PONSONBY PROFESSIONALS

APARTMENT OWNING & LIVING

LOGAN GRANGER: IT’S OUR HOUSING PROBLEM

New Zealand needs more houses, but despite the simplicity of that goal it’s been impossible to keep up with the demand. This problem has persisted through both National and Labour Governments. As much as we might juggle LVR restrictions and interest rates, the problem is with supply and how we think about it.

To take the pressure off the housing and rental markets, our local and central governments including us as citizens of our country will need to make big changes. We need to work together to build more houses, and I don’t mean physically! But in order for this to happen we need to stop short-term-thinking and old ways of thinking about home ownership. This is holding us back and creating unnecessary problems in what should be the best country to live in.

Every time we hear about the government “borrowing” we get comments about them “mortgaging our future” and “debts that will cripple future generations”. But our reluctance to acknowledge that our national debt will need to increase in order for this to happen is holding us back. The investment we make in the housing market will increase the health and well-being of huge numbers of New Zealanders. If we invest in affordable living, New Zealanders won’t need to spend their time worrying about where they’re going to live. Instead they can think about having a family, starting a business or working towards a promotion at work. All these things improve our productivity which then increases the wealth of our society.

Most of us are focused on our own immediate goals; deadlines, bills to pay and to-do lists. Thinking about national productivity or future standards of living and infrastructure are, not really boring, but not our job! We should be focused on us and our families and your business, if you have one. But this thinking also extends to the construction industry and others that support it. But without working together, we’re not going to get anywhere. We need faster and more cost effective building techniques. That means using a full range of prefabricated types to their fullest capacity. This would mean we could build houses in factories, in any weather, then assemble on site.

We’re not talking about the old type post-war prefab house and school classrooms. The modern equivalents are better and outperform our existing homes for warmth, comfort and ease of construction. Plus they are more cost effective.

A large number of us own houses already and enjoy that they keep increasing in value, but some of us are guilty of the “not in my back yard” sentiment when it comes to change in our suburbs.

Our lack of houses is a national problem that’s stifling our productivity and leaving younger New Zealanders and first home owners, feeling helpless. Solving the housing crisis depends on us working together, on some wealth distribution, and on a shift in mind-set. We need government, both central and local, and our businesses to work together. They need support in funding to build faster and cheaper homes and to make New Zealand a better place to live for everybody, not just those who’ve already made it onto the ladder.

This last year has demonstrated that we can pull together to protect and support each other. Let’s keep doing that.  PN

JOHNSTON ASSOCIATES, 202 Ponsonby Road, T: 09 361 6701, www.jacal.co.nz

Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.

Tammy McLeod

LEGAL ADVICE FROM DAVENPORTS LAW

Geoff and Dianne set their trust up in the early 2000’s when their children were in their primary school years.

It was set up on the recommendation of their accountant and while there were some asset protection reasons, the main driver at the time was tax efficiency. The trust owned their family home and the shares in their company, which was a successful car mechanic business with a number of branches across Auckland.

The business had provided great cashflow over the years, and on the recommendation of their accountant, they had used the trust to their advantage and allocated income to the beneficiaries. Their accountant had explained that trust income can be taxed in two different ways. Either the trustees pay tax on the income at the trustee rate which is currently 33 percent - and then most often the trustees can make tax free capital distributions to beneficiaries. Or, the trustees can allocate income to the beneficiaries at the beneficiaries’ personal tax rates - and the beneficiaries then declare the income in their tax returns and pay the tax at their marginal rates.

As Dianne wasn’t working, for many years the trustees had allocated income received by the trustees to her to take advantage of a lower tax rate. They had also allocated income to Geoff and Dianne’s two children, Jane and Tom, once they reached the age of 16. However, more often than not, rather than actually distributing the cash to Jane and Tom, the trustees would simply allocate the income to them and then use the actual cash to pay down trust debt. The trustees then ended up owing Jane and Tom what had been allocated to them. This was reflected in their beneficiary current accounts in the trust’s financial statements.

Over the years because of the profitability of the business, Jane and Tom had ended up with sizeable current accounts. Jane was owed just over $175,000 and Tom, as he was younger, $152,000. With the changes to the Trusts Act, Geoff and Diane understood that as their children were now over the age of 18, they had to know that they were beneficiaries of the trust, but they also could ask for a copy of the trust deed and the financial statements for the trust. If either Jane or Tom asked to see the financial statements for the trust, they would then be able to see that the trust owed them both large sums of money and could potentially ask for those amounts to be paid to them. Neither Geoff nor Dianne wanted this to happen.

Geoff and Dianne were actually not too concerned about Jane. Jane was a in a stable relationship with her husband of five years and Geoff and Dianne felt that even if Jane did see that the trust owed her $175,000, they would be able to explain the tax nuances to her and she would be able to see the bigger picture. Their accountant even suggested that they could ask Jane to gift her beneficiary current account to the trust in order to clear the balance.

Tom on the other hand was more of a concern. Geoff and Dianne were not that keen on Tom’s partner. They thought that she influenced Tom in a way that made him quite focussed on money and she was always hinting to Geoff and Dianne that she thought that they could be helping her and Tom with a deposit on a house. Even though Geoff and Dianne’s business had been successful, they didn’t have the ready cash for that kind of assistance and were firmly of the view in any event, that the children should be forging their own paths. They were very concerned that if Tom knew that the trust owed him $152,000, then he would tell his partner who would then encourage him to call up the loan.

Geoff and Dianne were in a tricky situation. They really needed to get some advice as to how they might be able to restrict the information that the trustees had to give the children if asked. However, that would still not get around the fact that the trust did owe their children that money.

As we move into a new tax year, it is an opportune time for trustees to review beneficiary current accounts, take specialist legal and tax advice and decide how to deal with them in the context of the new law.  PN

PEDESTRIAN CROSSING AT FRANCIS STREET/RICHMOND ROAD In 2017, Auckland Transport built a cycleway through the Westmere shopping and social centre. Richmond Road was raised and a new ramp leading away from the Francis Street crossing was created with a gradient of 1:8. As a paraplegic I found this gradient very dangerous, as I imagine it is for mothers with prams, the elderly and any others having difficulty in getting around.

Meetings were held with up to 40 attendees at AT’s headquarters which discussed this matter. In September 2018, with others, I created a complaint to the Human Rights Commission, which was eventually heard in April 2019. AT representatives promised the HRC to do something about the danger, and to correct the pooling water which collects and remains here, and on other footpaths in Westmere after rain.

In 2020, and in March this year I raised the matter with the Waitemata Local Board, supposedly our conduit to the Council and its subordinates like AT. Council regulations for private and public building will only consent to ramp gradients of less than 1:12. This ramp continues to threaten well after three years of the completion (or abandonment) of the AT contractors who built to Council plans which I have examined.

AT has informed me that some time in the future the same contractors who created this danger will rectify it, but AT will not show me any plans. No tenders were asked for which is against standard Council practice. Reparations will be slow and very disruptive to commerce. An AT engineer told me in 2018 that the cost of reparation would be at least $22 million.

All this to raise the crossing, (with another nearby on the same cycle lane), while all other crossings in Richmond Road, two outside schools, have the standard flat contour. It could be easily, speedily, and less expensively lowered, but this may affect the cycle lane.

I remain aghast... William Gruar, Westmere