Some need to know, with a bit of WealthDesign nice to know thrown in.

You may think that cryptocurrency (think Bitcoin) gains are tax free. Oops – you would be wrong. The IRD treat Bitcoin and the like, as property, very much like they treat investment in gold. These assets don’t generate an income, so the IRD basically thinks that investors are obviously buying these asset to make capital gains, meaning it’s taxable income.

Yes, some investors have made a lot of money out of buying these cryptocurrencies and haven’t known or wanted to tell the IRD about their winnings. Having poor records or pleading ignorance isn’t going to be a defence if the IRD coming knocking. 

There are more types of cryptocurrency than just Bitcoin. Not all of them can be valued in New Zealand dollars. If the cryptocurrency can’t be valued in New Zealand dollars, then investors need to value them in American dollars, and then record the purchase and sale value, based on the New Zealand/American dollar value. The difference is profit, and needs to be accounted for in one’s IRD tax returns.

Don’t be fooled into thinking the IRD can’t find out about past transactions. They have a whole department dedicated to tax avoidance and if they put resources into this area, the unaware could be in for a horrid tax surprise. Remember the IRD can go back seven years and can add some hefty penalties if they deem it appropriate.

If this applies to you and you have bought some cryptocurrency, my advice is to visit the IRD site for more details, or talk to your accountant.

John Barber
Managing Director
WealthDesign – a life well planned

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KiwiSaver – income for your future self

Maximising the income that will provide the lifestyle for your future self, is how to approach your KiwiSaver. And you may be surprised to learn that if you don’t have your finger on the pulse of your KiwiSaver scheme, your future self may be a little short-changed.

The KiwiSaver initiative is not a set and forget sort of deal, with a ‘bells and whistles’ app on your phone that gives you your balance instantly (can you tell I think the sales pitch for this gimmick is utter BS? But that subject can wait for another day!). It needs managing as it’s an investment like any other long term investment.

An example arose recently when a client’s tax rate was 28%, rather than 10.5% At 6% return on his money, he had paid $1050 more than he needed to. Unfortunately the app on the phone doesn’t prompt you to manage your KiwiSaver scheme balance wisely, it just tells you what’s in the account at any given time.

When was the last time there was a rendezvous between you and your KiwiSaver scheme balance? If you have over $50,000 in yours, recent research (by Westpac) reveals you are in the top 13% of men and the top 4% for women in New Zealand. And if your balance is over $30,000, you are in the top 27% for men and the top 15% for women in New Zealand.

These are scary statistics when you consider a 65 year old male will need enough money to live on for another 19 years from his 65th birthday. It is even worse for women, as they tend to out-live the guys, yet their KiwiSaver scheme balances are on average, much lower than males.

Here’s what’s important.

Join KiwiSaver as soon as possible. When is the right time to join? Yesterday. When is the next best right time? Right now.

If you know you are in KiwiSaver and you’re not sure where yours is at, contact IRD and they will give you the relevant details. Or click here to find out more.

Secondly, ensure you’re in the right fund for you, plus you have the right tax rate for you. How do you know? Give me a call – I’m here to help.

It really makes my day when I ensure people are optimising their KiwiSaver investment.  So come and talk to me about your KiwiSaver scheme – your future self will thank you!

 

John Barber
WealthDesign – a life well planned

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The investing ‘selfie’

In Australia, self managed superannuation (the selfie) is huge; with investments of over 30% of all superannuation assets managed by the individuals themselves. These assets add up to close to A $700 billion compared to the NZ $42 billion in KiwiSaver schemes in New Zealand. In fact, the average balance in these accounts is much higher than the average balances invested by individuals in managed funds, such as the New Zealand KiwiSaver schemes.  They are very popular as the individual investors have control of what investment strategies/ investments they employ.

For over 20 years I have helped our clients manage and grow their wealth in New Zealand. These portfolios are very much like the selfies of Australia. I am a firm believer in having investors actively engaged in where their money is invested.  I like direct Australasian shares and this strategy has been extremely profitable. Unlike many financial planners, I like direct property and I’m not a fan of managed funds.

It might be 10 years since the Global Financial Crisis, but I still haven’t forgiven a number of managers who miss led the market and who still bounce around telling everyone how great they are!

For almost 10 years we have been in a market recovery/bull market, as the world has recovered from the worst equity disaster of all time.

Whilst investing in good times is great, the real advantage of buying and owning your own shares/assets comes into play in the tough times. You aren’t exposed to silly selling by uninformed investors. You get to choose if you hold or sell an individual investment or change your investment strategy – you are in charge.  In fact you are often on the other side of the table buying when every one else seems to be selling. This is when you really make a dollar or two.

In March 2008 I clearly remember an astute client ringing and requesting we buy Australasian banking shares (ANZ, CBA, NAB and Westpac).  These shares had fallen sharply and whilst investors in managed funds seemed to be pulling out and going to cash, my elderly client rang and said “they just don’t seem to understand, I’m happy with the strong dividend payments these banking stocks are providing and no government is ever  going to let the major banks fail, let’s make money out of the silly sellers.” History showed she was 100% right and she pocketed a pile of tax free capital gain.

Buying direct shares isn’t difficult and once you are set up, the system works really well. Information today is only a click away and if you understand and apply a solid investment strategy, it can be very profitable.

We have a number of investors that are regularly buying Australasian shares. These portfolios are performing extremely well but we are looking forward and watching to see what happens next. As I say sometimes investors make more money in the tough times than in the good. Simply, we aim to buy when others are keenest to sell.

If you’d like to talk about investing, please give me a call. There is no charge for the first appointment, plus there is no time like the present to take the first step towards owning a successful investment portfolio.

 

John Barber
WealthDesign – a life well planned

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KiwiSaver is ten years old now. There is more than $43.2 billion invested collectively. Of that figure, do you know the details of your slice of that pie?

Even today, 20% of members still have their funds invested in a conservative default scheme. These investors are missing out on potential returns as the average default scheme returned 4.1% for the rolling 12 months, compared to 7.8% for the average balanced fund. If you do the numbers, that means that if you have a balance of $30,000 in your KiwiSaver fund, and it’s in a default fund, you have lost out on $1110 in just this year alone! When you compound that up (over however many decades until you turn 65) it could make you weep!

We have been doing some research and we are finding that:

15% of people don’t know who their investment is managed by.

62% of the members don’t know if their fund is doing okay compared to the market.

43% don’t know if their PIR rate is correct.

53% of members have never had any KiwiSaver advice.

Of the 47% who have had advice, 13% of members got it from a qualified adviser and 19% got advice from a bank employee (who can only give information about their bank’s products).

The trends are interesting. Those who got advice, seemed to understand and have invested in the right fund for their age and stage of life, and they tend to have an understanding of the tax implications. They also understand market volatility and how it will impact on their individual KiwiSaver.

It is nine years since the global financial crisis smashed the global equity markets. For those investors who don’t understand risk (the chance their balances could fall), a market correction could cause a lot of sleepless nights when they see thousands wiped off their KiwiSaver balance.

If you are one of the 53% that has never had KiwiSaver advice, or one of the 47% who wants to ensure management of your KiwiSaver fund is optimised, give me a call and come and have a coffee. I don’t charge for the first appointment. Let’s first see if we are a good match, and then we can go about optimising your investment plan for you and your circumstances.

John Barber
WealthDesign – a life well planned

 

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