Sometimes it’s the little things that tell a big story.
Parliament is sitting in the press-Xmas period under the shadow of urgency to pass a rush of “priority legislation”.
Guess what one of the top priorities is? Abolishing gift duty.
That’s right, at a time when Kiwi families are doing it bloody tough, when the recession is biting this year worse than last, when top earners have had two rounds of generous tax cuts, and when the government is confronted by evidence of large scale tax avoidance, their priority is abolishing gift duty.
Making it easier to transfer assets to the trusts or the kiddies (on lower tax rates) above the existing threshhold of $27k each per annum.
Surely not a prioirty in the Mana electorate, not a priority in New Lynn, nor quake-ravaged Christchurch.
Surely not an example of personal responsibility – where everone pays their fair share.
Surely not bringing relief to the squeezed middle.
For National it is clearly a prioirty to bring yet further relief to the top.
Sometimes it really is the little things that count.
Gift duty is nothing more than an envy tax – so we are well rid of it. As I understand it the amount collected was less than the cost of collecting it.
Envy tax, my a*se.
One of the nat’s main reasons for lowering the top tax rate was because the ultra rich used trusts, avoiding paying their dues.
So here we go, when all the dust has settled from the tax con in the budget, they gift a way for the ogliarchs of NZ to stuff their proverbial pillows full of cash.
Talk about getting the handmade cake presented on a silver salver, ready for the feast.
Sahmeful stuff.
@pdm, Muldoon put in place gift duty because rich people were using it to not pay the taxes that they owed. NACTs getting rid of it will just bring that rort back.
Pdm, if there is envy, then it is envy of the fact that not all of us can afford to set up family trusts, hire accountants to avoid tax or use ‘business expenses’ as a means for subsidising our lifestyles. Many people on here work in organisations that are a part of the state, that serve the interests of our community and make this a pleasant country to live.
This is really bad. It means that those with wealth will protect it by transferring it to a trust. And when they get sued for doing something wrong they can then claim to have nothing and refuse to pay. And stand in line for working for families and rest home subsidies and all sorts of things because they do not legally own anything.
This is really appalling. The only result is that the wealthy will become wealthier.
What was Dunne thinking?
To answer your rhetorical question: I Dunno !
It collects $900,000 a year yet Kiwi’s are spending $70,000,000 on lawyers, accountants, etc to structure their affairs to reduce their exposure, so yes it is a pointless tax, it’s removal isn’t the end of the world and it’s removal most definitely isn’t a priority…
To put it in perspective $900,000 is 0.0014% of the government expenditure of $64,000,000,000…
But Labour keeps bringing it up becuase they think lower socio economic and middle class people will vote for them if they paint this as the National Party giving their taxes away to rich people…
@JMH
Well, I don’t see anyone on $30k something paying much gift duty tax? So it not hard to paint that way.
@mickysavage
Some even have community services card and turn up at work and income and ask for more.
@PDM
Oh yeah, I envy the rich who buy crap that they don’t need and I don’t want! If anything we need the Gift duty and make it higher, stop such conspicuous consumption.
So Muldoon introduced this tax. Says it all really as Muldoon did more harm to NZ than even Clark and Cullen could manage.
Thankfully Sir Roger Douglas, Richard Prebble, David Caygill and a few others including Phil Goff and Helen Clark came along and started getting the country back on track again until David Lange lost his courage and the plot. Ruth Richardson got things back on track for a short time before she was stabbed in the back by Jim Bolger.
Perhaps John Key and Bill English are starting to see the light. Still too little too late but a small step in the right direction.
@Jeremy Harris.
Gift Duty is not a tax collection measure. It is a regulatory measure to stop the wealthy immediately divesting themselves of assets to defeat claims of creditors or to claim Government benefits intended for the poor.
It works. There is no policy to replace the effects of gift duty. It is bizarre that this Government wants to do away with it without replacement regulatory measures. Unless it wants the State to make further provision for the wealthy.
@MickeySavage. Exactly. You nailed it.
I wonder how many members of the Labour parlimentary party have trusts?
And is it posible for ordinary tax payers to find out,hmm away to Google
David do you have a family trust and are have you transferred assets into it ?
A very good question gitmo.
Actually I think it might be a matter of public record and DPF probably has where to find it at his fingertips.
It seems 17 Labour members, plus a couple of greens have Trusts and of course some of those are Maori trusts which a different matter entirely
David has one and as it is rated a nil interest, it stands to reason that lack of gift duty would favour him
So good on David being prepared to point out something that would favour him but not all the electorate
Now I know people like David Farrar love poking about it the registrars but it was a first for me, the big surprise is the people who have been in Parliament for ages and have nothing to show for all those giant wages, at least one needs an overdraft. Makes you wonder how good they are at managing our affairs when they are not much chop with their own
David could you please explain what the “press-Xmas period” is for those not so well informed?
Regards
“David do you have a family trust and are have you transferred assets into it ?”
Maybe he has a blind shares portfolio like the prime minister does, you know the one? The one where everybody except john key knows what’s in it, but I doubt it.
Open and transparent government indeed.
Almost as big a laugh as top rate tax cuts and abolishing gift duty.
urgency? Why couldn’t the politicians remuneration issue be under urgency?
Does any one know where I can go to find out if the amount of legislation passed under urgency this year or the last 2 years is on average or higher or lower?
“Maybe he has a blind shares portfolio like the prime minister does,”
And why shouldn’t he? MPs are allowed investments just like the rest of us aren’t they?
I’m wondering why the leader of the opposition opposes transparency on the leaders Fund, isnt that taxpayer money too?
“Maybe he has a blind shares portfolio like the prime minister does,”
“And why shouldn’t he? MPs are allowed investments just like the rest of us aren’t they?”
Not unsuprisingly, you missed out the most important bit. The bit about open and transparent
“you know the one? The one where everybody except john key knows what’s in it
I dont get the bringing of Trust tax into line with top income tax and then allowing unrestricted gifting to Trusts?
One thing that put some brakes on trusts was that the yearly limit was $52k per couple and $26k per single, meaning a property worth $500K would take ten years to gift over to a Trust entirely thus gaining the benefit of the shield, and 20 years for a $1m property.
Or have I misunderstood what is intended.
If Dunne’s measure to free up any constraint with gifting then the taxation take will be altered as new devices can be managed.
I have a trust to hold family property used for living in. No profit, trading or long term aggregation of wealth involved. Similar to collective ownership without concerns of relationship property acts nor the family protection act, both of which can be manipulated for unfair personal gain. Hence the formation of a trust to give stability to family matters long term.
Dunne’s bill may have some appeal to me as it saves lawyers bills BUT many trusts are tax devices and with no control over gifting will become means of avoiding fiscal liability. Bankruptcy cases where wealth had been gifted to avoid creditors rightful claims are well known.
Dunne’s bill may well give protection to rogues and pirates of the business world.
As a lawyer Tracey you will know that Courts have the ability to unwind trusts believed to have been set up purely for nefarious reasons. You will also know that yearly gifting limits are $27k and $54k.
Crikey Richard
I slipped up by $1k and $2k…
I don’t have a family trust, so don’t do the gifting thing. My recent involvement with Trusts has been 3 charitable trusts, a different kettle of fish entirely.
How often do you think
a) the “courts” unwind a trust
b) someone can afford to go to the High Court to unwind a Trust?
As a thinking person Richard you will know there is a huge difference between morally wrong and legal.
It is the job of the legislature to ensure the gap between the two is not large, as we have so many who consider the law represents the highest standard not the lowest. For example Mr. Hide who last night considered we needed changes to expenses etc because people like him cannot be trusted to set a standard higher than the words on a page (obviously he didnt put it like that).
I should further clarify.
A “lawyer” is someone who holds a practice certificate pursuant to the Legal Practitioners Act. I relinquished mine earlier this year. So, although I meet the colloquial definition of a lawyer (someone with a law degree) I dont meet the legal one
Fair enough Trace. I am sure trusts have been unwound in the past at the behest of IRD, but unless deemed newsworthy we don’t get to hear much about this.
I get a bit annoyed that some here, who obviously do not have, nor intend to have a family trust, seem to think that all are set up for reasons of tax avoidance, and get all uppity about it. Some Labour Party supporters seem to think that every body else is dishonest, or has no consideration for anybody else, that all National voters are morally reprehensible and are ‘rich tory pricks’. Name calling of course is the last resort of the weak. I challenge you to read some of the posts on this forum, trying to see the words from a genuine opposite point of view. You will be amazed at some of the attitudes that come through. For my own part, I follow the forum through curiosity, as we are all NZrs. If I contribute I try to be reasonably constructive, and avoid the vitriol and spite that some use regularly.
Deleted. Banned. Clare
Richard, I do agree. My mother used to say when I complained my brothers were calling me names that “it just means they have lost the argument pet, they have nothing else to say so revert to calling you names, just walk away that will annoy them more”
Bless her.
Most Trusts that I know of for friends and family, are in the case of business owning people, to avoid losing everything if it all goes pear-shaped and they are personally sued for business mistakes.
Of course there are two sides to this and the leaky home crisis brings that home, architects, developers and builders, wind up their companies, then when chased personally say “Oh, it’s in a trust I have nothing”.
My late mother-in-law set up a trust a few years before she died. The beneficiaries were her two children. It was set up becaue my brother-in-law is mentally and physically disabled and she didnt want him getting a bequest directly so he might wastefully spend it or be taken advantage of. Isnt that one of the reasons trusts were invented?
The world is not as black and white as some on both sides of the spectrum (politics) seem to suggest. The world is very grey.
You’re right IRD would have wound back some trusts, and some companies and wealthy people going through a dissolution, but it’s not available as a remedy to most.
I dont accept that even half of the trusts in existence today meet the original intent/purpose of trusts. Most are a mechanism of some sort which is different to saying they are illegal I hasten to add.
Sorry Richard I didnt address the “challenge” – I try as much as possible to read from both sides, while having my own particular bent makes that an inexact science.
The name-calling annoys me on all fronts. The “rich pricks” stuff and the ways ome seem to almost hiss “socialist” like a swear word.
Too much ego and not enough thinking in my opinion. For some here it’s the relentless pursuit of the prey to prove they’re “right” (as opposed to wrong, not left). Opinion, too often, is posted here as though it were fact, by all sides. I dont like the name calling by whoever does it.
But then I followed a link from clare to kiwiblog today and saw the same stuff just wearing different trousers.
People gotta chillax more brother, thanks for teaching me how to do the
Love Ya Trace.
That’s why I always raise the good points of social democracy, democratic socialism, and *gasp* collective, co-operative, or communal enterprise as ways to transform a purely capitalist economy
Back at ya RICHTONE
Aw Rich and Tracey are friends
No he didn’t.
The two examples used of defeating creditors and enabling state subsidies are expressly being excluded. No one will be able to transfer their house to a trust one day, be placed in bankruptcy the next, and then claim that the OA cannot grab the house because it’s in trust. The Court of Appeal has just confirmed that. Again. The provisions of the Property Law Act allow the OA to reverse the transfer into the trust, and place it back with the prior owners.
The second point, that state subsidies are more readily available, has just been dealt with by Peter Dunne in Parliament yesterday.
Read this (for example).
http://www.stuff.co.nz/dominion-post/news/4433528/Wealthy-families-claim-payouts
Gift duty is an anachronism. It is archaic and serves no purpose. It hasn’t been adjusted in 20 years, not even for inflation!
I’m glad it’s going.
Nick K
Examples would be appreciated. The bill itself only abolishes gift duty. I have skimmed the other provisions and do not see that it changes eligibility. If there is a change elsewhere please point it out.
You link to a stuff page but all it does is confirm that there are proposed new rules. I would have thought that the new rules should be in force before the repeal of gift duty.
I disagree that gift duty is an anachronism. I prefer that our Government do not keep making it easier for the wealthy to preserve and enhance their wealth.
Okay, I’ll have a go.
Disposing of assets with intent to defeat creditors has always been reversible at the hands of the OA. Section 344 of the Property Law Act says:
Then, the following sections go through the procedure to follow for overturning a disposition. See also: Regal Castings v Lightbody (Regal Castings Ltd v Lightbody [2008] 2 NZLR 153).
In terms of rules regarding resthome subsidies (for example), the clawback rules have been applied by WINZ for many years. The rules are contained in their eligibility criteria.
I admit to reading perhaps too much into Peter Dunne’s latest bill on “closing the WFF loopholes”, but when taken in context I took what he was saying to mean that with the abolishment of gift duty, don’t expect to transfer your assets into trusts and claim benefits as a result, because trust income will be treated as personal income. A better example of this classification is the IRD’s recent ruling against Andrew Krukziener, where it successfully claimed trust loans were income.
@Nick K
Agreed there are some rules but abolishing gift duty allows the divestment process to be speeded up. The PLA provision you refer to will be affected. If the divestment occurs when times are good then it may not apply. And I agree the clawback provisions may assist but right now they go back 5 years to the date of the last gift. If the gifting is completed in one go 6 years ago then presumably the provisions do not apply whereas before they would do because of the need to gift for an extended period of time.
Nick K
“Disposing of assets with intent to defeat creditors”
You are right of course, with time limits ont he winding back process.
Again, the legal okee dokee and the moral okee dokee to this are different.
I glad I checked this thread…
Both examples from MickeySavage are spurious, trust giftings can be clawed back now for a number of years and there is nothing stopping anyone with large incomes setting up multiple trusts currently…
We need trust reform IMHO but not the retention of gift duty…
I agree, the little things do count!