RNZ's money correspondent Susan Edmunds answers your questions. Photo: RNZ
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According to the IRD website, "If you only earn income that's already taxed like salary, wages or investment income, then there are several sorts of non-business expenses you can claim".
However, it is not clear to me with regards to investment income whether we can claim the Shareholders Association fee, magazines, etc. as expenses. Can you help me to understand, please?
I spoke to Oliver Mander, chief executive of the NZ Shareholders Association about this.
He said it would depend on whether you were making taxable income from your investments.
- Do I have to use my KiwiSaver to pay for my partner's care? Listen to No Stupid Questions with Susan Edmunds
If you are, then you can claim spending that helps you to make that income, which may reduce the tax you have to pay on it.
"If you're not generating taxable income then probably not. If you're a member of the NZ Shareholders Association and paying a subscription fee, and generating income from investments then it is likely that fee will be tax deductible."
If you have a main job paying PAYE, you can usually claim costs against any taxable income you earn outside that. (You'll also need to pay tax on the income).
If there are expenses in relation to your PAYE job, you'd usually claim those from your employer - they could then claim against their business income for tax purposes.
Deloitte tax partner Robyn Walker said there were two key things to be aware of.
"Deductions are able to be claimed for the cost of deriving income or carrying on a business of deriving taxable income. In tax lingo, this is known as the general permission, and it can be found in section DA 1 of the Income Tax Act 2007.
"However, there are specific prohibitions on claiming any expenses which are (1) private or (2) related to earning income from employment, amongst other things. In tax lingo, these are known as general limitations and they can be found in section DA 2 of the Income Tax Act 2007.
"It is because of the private and employment limitations that people can't claim deductions for things like buying a suit for work or travel to and from work. There are very few things that deductions can be claimed for, which is largely limited to (a) certain income protection insurance premiums and (2) paying someone to prepare your tax return."
She said the employment limitation did not apply to sole traders or contracts.
"But it is necessary to consider the private limitiation when determining whether you can claim deductions. In those circumstances, you generally still can't claim tax deductions for clothing or food (private), but you could claim deductions for costs of a home office and work related use of a vehicle etc. When it comes to things like costs related to making investments, then these may be able to be deducted. There are also specific rules which allow a deduction for the cost of borrowing money to buy shares (refer to section DA 5)."
My husband is 10 years older than I. We are fortunate to both have individual KiwiSaver accounts with healthy balances. My question is: If my husband requires residential care, if we do not qualify for any state rebates/assistance, and if I am also over 65 years, does my KiwiSaver count as relationship property and therefore have to be used to fund his care? Of course, I will support him, but I don't think it is fair if I am then left with very little KiwiSaver in retirement, as I have saved for retirement since KiwiSaver was introduced.
Yes it does.
I have had quite a few emails over time from people who are concerned about this prospect.
If either of you needs rest home care, you will only be eligible for a rest home subsidy if you have joint assets of either $291,825 or less, or $159,810 if you don't include your family home and car.
That means you will need to run down investments like your KiwiSaver until you get to that level. Even a contracting out agreement is not enough to stop this happening.
I am not aware of any way to avoid this happening - I know some people set up trusts in the past but that generally will only work if there is another reason for having the trust, beyond trying to protect your assets in this scenario.
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