FAQ's

Carl gets asked a wide variety of questions and here’s a selection of some quick questions currently being asked:

Bright-line land transactions

In January 2017 Sam and Sally bought a section in Papamoa to build their first home.  This is the first property they have ever purchased.  Eight months later Sam was forced to relocate to Auckland for his job and now Sally is pregnant with their first child.  They realise they can no longer afford to build a home on the section, and with the cost of renting so high in Auckland they decided in March 2018 that the section had to be sold.  They sold it for a gain of $80,000.

Are Sam and Sally liable for tax?  It was intended as their main home and it is only due to unforeseen circumstances that they’ve been forced to sell.

Marj has owned their family home with her husband Don for 30 years.  Don has had to be moved into full-time care at a rest home.  Marj put their family home on the market and bought a smaller unit closer to the rest home in July 2017.  Marj had started to move some furniture into the unit but before she had time to move in Marj got sick and had to go to hospital.  Unfortunately Marj’s health deteriorated and she died in hospital.  The executors of her will sold the unit in January 2018 and a capital gain of $120,000 was made.

Is the sale of Marj’s unit taxable under a genuine situation like this?

Jack and Jill bought 35 acres 4 years ago in their company.  The land had a cottage which was rented out, and they grazed some sheep on the land.  In April 2016 they separated and Jack purchased the property from the company for $2m, based on its market value.  In January 2018 Jack got an unsolicited offer for $3m and he decided to sell.

Now he comes to you and asks whether he is liable to pay tax on the gain?

Bees and tax issues

Ted is a budding beekeeper and wants to buy Dave’s 300 hives and business.  The proposed sale price is $360,000 based on $1,000 per hive plus $60k for unused supers, frames and extra equipment.

Dave has worked out that the value of the bee colonies would be $160,000 made up of 300 Queen bees at $50 each ($15k) and $145k for the colonies of worker bees.  He asks whether he can claim a deduction for the cost of his bees.

Dave has also bought a block of land and has spent $100k in purchasing 50,000 young Manuka trees and planting them.

Can he claim anything for tax?

Inter-company loans

ABC Ltd has 1000 shares, Sue owns 1 share and her trust owns 999.  XYZ Ltd has 100 shares, Sue owns 1 share and her trust owns 99.

ABC Ltd has lent XYZ Ltd $500,000.  Sue asks whether interest should be charged on the loan.  She doesn’t think so as the companies are wholly owned by her and her trust.

John owns 100% of ABA Ltd.  ABA Ltd owns 80% of the shares in ZZ Ltd and 20% are held by John’s father.

ABA Ltd has lent ZZ Ltd $1,000,000 to fund its start-up business and development costs.
John asks whether ABA Ltd is required to charge interest on the loan?

NRWT on interest paid to a non-resident

Jess is a NZ resident and operates a business in NZ as a sole trader.  Jess borrows money from her father who lives in Fiji and is tax resident there.  Jess is paying interest to her father of circa $10,000 p.a.

Her father has other income in NZ of $100,000 p.a.

Jess asks whether she is required to deduct NRWT or preferably Approved Issuer Levy at 2%?

We demystify the complex areas of tax law and find effective solutions for our clients.

YOUR TAXATION CONSULTANT

07 282 0722   carl@carlbrandttax.co.nz
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