8. What happens to the elderly and those that own houses but don’t have an income?

8. What happens to the elderly and those that own houses but don’t have an income?


That’s all about transition and as per my speech, the subject of negotiation with the government. Our preference is to allow home owners over 65 to pay the tax via a mortgage to the IRD, payable on change of ownership of their house, hence avoiding any cashflow issues. 

Showing 37 reactions

  • kate smith
    followed this page 2017-06-28 13:22:10 +1200
  • Chris O'Halloran
    followed this page 2016-12-13 23:37:46 +1300
  • Aaron Sowry
    followed this page 2016-12-08 13:47:31 +1300
  • James Turnbull
    commented 2016-12-07 23:13:22 +1300
    To reply to – Anthony Bew commented 2016-12-07 09:46:10 +1300 · Flag

    The answer is given below my friend … It appears that ‘as you’re likely to be dead soon neither your contribution to date nor your opinion here matters !

    I too Sir am now wondering at the wisdom of having joined ‘this’ as a protest against the ‘that’ which has regarded us as dumb units of milkable production for so long
  • James Turnbull
    commented 2016-12-07 22:57:21 +1300
    To Oliver I quote You " Rates are not taxes, they are fees for services rendered. "

    Utter nonsense … a fee for services rendered would alway be linked in some way choices and also to the quantity of service consumed and I’d have a choice of providers and the choice to say ‘no thanks I don’t want it’

    With local body rates I have none of those thingsFurther I have no right to contest those fees and if they remain unpaid the council place a statutory oder against my property.

    To Johanthon Spencer … You will excuse me being equally blunte then ?

    At core the older people who have built this country and in recent years seen it decline under the governance of woolly minded economic theorist have more interest in the long term survival of the country … we have families, children and grandchidren and perhaps great grandchildren or beyond whom we think of constantly,

    Your dedication and that of (some) others seems only to the notional perfection of your own you untested economic theories … like many before you you behave like kids in a big digger …yanking on levers with no idea what they are connected and less care for the destruction and chaos that follows.
  • Tim O’Donnell
    commented 2016-12-07 22:16:33 +1300
    This is probably the biggest part I disagree with Gareth. Once a person retires it’s theirs. Don’t rip away their independance after years of hard work & dreaming of financal freedom. You may not be physiclly taking their money from them but it’s the same thing as you’re slowly taking their house out from under them
  • Jonathan Spencer
    commented 2016-12-07 21:53:39 +1300
    Hi Gareth, this is an interesting idea. From the comments, those most against it appear to be older folk with assets, yet limited income. I can understand their angst so maybe a gradual introduction would be the way to go if this was possible? Excuse my bluntness but these folk probably won’t be around in 20 years time. Therefore while they should be treated fairly, their objections are no reason to discard the idea. I totally support the concept of restoring fairness for future generations. I worry a great deal about how the odds are stacked against my kids ever being able to afford a home in the city of their birth (Auckland). This is radical thinking and I like where you’re coming from. Looking forward to the evolution of this idea over time and to the release of more detail and the other policies.
  • Bruce Thomas
    commented 2016-12-07 21:00:34 +1300
    Gareth. this will be difficult I am afraid. some commentators are dissing you for talking down to them as if it were an econ 101 course, while others are making statements simultaneously which demonstrate how difficult it will be for people to lift them selves above self interest and look at what is good for the country and future generations. it would be possible to show how this policy will restore housing as a human right and not as an investment, and that a deposit would be affordable for most in time. But you have your work cut out I think. The nimble culture is alive and well.
  • Jaylene Witehira
    commented 2016-12-07 20:31:50 +1300
    Totally against this, it presumes if you can afford a house you can afford a tax (wealth tax, property tax, estate tax, however you want to spin it). What good would any tax cut be if NZ is in recession, lost our jobs and now the government has its claws into the one asset they think will save all our countries problems. I’m especially concerned for Maori who hold property not for its theoretical rent potential, not because they seek to horde wealth, but because cultural connection is like DNA. If its about wealth reallocation, would support a gains tax on share transactions but not the family homestead!
  • Julie Webb-Pullman
    commented 2016-12-07 19:02:30 +1300
    This tax on homes reveals a worrying primacy given to economics over human values – a primacy I thought TOP was supposed to be reversing. A home is NOT an investment, it is one of the fundamental human needs for survival – that of SHELTER. People buy a home to SHELTER themselves and their family – housing is a HUMAN RIGHT not a freaking investment. The example reveals an arrogance that shocked me, too – it shows how out of touch TOP actually is with the 80% if they think everyone has $300,000 lying around to invest, and decides, oh think I’ll buy a house, nah, put it in the bank, yeah nah, the stock market. That is NOT the reality – scraping together a deposit (which is rarely $300,000) by saving for years and borrowing off family and friends, then getting a hefty mortgage is how most people do it.

    The lack of detail in the policy is no different from every other political party – again, I thought that TOP was going to distinguish itself by having evidence-based policies – well, that requires more than throwing around a few numbers about generalisations, it requires actually telling us PRECISELY how this policy is going to be applied – and it does not.

    The policy is so full of holes, and others have already pointed out some, but here is one I have not seen yet that shows just how crazy it would be: a person builds/improves their own house using their own labour – for which they do not get paid, but actually get TAXED for!!

    There is NO WAY I will ever support a tax on a primary family residence – tax the owners of holiday and investment properties as much as you like, but keep your mitts off such a fundamental human need, especially one that is not generating ACTUAL income, but that by TOPs own admission is merely a source of potential income. What next – a baby tax?
  • Steve Cox
    commented 2016-12-07 16:32:50 +1300
    Hi all
    Years ago I read Gareth’s book “The Great Kahuna” in which this idea was espoused. It’s not quite the same but close enough.
    As i understand it as far as this policy is concerned I’ll give you a few numbers to explain: –
    You own a $1m house in Auckland, mortgage free. A deemed Rate of Return is set at say 6%. That is what you should earn if you are renting it out to someone else. So $60,000. The tax on that is $20,000 (round numbers OK?).
    Now the Income Tax rates are dropped to give you back some, all or more of that $20,000.
    if you’re earning $200,000 a year (and who isn’t?) then for this to be neutral your average tax rate would have to drop by 10%. You’d take home an extra $800 a fortnight in your pay packet, then pay it back with this tax.
    So as you can see, for the elderly, this is going to cost them because National Super just isn’t that generous. Hence why the Policy lets the retired have a mortgage with IRD.
    I could be totally wrong. So a set of five examples would be a great help for people to get their heads around this.
  • Gareth Morgan
    commented 2016-12-07 16:23:20 +1300
    This Thread is getting of track. The topic is specifically on what happens to elderly . With our policy They face no cash flow issues whatsoever. What the face is in effect an estate duty like they have in the US and the UK.

    Now if you have other concerns around the policy you can voice them over here. http://www.top.org.nz/how_would_you_make_new_zealand_fair_again

    Try to keep things organised folks. It helps people understand the issues.
  • Vicky Le
    commented 2016-12-07 16:11:03 +1300
    The policy is not realistic and fail to address the issue (affordable houses).
    1. Why it is not realistic?
    - The income generated by renting your house cannot be calculated as it is based on many factors: the house itself, the market price, duration of occupation. You cannot make any assumption about the rent you would earn, for example you cannot the rent the house out for the whole year but you still have to pay tax.
    - If you are taxed as you live in your own house which is considered as a productive asset, so how about land, boat (you can rent it out too). Are you going to tax those things even they DO NOT bring any ACTUAL income
    - Taxing people as they living in their own houses or enjoying their comfortable lives (boat, fishing, etc) seems to be based on the assumption that those assets DEFINITELY WIIL MAKE MONEY, which is not right at all. Those ‘taxing’ do not tax actual income, they tax ‘expected’ income, and no one can define how much ‘expected’ income is as people have different skill, abilities to earn different amount of money with same resources.
    - If people have to pay for the mortgage, how can it be counted?
    2. Why does it not address the issue of unaffordable housing?
    - Once you have to pay tax for living in your own house, price/cost for having your own house will increase, then it becomes less affordable

    My general ideas:
    1. The policy is wrong in term of principal economic rules: you only can tax ACTUAL income, you cannot tax EXPECTED income
    2. I agree with capital gains tax as it is ACTUAL income
    3. In term of addressing housing problem, I would vote for STOPPING oversea buyers.

    I hope that the people who are working on policy formulation will listen, OR we should have meetings with party members rather than a group of people (and I do not know who they are) creating some unrealistic thingy.
  • Oliver Krollmann
    commented 2016-12-07 15:54:08 +1300
    James – I’m just a taxpayer. I’m not (and have never been) a member of any political party, and I haven’t decided if to become a member of TOP or not (that will have to wait until after TOP 7 has been released and I have the complete picture). By knee-jerk reaction I wasn’t referring to people who disagree with me, but to opinions of people who don’t make an effort to understand the reasoning behind the policy, or people who joined early but now bail out after TOP 1 without even giving TOP 2 through TOP 7 a chance or trying to become well-informed. As for the income you receive from living in your own home, that is reasonably well explained in the policy and the FAQs, particularly when comparing home owners, investors and renters, however, I agree that it might need more examples and explaining in even simpler terms to become more understandable.
    Asta – nobody should be up to their necks in mortgage debt, because it’s reckless and irresponsible to do so. If you can’t afford it, don’t buy it. Nobody pressured these younger people (unless you count our obsession with having to have our own home at all cost), and I don’t feel sorry for them. However, even if you were that much in debt, you’d only pay “home owner income tax” (for lack of a better term) for the difference between the value of your property and the amount of debt, which would be small initially, and grow over time, as you pay back your mortgage.
    Anthony – we haven’t seen any numbers yet. The overall effect on you or me might be zero or negligible, once the numbers have been worked out. Don’t make the mistake to assume that all of this will cost you personally, and a lot, and from tomorrow. The first time I read the policy I thought “oh, that’s gonna hurt me in the pocket”, too – but the policy states that it’s not a new tax on top of all others but a redistribution, so in the end the not-so-super-rich among us might not have to pay more at all – or we’ll be able to afford it because of higher interest rates on our financial investments or higher wages or tax cuts in other income areas. Let’s see how this plays out first.
  • James Turnbull
    commented 2016-12-07 15:36:45 +1300
    Anthony Bew … I too share your disappointment.

    The answers in the FAQ are minimal and there’s a common failure to support any given hypotheses … I feel like I’m being talked down to by a first year economics student who thinks they know it all. I’m verging on angry and absolutely disappointed by everything I’ve seen here today.

    Even the answer concerning UBI .. it’s facile and misdirecting as it suggest there are no payment systems in place to support people who are caring in the community. There are and the ‘actual goals’ of UBI were never intended to be so that Harry could support Sally, the authentic notion was to provide for EACH to be self supporting at a basic level.

    This is IMHO all material that ought to have been open to all ahead of being announced as policy. It’s like computer software companies who launch products ‘too quickly’ and then make the punters (members) do the work of debugging.

    It’s on those grounds alone that I’m staying … but it has to be better thought out and better delivered that anything I see so far!
  • Oliver Krollmann
    commented 2016-12-07 15:29:25 +1300
    Rates are not taxes, they are fees for services rendered. It’s probably a daunting task to come up with a fair property value on which to base the tax, but we should have the data to come up with an approximation that is within acceptable limits. We already have land values and property values that are used to calculate our rates. As far as I understand the policy, the taxable value would be property value minus any mortgages or other debt, according to http://www.top.org.nz/so_i_will_have_to_pay_tax_on_the_deemed_income_from_the_whole_of_my_house
    I’d be okay, too, if every person would be granted an exemption of for example $300,000 for any kind of capital that would not be taxed for income. Home owners could choose their homes to claim that exemption and continue (up to that amount) to live tax-free in their homes, while renters would be able to invest up to that amount in any kind of investment, and receive interest or dividends tax-free. Of course we’d have to come up with a way to compensate for the shortfall of tax created by that exemption, most likely by raising tax rates evenly across all income types. So why not simply tax everyone and everything fairly instead? I don’t see that to be a limitation of anyone’s rights, or increase bureaucracy.
    As for cars, window taxes, taxes on household and DIY work etc. I think TOP have answered that sufficiently in the FAQ http://www.top.org.nz/why_don_t_you_charge_tax_on_all_non_cash_transactions_for_example_when_i_cook_and_eat_a_meal_myself
  • Anthony Bew
    commented 2016-12-07 15:18:30 +1300
    It is now obvious to me after reading all the other FAQs that this Policy number 01 is the CORNERSTONE of the TOP party policy. So my mistake for joining I resign.
  • Asta Wistrand
    commented 2016-12-07 15:09:13 +1300
    Not my mistake, it’s yours. What about younger people who are up to their necks in mortgage debt as many are? Are they too expected to pay tax on top of everything else because they are living “rentfree”? Better tax their kids and pets too.
  • James Turnbull
    commented 2016-12-07 15:06:48 +1300
    To Oliver Krollman … so, if we don’t like your idea then we’re ‘knee jerkers’ … this is retrograde, hurtful and it isn;t won hearts, minds, votes or members. Let me ask – are you writing as amember or in some capacity as part of the party establishment?

    Reality check – many people have worked hard and ‘done without’ in order to have a future in retirement in which we might ease up a bit. The homes that we own have been bought and paid for out of tax paid income and the capital growth on ‘own home’ (ie not rental property is the ONLY tax break that person on PAYE ever gets.

    It’s it’s utter and entire crass nonsense to claim that there is any INCOME from living in your own home

    INCOME is defined as " The return IN MONEY from one’s business, labour, or capital invested; gains, profits, salary, wages, etc. " For sure, no one is giving me any money for living in my own home and my fixed income isn’t growing at anywhere near the CityCouncil rates increase.

    So, what do YOU plan … we have to a rating assessment, and then we have to have a rental assessment … and, when foreign buyers have bought most of the housesand pushed up rents YOU are going to claim that MY income accellerated do now I have to pay more tax?

    What if I live longer and my IRD Mortgage exceeds the value of my home … don’t say ‘It can’t happen’ that’s not an answer.

    Winston Peters is going to have such a howling screaming fit of laughter when he reads this … it has to be a joke ?

    Anthony Bew … why stop at a window tax, why not do a Thatcher Style Poll Tax and charge people for existing ?
  • Anthony Bew
    commented 2016-12-07 14:56:07 +1300
    Also Oliver, it is fallacious to compare money in a savings account or shares with money invested in one’s home. The home owner has already paid enormous amounts in tax, in the form of rates, towards the upkeep of the community. They have also paid the upkeep costs of the property which keeps people in work and contributes GST. The term deposits shares savings etc have not.
  • Earl Mardle
    commented 2016-12-07 14:54:29 +1300
    The principle issue for me is who deems how much income a given property has “earned”? This would naturally vary significantly between a central Auckland 1,000 sq/m place and an identical sized and constructed building in Westport. What is to be the benchmark? How much food could be grown on that piece of land if conventionally farmed, or should that be farmed sustainably? Or, in the case of Auckland central would the benchmark be a retail property in the same location, commercial office property or a factory/warehouse? Would the deemed income change from domestic rental when someone has to give up their job to care for a sick or disabled relative? Would that deemed income become that of a managed care facility for example?

    Until we can agree on how that deemed income is arrived at, and the actual “value” of the property rather than the assumed value based on CV, we are just shooting the breeze. If, for example, the entire capital housing stock of a community was placed on the market, its assumed value would be rather less than if it was sold one house at a time over many years, which should we choose? And what happens during a downturn when the capital value of real estate can, has, and will fall rather than rise? Will the state compensate those who have “lost value” or, lets say averaged over 20 years, paid more than their “fair share”?

    On a more fundamental note, my concern is that the only assumption you make about capital is that it must be “employed” for profit; who says so? Would those who have borrowed money to buy this property be allowed a deduction for the costs of that debt as any commercial property does, or are you proposing that commercial debt no longer be deductible? If we are going to assume that all; property earns, why should any property be given any preference over any other?
  • Anthony Bew
    commented 2016-12-07 14:45:34 +1300
    Oliver, Why stop at houses? What about your car? You could be renting it instead. You should be paying tax on that asset as well when you sell it because if you saved the money you would pay tax on the interest. What about any asset? More taxes, more laws, more loopholes for the rich, more bureaucracy, more limitations on peoples’ rights. Sorry I was looking for something innovative than this. Maybe a window tax??
  • Vicky Le
    followed this page 2016-12-07 14:28:01 +1300
  • Oliver Krollmann
    commented 2016-12-07 13:26:11 +1300
    Asta, you have two incomes – super and the (currently not taxed) free accommodation your own home provides, and which you’d have to pay for out of your net income if you rented.
    You’re probably making the same mistake many people make, by looking at the paid and mortgage-free home as some kind of a final state or end of the road that deserves special treatment, when in fact it’s just like any other investment you could make. For example, if you sold your paid home, invested the money in shares or term deposits, earned interest and used that to pay rent, you’d be paying tax on the interest. We all accept that because we see the income and tax numbers on the statements – we’re just unwilling to accept that our own homes provide us with an income, too, just not one that you can simply deduct PAYE or RWT from and be done with it.
  • Asta Wistrand
    commented 2016-12-07 12:56:22 +1300
    Gosh, I was really excited by your party until I read this policy. I’m 70 and my husband will be 75 later this month. We have been wager earners all our working lives and now, finally, own our own property. The current ratable value is $230,000, though we would be very hard pressed to sell it for this amount. Our only income is super. So now you are saying that on top of the amount taxed on super and our rates we pay to the local authority, you want to tax us further by way of a mortgage to IRD. No way mate.
    And do I understand correctly that if I help a mate cut and store firewood, that you will tax him/her for the work done? Also, if a family member comes to stay for a few days, will you tax them for their accomadation and for the food we provide them? This part of your policy makes me want to go out and make friends with a feral cats (we usually shoot them). Well done on the rest though.
  • Oliver Krollmann
    commented 2016-12-07 11:47:04 +1300
    Interesting to see some knee-jerk reactions, without even having had the chance to do the math and check if you’d be better or worse off (ignoring the fact that this is all about restoring fairness, not putting yourself first yet again). But good to see some support as well.
    If TOP 1 became implemented and phased in, and you were unhappy with it as a home owner, you could still sell up in time, make some tax-free bucks out of it, invest it in shares or term deposits or other financial assets, become a renter, and you would even pay your fair share of tax that way.
    Looking forward to TOP 2 through 7, and please don’t hold back because some think it’s too controversial or too much change at once. People have become tired and jaded about politics and been asking for a fresh approach. If you watered the TOP 7 down or made them more palatable to woo voters TOP would only present itself as yet another Establishment Party.
  • Paulette Hirschman
    followed this page 2016-12-07 11:08:16 +1300
  • Peter Carey
    commented 2016-12-07 10:35:22 +1300
    I think people are panicking here a bit, I don’t believe the intention is to bring such a policy in immediately but phase it in. If you’re already in that age group then you’re probably not going to face much change, I would hope its talking about the next generation entering into that phase. The whole point is, though, to move away from only thinking of assets that are purely property-based. I also can’t get too worried about passing on such assets to children tax-free. Hopefully most of our children are independent but if they’re not, they’re still getting an asset for nothing! They didn’t earn it, why should anyone because of the luck of birth, get such an advantage while others don’t? Frankly, if my parents passd their house on to me and I had to pay a mortgage on it I’d still be bloody grateful! However, we do need to know on what time scale this is going to occur so people, espcially those who have limited flexibility, can be assured that they aren’t going to have the rug pulled out from under them. I’m in my mid 50’s so I have time and the flexibility to restructure my finances accordingly but agree others don’t.
  • George Adam
    commented 2016-12-07 10:20:30 +1300
    We lived in France for a few years prior to returning to New Zealand.
    We paid two taxes each year on the property we owned, Tax Habitation, your suggested “rent” on homeowners and Tax Fonciere, our rates.
    Tax habitation stopped at age 60, rates obviously carried on.
    There were also capital gains tax, on sale of property, on Non EU citizens and on all owners of second and subsequent homes.
    Income from rental properties is taxed and deductions severely limited.

    Your suggestions are, I hope, only a part of your tax policy, before I join the party I look forward to seeing all your policies, not just revenue.

    Might pay to speed up the process, could be an election sooner rather than later.
  • John Stroh
    commented 2016-12-07 10:15:14 +1300
    I too have a Supergold card and am chuffed that the Government is paying me to stay alive. I still have a bach, the only remaining capital asset that remains after using most of my life savings on battling cancer in the family. I now pay a modest weekly rental and work at just above the living wage to supplement fortnightly superannuation payments. I may have to sell the bach if and when I can no longer work. I UNEQUIVOCALLY and UNRESERVEDLY SUPPORT this policy.
    After a lifetime in corporate and small business and the now distant memory of a degree in Economics, I firmly believe that this policy is not only workable, but is in fact the only overall taxation strategy that will, over time, restore fairness to the New Zealand tax system. I see it as my duty to make every effort to give the next generations real opportunities to assert their financial freedom. As it stands, the current system will continue to cripple those 80% of New Zealanders who TOP is trying to help. As I understand it, the tax savings from lower tax rates for those 80% should largely if not wholly offset the proposed tax on home ownership. And if not the policy “to allow home owners over 65 to pay the tax via a mortgage to the IRD, payable on change of ownership of their house…” should address any shortfall in cashflow. Go Gareth. Thank you!