Source: Radio New Zealand
RNZ money correspondent Susan Edmunds. RNZ
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When I remarried, I kept my home and rented it to help pay off the mortgage.
I have made a loss for the past few years, as the house required quite a few serious repairs, due to its age. For the past two years, my son and partner have been renting it.
I am retiring this year and have little superannuation. My question is, when I sell it at the end of next year, how can I give my children $150,000 each, without them being hit with a tax of some sort?
You shouldn’t have any tax to pay on money you give to your children.
New Zealand no longer has a gift duty, but you may need to be aware that this could count against you, if you apply for a rest home subsidy in the future.
You can only gift up to $8000 per person per year in the five years before you apply for a subsidy or $27,000 per year for gifts made five years ago.
We discussed this on the podcast an episode or so back, if you want more information.
If that is a concern to you, you could seek some advice from a lawyer on the best way to manage it.
With many people working two or even three part-time jobs with low pay, there is a problem with being eligible for the full government contributions.
If part of your full contribution comes from one job and the remainder from another job, I was told you are not eligible for the full government contribution. I found myself in this position – nowhere is this explained.
On enquiring why I didn’t receive the full government contribution, I was told that the minimum amount for qualifying for the full contribution has to come from one source – multiple sources do not qualify.
You’ve been misled here.
Inland Revenue confirms this is “totally untrue”.
“You can contribute from as many sources as you like – multiple employers, direct contributions – and they all count towards your total contributions, which are included in the annual government contribution calculation.”
Employer contributions don’t count towards your $1042 required to get the full contribution, though, only what you put in yourself.
Every time my home loan comes up for refixing and I have to worry about which term to choose, I wonder why don’t New Zealand banks offer a 30-year, home-loan fix like people can get in the US?
Wouldn’t that be a better option?
In the United States, it’s possible to lock in a 30-year mortgage term when you buy a house and stick with that interest rate the entire time, unless you sell and move.
In New Zealand, that’s not an option. We can generally fix for terms out to five years, and 1-2 years are usually the most popular.
There are a couple of reasons for that.
Infometrics chief executive Brad Olsen said one was just the size of the New Zealand home-loan market.
When banks lend money, they have to know that they can get funding on the other side at interest rates that work for them.
New Zealand’s market is not really big enough for banks to be able to manage that interest rate risk.
“If we were to offer those long-term rates, they’d often be more expensive than otherwise, because banks have to hedge their bets a bit on what they would be repaid over time,” Olsen said.
“If it’s not as big a market, if there’s risk, they have to price that risk, which would make this more expensive.”
In the US, government mortgage entities like Freddie Mac and Fannie Mae (Federal National Mortgage Association, which bundles loans into mortgage-backed securities) help to manage this.
At times, New Zealand banks have offered a seven or 10-year mortgage option, but they have not been hugely popular.
“Barely anyone took it, so the banks are going, ‘well, I have to make sure all the funding lines up, but also barely anyone calls me about them’, so they are a lot of effort to do and very little return.
“Yes, people crave stability, but there’s realistically not quite as big of a market and not quite as much of an ability to fund those loans over the long term.”
The US is a bit of an outlier – other countries don’t really do it either.
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