11 minute read
PONSONBY PROFESSIONALS
TALKING TRUSTS: BILL & JANE
Bill and Jane were in their early ‘70s. They had been living in their house in Ponsonby for 35 years and that is where they had brought up their children.
They had run a very successful business which they sold ten years ago. Initially they had the sale proceeds in term deposits but because of the low interest rates those moneys were now invested in managed funds.
Bill and Jane’s house had increased hugely in value since the time they bought it in the late 1980s. It still bewildered them to think that the house was worth so much more than the business had been when they sold it. They had worked so hard in the business and yet with the family home all they had to do was to continue to own it. The house and the managed funds were both in a trust which had been established when they had their business. Bill and Jane were the beneficiaries of the trust together with their three daughters and their children. The trustees were Bill and Jane and their accountant.
Bill and Jane had decided that they might move into a retirement village. The house in Ponsonby had been getting too much for them. The grounds were extensive (they were one of the few sites which had not been subdivided) and the stairs were starting to get a bit much for Bill who had had a knee replacement. They had friends who were in a retirement village in Remuera who loved it and raved about the lifestyle they now had. Bill and Jane discussed this with their daughters, spent many weekends looking at the different villages and finally settled on one.
Bill and Jane were told that they needed to get legal advice on the occupation right agreement. They went to see their lawyer, who they had needed to visit infrequently since the sale of the business. She said that they should take the opportunity to review their wills and their trust documents at the same time. However, she said that trusts had become quite a specialty area and she thought it would be a good idea to get some expert advice. She referred them to a lawyer who specialised in trusts.
When they went to see the lawyer, she explained that trust law had changed quite a lot since they set their trust up in the mid 1990s. Back in the 1990s, trusts would often have extensive beneficiary lists. This would often include spouses and de facto partners. When the lawyer looked at Bill and Jane’s trust deed, she saw that not only were their children and grandchildren’s partners and spouses potential beneficiaries, but also any carers for those people. This would include the nanny of their eldest daughter’s children. The lawyer said this wasn’t necessarily a common inclusion, but she had certainly seen this before. Clearly this is not what Bill and Jane had intended when they set the trust up.
Bill and Jane were particularly concerned as their youngest daughter was going through a messy divorce and it was a worry to them that her ex-husband was a beneficiary of the trust. Unfortunately, the lawyer said, that given the age of the trust, there was no power to remove beneficiaries. She said that sometimes in these cases the trust deeds could be varied to include a power to remove beneficiaries which could then be exercised. But again, in their case there was no power to vary the trust deed. The only options open to them were to resettle the trust which meant setting up a new modern trust with a smaller class of beneficiaries and settling the assets onto that trust or winding the trust up and put everything back into their names.
Bill was reluctant to wind up the trust given the effort and cost of setting the trust up and maintaining it over the years. However, the lawyer advised them that the right to occupy the villa in the retirement village wasn’t able to be owned by the trust in any event, and now that they didn’t have the business risk or any obvious family issues that would necessitate a trust, winding it up would be the sensible option. She said that the trust had done its job and they could still protect their daughter’s inheritance with wellcrafted wills.
So, Bill and Jane agreed to wind their trust up and put in place new, more extensive wills. They sold their Ponsonby home, and purchased the occupation right to a villa in the retirement village. The balance of funds from their Ponsonby home was added to their managed funds which were now just in their own personal names, which meant that their tax returns were more straight forward and there was no need to go to the extra cost of preparing a set of accounts for the trust annually.
Bill and Jane were very happy with the outcome, still understanding that their trust had done a great job for them and given them peace of mind when they needed it. PN
Tammy McLeod
PONSONBY PROFESSIONALS LOGAN GRANGER: DECIPHERING CRYPTOASSETS TAX – THE NZ TAX TREATMENT WHAT ARE CRYPTOASSETS?
Cryptoassets are cryptographically secured digital representations of value that can be transferred, stored or traded electronically. They use some form of distributed ledger technology such as block chain.
The cryptoasset sector is still developing and there is currently no standard terminology used.
Tax treatment of Cryptoassets IRD treats cryptoassets as property for the purposes of tax, so normal income tax rules apply. What people make from selling, trading or exchanging cryptoassets is essentially taxable.
The IRD default view is that most people acquire cryptoassets with the intention of selling them. That’s because cryptoassets don’t pay interest and it’s only upon disposal that someone will realise a return on their investment. This is very similar to its position on gold.
As such, in most cases, the profit an investor makes from disposing or exchanging cryptoassets is taxable. Also, if you make a loss when you sell your cryptoassets you may be able to claim this loss.
To determine if tax is payable, IRD will look at the main purpose for acquiring cryptoassets at the time of acquisition (not disposal). A person will face an uphill battle to challenge that they did not acquire cryptoassets with the intention of selling them. They will need to provide clear and compelling evidence that support this claim which could include factors such as:
• the circumstances surrounding the acquisition of the crypto, its use, and its disposal;
• the nature of the crypto (whether it provides an income stream or any other benefits while held);
• the number of similar transactions; and
• the length of time the crypto is held.
It does not matter how long someone plans to hold on to cryptoassets for before selling or exchanging them. A person’s main purpose can still be to sell or exchange them despite holding for several years.
Cryptoasset income must be included as ‘other income’, business income or self-employed income in the tax returns. Any cryptoasset holder is expected to keep accurate and complete cryptoasset records for at least seven years.
Cryptoasset tax for individuals • New Zealand tax residents who buy, sell, trade, exchange, or mine cryptoassets must pay income tax – even if they acquire and dispose of it overseas. • Non-resident taxpayers are subject to New Zealand tax if their cryptoasset income has a source in New Zealand.
Cryptoasset tax for businesses These taxes apply to businesses that trade in, or use, cryptoassets.
• Businesses that operate cryptoasset mining, dealing, or exchange must pay income tax on their profits. There is guidance about what defines a crypto-asset mining operation as a business, including the size of the operation, the length of the operation, the regularity of mining activity, and how much people make from mining.
• Businesses that trade in cryptoassets must also pay income tax on their profits.Those that don’t fit the definition of cryptoasset businesses but do use cryptoassets in their business, must also account for these assets in the same way as any other business asset. Therefore, must pay income tax.
• Businesses can pay employees in cryptoassets, however, these are still subject to standard PAYE and fringe benefit taxes. In cases where employee share scheme rules apply to cryptoasset payments, these are still subject to income tax.
For more information on any of the above topics, please contact us at Johnston Associates. (LOGAN GRANGER) PN
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.
JOHNSTON ASSOCIATES, 202 Ponsonby Road, T: 09 361 6701, www.jacal.co.nz
At last month’s Waitemata Local Board Meeting, member Sarah Trotman awarded Keith McConnell with The Penny Bright Memorial trophy. This was given to Keith for his work on better governance in Auckland City. PN
Metro Law Appoints Associate
Metro Law is pleased to announce the promotion of Annemarie Schenk, of Ngati Porou and Te Arawa, to Associate.
Annemarie joined Metro Law in 2017 while completing her degree. She specialises in property, commercial law, trusts and estate work.
METROLAW, 169a Ponsonby Road, T: 09 929 0808, www.metrolaw.co.nz
Spacious and timeless
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FINAL VIEWINGNEW LISTING
Nestled in a quiet spot, and after 25 years, this stunning three bedroom townhome comes to the market for the very first time. Clever design combines abundant light, voluminous spaces and green outlooks through the huge windows. The ground floor double bedroom with ensuite overlooks the truly well kept designer garden. The expansive middle floor, with two separate living areas & stunning open plan designer kitchen. Upstairs, retreat to the two double bedrooms, bathroom/en-suite and fabulous roof deck with Sky Tower views. Double garaging plus one visitors park - a rare commodity! The owners are off on a new adventure. Viewing a must. bayleys.co.nz/1671656 3 2 2 2 1
Auction (unless sold prior) 2pm, Wed 11 Aug 2021 Bayleys House, 30 Gaunt Street, Auckland View Sat/Sun 12-12.45pm or by appointment Suzie Paine 021 976 008 suzie.paine@bayleys.co.nz
BAYLEYS REAL ESTATE LTD, PONSONBY, LICENSED REAA 2008
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@ACQUIRE FINANCIAL
Acquire Financial is your GPS on your financial journey, helping you navigate to your financial destination.
Tell us about your background? I have been working in the Financial Services Industry for just over 12 years after moving from the United Kingdom. I worked in roles with Westpac before moving to financial planning providing individual personalised financial advice. The next step was setting up my own financial planning practice and Acquire Financial was born. I have been a financial adviser for the past 11 years and love helping New Zealand clients achieve their financial goals.
Tell us about the services you offer? Acquire Financial’s vision is to help as many New Zealanders as possible to achieve their financial goals, whatever stage they are at on their financial journey. At Acquire Financial we like to build long lasting relationships by helping clients in all aspects of their financial lives. We understand that everyone’s financial situation is different and tailor our financial advice to each individual and family’s situation, ensuring that they can achieve their financial goals whilst living the life that they want to live.
We believe that it is about finding the right balance. We are able to help clients with mortgages, investments, Kiwisaver, retirement planning, insurance and general financial planning allowing us to help clients throughout their entire financial journey. I believe that every financial goal is achievable as long as you have the right financial plan.
What is the feedback from your clients? I sometimes wonder why I do what I do, but it comes back to one simple message, which is to be able to help everyday Kiwis achieve their financial goals; whether that is buying their first home, next shop, getting set up financially or planning for retirement, I am with them every step of the way. There’s a lot that goes into a financial plan and the journey that I take with my clients. It is the peace of mind that I give them knowing that I am always there to provide the advice they need, when they need it and that they have their financial life under control. PN
For further information email richard@acquirefinancial.co.nz
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