Last week, a reader suggested this as a way a retired couple could generate some cash. But, as you point out, there can be complications.<\/p>\n
Your comments are generally correct, tax expert Terry Baucher of Baucher Consulting says. \u201cIf the owner sells their holiday home in the course of operating the holiday home business, there may be GST payable on sale if the holiday home has been wholly or partly used for making GST-taxable supplies.\u201d<\/p>\n
I asked Baucher what he thought you meant by \u201cin the same entity\u201d. \u201cIt probably refers to the problem of having a residential property owned by an already GST-registered entity, such as a trust,\u201d he says.<\/p>\n
\u201cThe GST registration threshold of $60,000 applies per taxpayer (ie entity). This means that if a trust owning a commercial property, and therefore GST-registered, also owns a residential property which is then used as an Airbnb, then all the income from the Airbnb is subject to GST.<\/p>\n
\u201cFurthermore, as your reader notes, GST will be payable on sale on the portion of the residential property used as an Airbnb.\u201d<\/p>\n
Baucher adds some tips for bach landlords:<\/p>\n
\u201cKeeping detailed and accurate records of all income and expenses for the holiday home will help ensure compliance. \u201cMaintaining a separate bank account for transactions associated with the holiday home is also important, as it differentiates the owner\u2019s private use from taxable use of their property. \u201cIf the Airbnb is used by the owner, this may trigger the \u2018mixed-use asset\u2019 rules. These rules are complex and can create compliance difficulties if not carefully managed.\u201d He refers readers to a page on Inland Revenue\u2019s (IRD) website called \u201cRenting out a holiday home\u201d. See\u00a0 tinyurl.com\/RentingHolidayHome.\u201cWhen calculating if the GST $60,000 threshold has been breached, you must include the deemed market value of any private use. For example, if you charge $250 a night and your Airbnb income is $52,000, but you and friends or family have also stayed at the property for, say, 40 nights, then the deemed value of these stays will be $10,000 (40 times $250). Once combined with the other income, this means the $60,000 GST registration has been exceeded and you must register. GST is not always the simple tax people think it is!\u201d<\/p>\n
It sounds as if a conversation with an accountant and a reading of the IRD\u2019s web page is advisable before renting out a bach.<\/p>\n
There can be other problems too. You really need a Johnny or Jane on the spot to manage the place, but local property managers don\u2019t all perform well. And my guess is that short-term holiday tenants are more likely than long-term tenants to hold parties that can leave damage.<\/p>\n
Still, for some people, renting out a holiday home makes it viable. Given the income some beautifully placed properties can bring in over summer, it can work well. <\/p>\n
Take care <\/p>\n
Q: Regarding your Q&A last week about scams, what\u2019s wrong with providing people with your bank account number? They can put money in, but they can\u2019t take money out, right? I tell people my bank number all the time so that they can pay me.<\/p>\n
A: Good question, which I\u2019ll get to in a minute. But first, I probably got it somewhat wrong in that Q&A last week.<\/p>\n
The letter you refer to was from a reader who had responded to an Instagram advertisement falsely claiming I would tell her which shares to buy. Facebook was running similar ads.<\/p>\n
The scammers had asked for her bank account, claiming they would compensate her after one of the recommended shares lost value. This made her suspicious.<\/p>\n
While she hadn\u2019t given them any bank details, I said in the Q&A that anyone else who had done so should immediately contact their bank \u2013 which prompted your letter.<\/p>\n
I then went on to say to her: \u201cIf you continued, somewhere along the line you would be sure to give the scammers way more money than they ever gave you. And that\u2019s the last you\u2019d see of it.\u201d<\/p>\n
However, a Financial Markets Authority (FMA) press release suggests the scheme was of a different, particularly sneaky type that has become common lately.<\/p>\n
\u201cPump-and-dump\u201d scams use social media ads \u201cimpersonating business leaders or financial commentators [and] encouraging investors to join a fake investor chat group\u201d, the FMA says. \u201cThe scam is part of a global network of scams aimed at market manipulation.<\/p>\n
\u201cThe scammers may initially recommend purchasing shares of a large, well-known company such as Nvidia or Tesla. This is a tactic to build trust before drawing potential victims into the pump-and-dump scheme.\u201d<\/p>\n
After a while, the scammers buy shares in a smaller overseas company. They then \u201cuse social media and online forums to create a sense of excitement about buying the company\u2019s shares by spreading false information about the company\u2019s prospects. This excitement and interest artificially drives the share price up as they lure investors\u201d.<\/p>\n
\u201cThe scammers then sell (or \u2018dump\u2019) their holdings at the inflated price. When the share price collapses, victims are left bearing the loss.\u201d<\/p>\n
And that\u2019s not the end of it.<\/p>\n
\u201cAfter a victim suffers a loss, the scammers\u202foften\u202fclaim, falsely,\u202fthat the victim is entitled to compensation or reimbursement. The scammers then collect personal information and further payments from the victims,\u201d the FMA says.<\/p>\n
They may also present \u201copportunities to trade out\u201d of the losses, or support to recover lost money. Don\u2019t be sucked in.<\/p>\n
\u201cWe have received a number of complaints, with multiple victims having lost significant amounts,\u201d John Horner, FMA director of markets, investors and reporting, says. \u201cThese complaints are likely only the tip of the iceberg.\u201d<\/p>\n
If you have been caught in a pump-and-dump scam, the FMA gives advice at tinyurl.com\/ScammedFMA.<\/p>\n
Its main message: stay away from social media investment tips. I go further than that. I don\u2019t think anyone \u2013 legitimate or not \u2013 is good at picking which shares to invest in. They may get it right for a while, but not for long. It\u2019s far wiser to invest in a managed fund, in or out of KiwiSaver, that invests in a wide range of shares.<\/p>\n
Okay, finally to your question about giving others your bank account number.<\/p>\n
\u201cThat question is probably best answered by the banks,\u201d FMA regulatory services manager Sam McGuire says. But, he adds, \u201cOnly those with authority should be able to access your funds (through account mandate or an authority like a direct debit).<\/p>\n
\u201cHowever, there are circumstances where remote access software can be loaded which will enable access, or you can be manipulated into making payments.\u201d<\/p>\n
He recommends taking care about who you give account info to, and to also conduct \u201cregular reviews of your details with your provider, using strong passwords and enabling extra features such as multi-factor authentication\u201d.<\/p>\n
McGuire adds that further contact from scammers can happen years later.<\/p>\n
As Sergeant Phil Esterhaus said in Hill Street Blues, \u201cLet\u2019s be careful out there\u201d.<\/p>\n
Managed, active, passive?<\/p>\n
Q: Looking at InvestNow and their Foundation series funds, they are advertised as managed funds, but appear to be tracking an index such as the Foundation Series Hedged US 500 Fund.<\/p>\n
They have been described as a passive managed fund. I just want a passive index fund, so does this fund meet that criteria?<\/p>\n
A: Yes it does. Let\u2019s start with \u201cmanaged fund\u201d. This is a broad term that covers all funds that invest in a range of shares, bonds, other investments or combinations of these.<\/p>\n
Managed funds can be divided into active funds, whose managers decide what to invest in and when, and passive or index funds, whose managers simply buy and hold the shares or bonds in a market index.<\/p>\n
The latter are cheaper to run and, over time, tend to perform at least as well as the average active fund, while charging lower fees.<\/p>\n
You\u2019ll notice I\u2019ve lumped passive and index funds together. A few passive funds don\u2019t use an index, but still buy and hold shares in a sector of the market in much the same way as an index fund does. Generally, though, the terms \u201cpassive\u201d and \u201cindex\u201d are interchangeable.<\/p>\n
By the way, can I suggest you consider a global fund rather than a US one? You reduce risk by not depending on the performance of just one economy.<\/p>\n
Proving who you are<\/p>\n
Q: Thank you for your column explaining the \u201cKnow your Customer\u201d obligations that banks have.<\/p>\n
My wife opened an account with the Teachers Retirement Savings Scheme when Government Superannuation closed. Her account was transferred to SuperLife four years ago.<\/p>\n
All was well until we sought to advise Superlife of our new address. My wife has neither a driver\u2019s licence nor a current passport, but SuperLife demanded she furnish one or the other. One member of the staff would even accept a cancelled driver\u2019s licence.<\/p>\n
This is not a new problem. The former Teachers\u2019 Council, however, would accept an 18+ Card (now a Kiwi Access Card), but not SuperLife. It seems from your comments that there were alternatives available to us but not known to SuperLife.<\/p>\n
Do you think SuperLife might have been interpreting the rules rather stringently?<\/p>\n
A: Firstly, while SuperLife is not a bank, the same rules apply, the FMA says. \u201cBanks and providers of KiwiSaver and other managed funds, such as SuperLife, have the same customer due diligence obligations (also known as \u201cKnow Your Customer\u201d rules).\u201d<\/p>\n
When we look at those rules, it seems there\u2019s been some miscommunication between you and SuperLife.<\/p>\n
\u201cWe do not request identity documents for address updates (as a standard process),\u201d Simon Beattie of NZX, the owner of Smartshares which manages SuperLife, says. \u201cIn certain cases, such as when we\u2019re unable to verify the member\u2019s identity appropriately due to discrepancies, we may request additional documentation to ensure the request is legitimate or that we are speaking with the correct customer.\u201d<\/p>\n
Even if that was your wife\u2019s situation, \u201cWe do accept the Kiwi Access Card as a valid form of ID when conducting customer due diligence for anti-money-laundering purposes.<\/p>\n
\u201cHowever, in line with our interpretation of the requirements of Anti-Money Laundering obligations, it must be supported by additional documentation (eg birth certificate or citizenship certificate) to meet requirements.\u201d<\/p>\n
Information from the FMA backs up what Beattie says: a Kiwi Access Card plus a birth certificate or similar should be sufficient ID.<\/p>\n
Presumably your wife has a birth certificate. So what should she do now?<\/p>\n
\u201cWe understand this situation may be frustrating, and we\u2019re here to help,\u201d Beattie says. \u201cGiven the limited information available, we recommend they contact us directly by phone. They\u2019re welcome to escalate their concerns to one of our contact centre team leaders for further support.\u201d<\/p>\n
He adds: \u201cWe suggest this customer log in or sign up to our secure customer portal, where they can view their investments and change their contact details (including address details). We\u2019re also happy to assist with setting up the secure customer portal.\u201d <\/p>\n
You might want to take up this offer.<\/p>\n
A bouquet to a bank <\/p>\n
Q: Last week\u2019s letter about the homeless guy and the need for banks\u2019 Know Your Customer rules was the best letter in a long time.<\/p>\n
I have been using a PO Box for the last 15 years. I rent, and my physical location is never guaranteed. I hardly ever receive mail to my physical address.<\/p>\n
Recently, I needed to open an ANZ bank account. I did bring in a letter with my physical address, but turns out it was older than six months, so didn\u2019t qualify.<\/p>\n
The ANZ were wonderful. They found a way to verify me. I won\u2019t mention it here, just in case scammers might find a cunning way of exploiting it. The main thing was that the ANZ dealt with it there and then. It probably helped that I took in extra verification to compensate.<\/p>\n
A: I often give the big banks a hard time in this column and ANZ has had its fair share of criticism lately. So it\u2019s good to acknowledge when they get it right!<\/p>\n
PS: Last week\u2019s homeless \u201cguy\u201d was actually a woman. It\u2019s funny how we leap to conclusions!<\/p>\n
* Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary\u2019s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com<\/a>. Letters should not exceed 200 words. We won\u2019t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice. <\/p>\n