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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Check your credit score

Do you ever check your credit score? Did you know you could check your credit score?

Like many of us, I’ve never really given this much thought but I was reminded today that I should check.

Behind credit (borrowing money from the banks or finance companies) there is an industry of recording our private information. Information we don’t even know exists, let alone check.

Things like late payments to your credit card or utility bills are monitored. Even when you change telecommunication suppliers, your credit rating will be checked.

After hearing this, I went on to creditsimple.co.nz and checked mine. My credit score was ‘pretty healthy.’ Hmmmm … I wasn’t that happy about this, given my lifestyle and occupation! So I checked further, only to find a late payment to KiwiBank, due to their administration error, which had given me a black mark beside my credit rating. On creditsimple.co.nz you can comment on this, and your comment will stay on file. As you can guess, this is exactly what I did!

Without looking this up I’d have never known that a small administration error would show up somewhere in cyber space on my credit score.

So take five minutes and check that your credit rating is in line with what you think it should be.

creditsimple.co.nz
checkyourcredit.co.nz
centrix.co.nz
mycreditfile.co.nz

John Barber
WealthDesign – a life well planned 

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Considering signing up to Airbnb?

The Airbnb ethos resonates with New Zealanders – real people, real experiences – it’s just how we roll. I stay often at Airbnb places and think it’s an awesome addition to the accommodation industry.

More and more people are signing up to Airbnb, seeing it as a way to share their little corner of paradise, whilst earning a bit of spare cash.

There are some important things to know though, if you would like to become part of the Airbnb world.

  1. The revenue is income and subject to tax. Don’t think you can do a ‘cashie’ or you could run foul of the IRD. Consider running your Airbnb like a little side business. Keep records and claim whatever expenses you are legally allowed to claim. This way, you only pay tax on the profits.
  2. Make sure your insurance company knows you are listed on Airbnb. The last thing you would want is someone burning your house down and the insurer walking away on this technicality. Most insurers don’t cover intentional damage, however theft is covered. Ask your insurer about their policy around illegal drugs. You don’t want to become ‘cook-a-batch’ (as opposed to book-a-batch!), and find you’re up for expensive clean up costs, due to contamination.
  3. Check out the automatic insurance covers offered by Airbnb, as it may pay to carry these additional covers.
  4. Be careful who you invite into your home. This way you can mitigate many of the risks. I believe people are generally reliable and caring when they use Airbnb, but not all people, unfortunately!

Enjoy the Airbnb experience, yet be prudent about how you do it!

 

John Barber
WealthDesign – a life well planned

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There are plenty of ways to buy insurance these days  – and in this fast paced world of online solutions to everyday problems, you would assume that an online insurance purchase would have you covered.

However, you could well be wrong – very wrong.  And you won’t know until it comes to claim time, unfortunately. (The very reason you’re buying the insurance for in the first place.) 

The difference between insurance companies and their products is much more than just price. Little things like having the wrong word can be the difference between having a claim paid or not. A simple example is the difference between ‘own occupation’ and ‘any occupation’ within a total and permanent disability policy. Basically if you have the ‘any occupation’ policy, you must be unable to work again in any occupation to get a claim, where as ‘own occupation’ policies are just what it says, if you can’t work in your usual occupation ever again, you can claim. ‘Own’ and ‘any’ are tiny words in and of themselves, but they have massive ramifications at claim time.

One word could cost thousands.

Insurance portfolio structure is also important. If buying insurance online, would you know which covers to have, which not to bother with, what impacts increased excesses, or length of benefits and what stand down periods they have? These all can impact the overall cost of the insurance package.

Ownership of the policies is also important and understanding how this fits in with the other estate planning tools such as wills, is vital.

On top of all this, the difference between policy wordings is enormous and getting the wrong policy wording can also cost thousands, as you lose the ability to claim on the policy.

We pay for independent research so that we can compare insurers. Not only on price, but on policy benefits.  After years of helping our clients (both setting policies up and also at claim time), we know how to get things right.

Yes I’m biased towards insurance advice, however,  there’s a very good reason for it! Find someone who knows their stuff before embarking on buying insurance.

Don’t be fooled – cost isn’t everything!

John Barber
WealthDesign – a life well planned

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