April 07 ~ Time for action
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It’s been a long time comin’
Yes I know, April is just about over and I have only just sent you this April edition.
Well The reason is there has been so much going on both with Massive Actiona dn with the government that Ihave been waiting for some things to be confirmed before I sent this out to make sure I don’t have to annoy you with several emails over the month. So my apologies for the tardiness of this month but I have been thinking of you!!
Please read this and take some action
The main reason for the delay in sending this month’s newsletter is that I nned to bring to your attention the proposed changes to the “Associated Persons” legislation. If you and I don’t do anything about this it has enormous implications for anyone involved in property investing, building or developing.
Below is an article Garth Melville sent me regarding the changes. I have also discussed it with Matthew Gilligan and they are both of the same view. This is a potential nightmare unless we complain and ensure it doesn’t happen.
Beware of Proposed Associated Person tax definition changes which may taint investment property
The Policy Advice Division of the Inland Revenue and the Treasury announced on 29th March 2007 major recommendations in a Policy paper issued for discussion. The title of this huge 32 page paper is “Reforming the Definition of Associated Persons”
In essence these proposed changes to the definition of ‘associated persons’ in the Income Tax Act will be re defined in such a broad manner, that certain persons that carry on a tainted activity (for example land traders, developers, subdividers, builders etc.) will not be able to dispose of most investment land (buy and hold) without paying income tax on any gain on sale.
“Associated persons” rules have been in existence for many years, but with the correct property structures it has been possible to carry out a tainted activity in one correct structure and also build a portfolio of buy and hold properties in another non associated structure. Traders in circumstances where they have purchased with the intention of on selling, have of course paid their due tax at 33% or 39%, plus 12.5% GST, making a total tax payment of around 50% on profits. On their portfolio of rental properties purchased with the intention of holding for the long term, by purchasing into a correctly formed separate structure, they have paid tax on net rental income. Sales of these buy and holds have often been free of capital gains tax on sale, if sold within 10 years of purchase and always free of capital gains tax if sold after the 10 year point.
All this will change if the recommendations outlined in the paper are adopted by Government. If the recommendations are adopted it will be difficult to break an association to a tainted activity. The position is that once you are carrying out a tainted activity, you are tainted and that’s it, end of story.
It is quite possible that in addition to these proposals, the 10 year rule may also be abolished, so regardless of how long properties are held, in situations where there is any association with a “tainted” property transaction, the rental properties will be tainted regardless of how one is structured. It also appears that there may be no concessions for situations existing prior to any legislation being introduced. The Policy makers’ intention is to have draft legislation in place by November this year with legislation effective for year commencing 1 April 2008.
This is major and this spells disaster for the property trading and investing sector. When will they stop? Perhaps when the last property investor has left the shores!
The interesting thing is that all of us can simply ignore this intrusive meddling, or be totally proactive to assist ourselves and the remainder of the property owning community and the economy of New Zealand
The submissions close on 11 May 2007 which is less than 6 weeks from the policy change. These need to be addressed as follows:
Associated persons project
C/- Deputy Commissioner, Policy
Policy Advice Division
Inland Revenue Department
P O Box 2198
Wellington
I consider all of us need to take action and prepare our own individual or group submissions. If we make enough concerted noise then the provisions may be watered down or better still dropped altogether. Note that it is often best when making submissions to provide an alternative which may be somewhat of a compromise. Individually we also need to deal to our member of Parliament and announce that this is all totally unacceptable and will result in lost votes! Politicians want to gain votes, not lose them, so make this as political as possible!
I have assisted with a N.Z. Herald article by financial journalist Diana Clement and are writing an article for the NZ Property Magazine which will be published approximately 11 days before the submission deadline. Also assisting with a N.Z. Property Federation submission and lobbying to Government. Remember these changes will come into effect if everyone waits for someone else to fight them.
Kind regards
Garth Melville C.A. TEP
Chartered Accountant & Managing Director
Company Solutions Limited and NZ Securities Limited
Just to make life more difficult we have already been advised that any submissions that are mass produced with just name changes will be treated as one and if several people all sign one submission it will also be considered as one.
So I need you to write something stating your objection to these proposed changes and send it to :
Associated persons project
C/- Deputy Commissioner, Policy
Policy Advice Division
Inland Revenue Department
P O Box 2198
Wellington
Up and coming events
I am speaking all over the place in the next 3 months and hope to see you at one of the following:
April 2007
Hawkes Bay PIA meeting: Thursday April 26th
Venue: Havelock North Community Centre
7.00 - 7.30pm Socialise
7.30p.m. meeting starts
HBPIA Breakfast: Friday April 27th
Venue: Crave Cafe and Wine Bar
108 Market Street Hastings
Friday morning 7.30 a.m.
May 2007
Canterbury PIA meeting: Wednesday May 16th
Venue: Papanui Club in Sawyers Arms Rd. Christchurch
7.00 - 7.30pm Socialise
7.30p.m. meeting starts
June 2007
Capital PIA meeting: Tuesday June 12th
Venue: TBC Wellington
Advanced Trading Workshops
A reminder that your final chance to attend our Trading Event is in
Wellington at The Duxton June 23rd
and we can now confirm
Christchurch at the Hotel Grand Chancellor June 30th
(Earlybird runs out this week. BOOK HERE NOW!!)
I put this event together to teach you everything I know about trading. We have somewht reluctantly put the event on again due to overwhelming demand but this will be the last time it will ever be presented.
Here’s yet another email I received just today from an Auckland graduate
” Well, I’ve just secured my third “big deal” since attending your workshop less then two months ago, and I have to admit I’m feeling rather proud of myself, to the point that I wanted to share with you and say yet another “thank you” for helping me to get unblocked and THINK BIGGER. I am doing each of these deals with JV partners, so in fact have not even put a penny on the table to potentially gross over $400K in the coming year…. and that’s only after two months and three deals!
PURCHASE PRICE CURRENT VAL FINAL PROFIT
Deal 1 8 flats $1,359,000 $1,663,000 $ 278,000
Deal 2 House & 6 sections $ 830,000 $ 860,000 $ 205,000
Deal 3 House & 11 sections $ 730,000 $ 800,000 $ 337,000
$2,919,000 $3,323,000 $ 820,000
From what you’ve taught at the Auckland Trading Workshop, $500K a year property trading is going to be a walk in the park!”
So are you ready to get these kinds of results? Then come and learn:
- How to get agents falling over themselves to bring you deals.
- My “every little trick in the book” secrets for uncovering opportunities that most people miss. I do my investing mostly from my office. I’ll teach you how to find a great trade a day from your chair.
- How to get in and out of Million dollar plus deals with no money.
The bigger the deal the less money you need, the less competition and the bigger the cheque and with my systems you get paid INSTANTLY. - How to stay safe as a trader.
I have never lost money on a single trade EVER. I will teach you how to do this.
- How to find buyers happy to pay you huge assignment fees. My last 2 assignment fees were $50,000 and $200,000. YES, TWO HUNDRED THOUSAND DOLLARS. Would you like to be able to charge that?
It is so easy you won’t believe it. Real win~win strategies. - Step by step systems for full time trading. How to systemize what you do so that you have more deals than you have time to pursue.
- How to get your head in the right space to enable you to create the wealth you want every year. Essential to success, I’ll teach you how to develop a traders mindset.
- How to analyse any property deal and know how to get in and out of it with a minimum profit of 50K EVERYTIME.
- Multiple trading strategies. I do them and I’ll teach you what I know. It makes me over a million dollars a year, it will work for you too!!
Lease options 103
For the last 2 months we have been looking at the basics of lease options as a trading stratgey. I hope that what I have shared with you has whetted your appetite enough for you to get a further education in this area.
As a final attempt to convince you to pursue this education here are some of the results people are getting:
” 5 completed lease options in 5 months created enough cashflow for me to retire permanently!! ”
” With the first 2 deals, we have generated $135K in immediate equity, and $410 profit per week. ”
” We have been able to put 3 people into their own homes and we get over $500 a week pretax ”
People are getting these results in Auckland, Tauranga, Wellington, Christchurch, you name it, it can be done. And this is just one of the things you can learn more about by joining me in Wellington or Christchurch!!
Final Words
Finally I wanted to comment on people’s current fascination with “The Secret”
It increasingly concerns mw as it is being treated as some supernatural cure all for ill health, poverty, you name it.
I think it is Zig Ziglar who says – positive thinking doesn’t work every single time but it certainly works better than negative thinking will every single time. I believe in the power of positive thinking – it has always helped us enormously and still does however positive thinking won’t accomplish what is physically not possible.
It doesn’t matter how positive I am, I am never going to be a concert pianist or a member of the Royal ballet for that matter.
Furthermore I am a strong believer in another principal that follows on from this. It is reflected in the following quote and I can’t remember who said it but it goes -
“positive thinking doesn’t work unless YOU do”
I believe there is power in dreaming and visualizing and goal setting and positive thinking but without the work ethic and the proper strategies and techniques to bring those dreams into fruition it is all a pointless waste of time.
It is well known that one of the most powerful things about us as human beings is our self awareness. We have the God given ability to dream our own dreams. To see where we are at today in relation to those dreams and then to choose whether to pursue them or not.
We are personally responsible for what happens to us. “Life” happens to all of us. Good things will and do happen to bad people all the time just as good things happen to bad people. WE can influence our situation by our actions and mindset but they all require WORK!!
If the Secret were universally true then only those that attracted abuse would get abused. Only those who deserved to be tortured/raped and murdered would suffer. And this just isn’t so.
That is why I always encourage others to ‘dream their own dreams’ and to pursue them.
The reality is that “The Secret” makes it’s creators millions and millions of dollars. And it is the same material that has been around for over a hundred years. It is just being marketed exceptionally well.
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