now and don’t think that I should be shamed for accepting it. Cheers

]]> By: andrew http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38587 andrew Fri, 29 Feb 2008 04:56:16 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38587 thanks although i'm still keen to see an explanation from toad. in particular i'd like an explanation which avoids vagueries like "it comes about as..." something a bit more concrete, like: "if you buy a property, earning x in rental income & paying y in interest, your taxable (& child-support levyable) income will increase/decrease by z while your actual income will increase/decrease by w", showing the maths. please note i'm not looking for an explanation of tax-free capital gains - i already know about that. it's this other thing, exemplified in toad's quote: "Purchase a property or two and get into the Loss Attributing Qualifying Company lark. That way you can make a paper loss, so pay the minimum Child Support." thanks although i’m still keen to see an explanation from toad.
in particular i’d like an explanation which avoids vagueries like “it comes about as…”
something a bit more concrete, like: “if you buy a property, earning x in rental income & paying y in interest, your taxable (& child-support levyable) income will increase/decrease by z while your actual income will increase/decrease by w”, showing the maths.

please note i’m not looking for an explanation of tax-free capital gains - i already know about that. it’s this other thing, exemplified in toad’s quote: “Purchase a property or two and get into the Loss Attributing Qualifying Company lark. That way you can make a paper loss, so pay the minimum Child Support.”

]]> By: bjchip http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38582 bjchip Fri, 29 Feb 2008 03:01:57 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38582 I should have said that if your "advertised" primary purpose is to gain rental income. Basically this is the key to avoiding the cap-gains. So you have to rent the property... even if it is rented at a small loss.... to avoid the tax. I should have said that if your “advertised” primary purpose is to gain rental income. Basically this is the key to avoiding the cap-gains. So you have to rent the property… even if it is rented at a small loss…. to avoid the tax.

]]> By: bjchip http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38579 bjchip Fri, 29 Feb 2008 02:55:26 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38579 Briefly it comes about as a result of the benefits that come along with that reduced income and the ultimately untaxed cap-gain. If your primary purpose is to gain rental income you don't have to pay cap-gains on the appreciation of the property. The key is balancing your paper losses and the interest paid with against your "excess" of income over the thresholds. What happens is that you gain in a variety of State subsidies and taxes you don't pay, enough to offset any real losses and the cap gain is all profit... or you let it stay in negative gearing and you expect the cap gain to more than make up the difference at the end of your run. I went to an accountant. He didn't have to spend any time on it at all. So many people come in with the same questions that he had a brochure all printed out and ready with worked out examples. Free. I can probably find it in my stack overflow if I look for it. The only thing to worry on is that Cullen has given the IRD more money to try to crack down on this. I don't think it is a big worry. respectfully BJ Briefly it comes about as a result of the benefits that come along with that reduced income and the ultimately untaxed cap-gain.

If your primary purpose is to gain rental income you don’t have to pay cap-gains on the appreciation of the property. The key is balancing your paper losses and the interest paid with against your “excess” of income over the thresholds. What happens is that you gain in a variety of State subsidies and taxes you don’t pay, enough to offset any real losses and the cap gain is all profit… or you let it stay in negative gearing and you expect the cap gain to more than make up the difference at the end of your run.

I went to an accountant. He didn’t have to spend any time on it at all. So many people come in with the same questions that he had a brochure all printed out and ready with worked out examples. Free. I can probably find it in my stack overflow if I look for it.

The only thing to worry on is that Cullen has given the IRD more money to try to crack down on this. I don’t think it is a big worry.

respectfully
BJ

]]> By: andrew http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38575 andrew Fri, 29 Feb 2008 02:42:02 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38575 toad: <blockquote>Lesson 2: Purchase a property or two and get into the Loss Attributing Qualifying Company lark. That way you can make a paper loss, so pay the minimum Child Support. You also pay no tax, but make a nice tidy capital gain when you flick off a property.</blockquote> perhaps you folk really do know something about this laqc lark which has escaped me. could you toad possibly explain how a paper loss is possible, i.e. how to reduce ones taxable (& child support levyable) income without reducing ones actual income? toad:
Lesson 2:

Purchase a property or two and get into the Loss Attributing Qualifying Company lark. That way you can make a paper loss, so pay the minimum Child Support. You also pay no tax, but make a nice tidy capital gain when you flick off a property.

perhaps you folk really do know something about this laqc lark which has escaped me. could you toad possibly explain how a paper loss is possible, i.e. how to reduce ones taxable (& child support levyable) income without reducing ones actual income?

]]> By: toad http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38402 toad Tue, 26 Feb 2008 04:12:02 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38402 SPC said: <i>Do you have any evidence to suggest that single parents who are working are any more or any less supported by the other parent of the child?</i> No, I don't. I just put Lesson 6 up as one way that non-custodial parents can avoid paying child support. I'm not in any way suggesting that there is any correlation between the Child Support payments of the non-custodial parent and the and the employment status of the custodial parent. Just that it opens up one more possibility through threatening to make malicious allegations to Work and Income to coerce the custodial parent into not applying for Child Support when the custodial parent is on the DPB. I totally agree with your second point re the State grabbing all the child support and the custodial parent getting none. That doesn't provide an incentive to pay, even to non-custodial parents who genuinely want to financially support their children. SPC said: Do you have any evidence to suggest that single parents who are working are any more or any less supported by the other parent of the child?

No, I don’t. I just put Lesson 6 up as one way that non-custodial parents can avoid paying child support. I’m not in any way suggesting that there is any correlation between the Child Support payments of the non-custodial parent and the and the employment status of the custodial parent. Just that it opens up one more possibility through threatening to make malicious allegations to Work and Income to coerce the custodial parent into not applying for Child Support when the custodial parent is on the DPB.

I totally agree with your second point re the State grabbing all the child support and the custodial parent getting none. That doesn’t provide an incentive to pay, even to non-custodial parents who genuinely want to financially support their children.

]]> By: SPC http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38395 SPC Tue, 26 Feb 2008 02:39:52 +0000 http://blog.greens.org.nz/2008/02/25/more-on-the-domestic-purposes-benefit/#comment-38395 toad Are you sure it's wise to link the DPB to parents not paying child suipport. Do you have any evidence to suggest that single parents who are working are any more or any less supported by the other parent of the child? As to circumstance (and thus a good guess at what might be occuring) - of course when the government is paying DPB they collect the child support payments - so this gives the absent parent no reason to think their payments will actually provide any extra assistance to their children. If there is any basis of the link between non supportive absent parents and recepit of the DPB, it's because the DPB system does not allow the child support to provide extra help to the children of the couple (perhaps if half went to the family and half to the government, this might change - perhaps the amount to the family could be allocated for such things as heat pumps/home insulation/etc - which add value for the family and wider society both). toad

Are you sure it’s wise to link the DPB to parents not paying child suipport.

Do you have any evidence to suggest that single parents who are working are any more or any less supported by the other parent of the child?

As to circumstance (and thus a good guess at what might be occuring) - of course when the government is paying DPB they collect the child support payments - so this gives the absent parent no reason to think their payments will actually provide any extra assistance to their children.

If there is any basis of the link between non supportive absent parents and recepit of the DPB, it’s because the DPB system does not allow the child support to provide extra help to the children of the couple (perhaps if half went to the family and half to the government, this might change - perhaps the amount to the family could be allocated for such things as heat pumps/home insulation/etc - which add value for the family and wider society both).

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