Why are MP’s such hypocrites?
Filed under: General Budgeting, Property & General Investing, The Book and Website
I know not everyone agrees with the fact that Property Investors can use the tax laws here to their advantage, but a few weeks ago, our MP’s discovered that some investors were using a loophole in the system to get access to government benefits they would not normally have been able to get – the Working For Families Tax Credit.
In a nutshell – the situation is this: you can use specific company set ups such as the LAQC, to offset your losses in your rentals (because believe me the rent is no where near high enough to make a profit right now) against your income.
So basically if you earn $60k in your job, and “lose” $40k on your business – you technically earn and pay tax on just the $20k left.
Which drops your salary down to the level at which you can claim benefits.
Now – obviously I’m a bit thick – because we use an LAQC for our property business, and take full advantage of the tax benefits. It was after all one of our many reasons for leaving the UK – to escape the governments ever increasing greed and need to tax the living crap out of us. So to come to a country that says you can actually reduce your tax was a bonus. We were happy with just a lower level of tax, but once we got here and realised that we could get it even lower – well – I was a happy bunny.
But I would actually never have dreamed of using that to then claim benefits – we do still after all earn quite a high salary by New Zealand standards.
And that is what has got the MP’s in a bit of a stew. It seems that there are a number of people claiming benefits, particularly working for families, who not only earn high salaries, but have rather a large asset base and are worth a lot of money. As I object to people getting welfare benefits when they don’t really need it, I also happen to object to this scenario as well. This is actually the reason I don’t like paying tax – because it gets wasted on things and people who don’t need it, which means there isn’t enough for the people who really do need it.
But I have to say I’m rather revolted at MP’s in any party that have the bloodly gall to complain about people doing this (Rorting the system) when they do exactly the same thing, and have their snouts in exactly the same trough and justify it because “its within the rules”. Well, so is what these wealthy people are doing – some of them on considerably smaller salaries than MPs, and with much less generous retirement benefits to look forwards to.
It seems that the MPs are looking to close this loophole. Hopefully if they have an ounce of decency – it will be shortly after they stop filching from the public purse themselves.
Note: If you decide you want to use LAQC’s yourself – make sure you get advice on how to set it up and how to do it. Tax evasion is illegal in New Zealand, and you need to make sure you get it right. You cannot set up an LAQC for the purpose of paying less tax. The basics are explained in Avalon’s Guide. You should also be aware that, despite what many people want to believe, the LAQC system is not just for property investors: many people turn a “hobby” into a business and claim tax benefits.
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Related posts:
- What is happening to LAQC’s?
- Some useful new Tax Calculators and graphs
- Tax Changes – boring but important.
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