Rumour has it the Beatles got taxed at 94 percent in the UK in 1963, rousing George Harrison to write the heartfelt lyrics, ‘Now my advice for those who die, declare the pennies on your eyes…. yeah, I’m the taxman, and you’re working for no one but me’.
We haven’t reached 94 percent in New Zealand, but according to Jason McFadden of McFadden Accounting, the New Zealand system is so complex, “people are often paying more tax than they need”.
Take Portfolio Investment Entities (PIE) and KiwiSaver, taxed at a discounted rate determined by your income band. People nominate the tax rate at the outset: if you set your tax rate too high and pay too much, you won’t get the excess tax back; set the rate too low and you have to include your PIE or KiwiSaver income in your tax return – you’ll be taxed in your income band and lose the discounted rate. “A rate set too high or too low sees you penalised. It is quite a prevalent problem,” Jason says.
Buy a new mortgaged home and rent out your retained mortgage-free house, then no claim on mortgage interest payments is possible. However, sell the renter into a company which raises the mortgage, and that company can claim a tax deduction for the interest. Jason says you will incur conveyancing costs, but you can be better off longer term.
With 26 years’ experience, Jason offers a competitive service, travelling to you to see where, why, and how you operate. Jason can see you promptly throughout Christchurch and North Canterbury.