[mathmussim]

Hello all -

Has the rising value of the NZ$ had any noticeable affects (good or bad) yet on life in NZ? (E.g., employment, wages, prices)

Thanks -

John

[Wannaway]

The high NZ$ (and continuing upward trend) is starting to become a higher priority here in NZ. Exporters are beginning to kick off about it now, particularly as the medium term prognosis seems to be a weak(er) US$. As I have said before, the high NZ$ has been masked by two factors - high commodity prices (so exporters of dairy, meat, wool etc have not felt the full effect of high exchange rates because they have been compensated by higher prices) and the effect of "hedging". The possibility of the Reserve Bank stepping in to cool down the NZ$ has started to be talked about here also, another sign that the issue is becoming of wider concern.

I think the hope is that the interest rate rise last week will cool consumer activity, stabilise prices and inflation (biggest pressure - wages, people are going to want more of the "good times" the country has generated recently reflected in their paypacket and to help them maintain their lifestyles). The problem is that most people have been insulated against interest rate rises over the last year or so because of fixing their mortgage rates. Statistics show that a lot of these deals come to an end this year, and people will see large increases in their mortgage outgoings as they gain full exposure to rate increases. This could push up wage demands and/or cool demand. The NZ$64,000 question is how hard will the landing be?

We are thinking of buying a house and the main factor holding me back is where exactly the ecomony goes over the next 12 months. It seems to me to be at a crossroads. If the Government get it right there will be a cooling off over a period of time, if they get it wrong it could get really messy for a while.

By the way, UK sterling is still holding up reasonably well despite the NZ interest rate increase. This suggests that the fundamentals of sterling still look strong, but to get what we all hope to get (2.70, 2.80 +++ etc), I think we need to see clearer signs that interest rates will be going up in the UK.

[Moorf]

In todays Press newspaper

http://www.stuff.co.nz/stuff/thepress/0,2106,3215725a6430,00.html

[foolsgold99]

http://www.westpactrust.co.nz/olcontent/olcontent.nsf/content/FM_Weekly_20050314/$FILE/NZWC1403.pdf?Open

interesting report from westpac, it predicts the pound buying 3.15 NZd by next June.

Gonna be worth renting for a year,and retaining capital in the UK

[tauma]

Anybody in NZ now with spare cash should pursue an options trade either Kiwi/Yen or Kiwi/$US. Or anybody sat on Kiwi $'s for that matter.

The Kiwi is too high and if you took out an option to buy NZ$100000 of US$ it would cost you only NZ$4000 with the option to conduct the trade in 12 months.

Lets say the Kiwi falls to US60 cents over 12 months you execute the option and walk away with approximately NZ$20000 after costs all for the original NZ$4000.

If it doesn't fall you don't execute and lose the NZ$4000.

You can do this with any amount but the minimum is NZ$2000 i.e an option on NZ$50000. Put simply the cost is 4% of the amount you wish to make the option for.

Worked example

I take out a 12 month option on NZ$100000 at 4% i.e I pay NZ$4000 to but an option to buy US$ at todays exchange rate (1NZ$=US75cents)

12 months later I execute the option but the Kiwi is now NZ$1 = US60 cents. So I sell my US bought at 75cents for Kiwi dollars bought at 60 cents. Voila NZ$125000-NZ$100000= $25000 for a NZ$4000 punt.

A Kiwi/Yen trade would be even cheaper as US$ options are the most expensive.

The option is for a fixed time period you cannot get out early or roll it over. They are normally 12 months for FX.

Good luck

[Wannaway]

That Westpac report makes for interesting reading. I definitely think it is worth sitting on sterling if you can. We have pretty much decided to stop even considering buying a house in NZ this year, on the basis that the exchange rate must start to improve as the year goes on and house prices are certainly not going to take off in the same period.

As for speculating on currency, I am not sure I would have the guts to take such a punt. Its OK if you have some spare cash you can play around with, but I would not put risk capital that underpins my family's future. I have heard so many conflicting views on the global ecomony, domestic economy (UK,US, Aus, NZ) to make me realise why being an ecominist is such a cushy number - you spout loads of theories which may or may not be proved right and put the blame on other people and factors when things don't pan out as predicted!

[bbq]

Hi All

Like everyone I guess, I am really interested in what happens to the rate. What is niggling in the back of my mind is an issue about what happens if you sell your house in the UK, more than (say) a year after becoming a resident of NZ. In the UK, I have this feeling that Mr. Brown will claim Capital Gains Tax as the house is no longer your home, which if you lived in your house for more than a few years could be very significant.

I know CGT is not payable in NZ on assets sold which were not held for trading purposes, but not sure if the double taxation treaty with the UK covers CGT.

Any experts out there willing to comment?

cheers

alex
:?

[Moorf]

BBQ - as far as I am aware if you don't rent out the house and it is still your main residence in the UK you won't need to pay CGT.

On another note, if you do leave your house empty for more than 30 days check your insurances as most become invalid if the house is empty for longer than this period.

Plus, if you leave your house empty with nothing drawing elec etc and no furnishings you can get away with paying no council tax too!

[bbq]

Thanks Helen

cheers

alex

[Wannaway]

Alex,

It is highly unlikely you will pay CGT in the UK on the sale of your house. Firstly, if you have left the UK to take up residence in NZ and you selll after leaving the UK, you should cease to be UK resident which would exempt you from UK CGT (there is a five year rule to think about re returning permanently, but that should not be an issue for other reasons). as you say, there is no CGT in NZ so no issue there.

Should you become liable to UK CGT on the sale of a property that was your "principle private residence" or PPR (ie it was your main home for a period of time), you are only liable for the period the property was not your PPR. Certain periods of absence from your PPR can be excluded from this liability, eg the last 24 months (may be 36 months now) of ownership prior to sale. That is, if you leave your home/PPR but sell it within 2/3 years those last two/three years are still exempt from UK CGT.

Not sure how clear that is, but generally it would take an unusual set of circumstances for someone to end up paying CGT on the sale of their main home (unless it was on a lot of grounds - have you got a mansion!?).

[foolsgold99]

Seems to be falling a bit now, the Pound now buys over 2.60 again now, it had dropped to 2.55.

Let's hope this trend continues :clap :clap

[Moorf]

Wannaway - it wasn't our main residence and hasn't been for over 12 yrs - I've had the flat for ages (bought it for my 21st b'day!) , it's declared as rented on our tax returns for years, and so I am liable. Having checked out the "Non-Resident Landlord" scenario I can pay rental tax on it here in NZ which I believe will save a few pennies (accountant is working on it for us!).

Plus, I will also have taper relief and indexation applies up to end 1998, so my CGT liability will be greatly reduced - the property is in my name only at present but adding Warren to the Title will enable me to claim for both our tax reliefs on the property which totals £17,000 (i.e. 2 x £8500) :nice1

Damn, no escape from paying it, was kinda hoping there would be a loop-hole somewhere! So we'll probably end up keeping it (we have this thought of selling every few months or so!! :laugh )

[Wannaway]

Moorf,

If you seel the flat whilst not a UK resident, you should not pay UK CGT. There is a rule about being a non-resident for 5 years or something, but if you sell when not UK resident there should be no UK CGT at that point in time. You should get your accountant to confirm this for you.

[Moorf]

Cheers Wannaway - Woz is investigating and would be really grateful if you could refer him to the IR doc number or a link to the info on the IR site (is it your partner that worked for them? Sorry, can't remember!! Looong day at work!). He'd rather start investigating himself cos our UK accountant at £50/hr isn't quite as cheap now we're here on NZ wages!! :?

Taa
Moorf

[richard]

Have you looked at IR20 - Residents and non-residents Liability to tax in the United Kingdom?

Section 8 is all about CGT. Bit confusing though :?

[Wannaway]

Moorf,

Here is the link the relevant IR publication.

http://www.inlandrevenue.gov.uk/pdfs/ir20.pdf

Your situation is covered by paragraph 8.4. The effect of this is that gains on assets resalised by you whilst non-UK resident will not be subject to UK tax unless you return to the UK to take up residence there within 5 full tax years of leaving the UK. So if you left the UK between 6 April 04 and 5 April 05, and you sell your flat whilst non-UK resident, to completely avoid UK capital gains tax you will need to remain non-UK resident until 6 April 2010.

How does it feel to be a tax exile?

By the way, the PMs have been coming from my (sickly) wife, who is the personal tax expert in our house. I specialise in company tax but have been known to dabble in personal tax, but I can stop whenever I want y'know, its not a habit.......

[Moorf]

Thank you Richard and Wannaway :nice1

[markkellaway]

Hi Guys,

To get back on topic, it looks like the NZ$ may have topped out. :hopeso

Looks like my money may be worth a bit more mid year. :clap

Mark. :P

[Moorf]

Sure hope so - am keeping off pulling rest over for a bit :hopeso :hopeso

[foolsgold99]

The dollar has dropped every day this week, the pound has gone from $2.55 to $2.62, not much, but hey it's a start.

When we're discussing the transfer of large sums of cash from house sales, even a couple of percent can make a big difference

[foolsgold99]

up another cent today, a pound now buys $2.63.

I hope this is the start of a sharp trend

[foolsgold99]

$2.655 now !!

Another couple of months of raises like this and I'll be able to afford a boat !!!

[sweetpea]

NZ$1 = US69.54c

Yay yay yay broke the 70c barrier. Down down down

:clap

[baboonworld]

£1 = $2.59 A SLIGHT IMPROVEMENT

I WILL SETTLE FOR 2.7!

[DrPhred]

NZ$1 = US69.54c

Yay yay yay broke the 70c barrier. Down down down

:clap


Yeah! I was seriously worried about what the high NZ$ was doing nest egg. :clap :clap :clap :clap :clap

[jo b]

Anybody got any news whats happening with the NZ dollar.

Jo

[markkellaway]

Jo,

Still at $2.56 - $2.57 to the pound, so all in all not brilliant at the moment. :wah

Fingers crossed it will weaken soon, trouble is the Bank of New Zealand are talking tough on interest rates at the moment and uk rates are looking like going down. (Never thought I'd be cheesed off about that!!!)

Mark. :P

[sweetpea]

Bounced up a little vs. the US dollar -- NZ$1 = US70.79c again.

I'm giving myself till the end of the summer to see if it decreases a decent amount, then I absolutely must get my tuition payment in...

[acisman]

Some of the rates given recently seem to be the inter-bank rate, which is not what you will get unless you are talking in millions.

We have to convert our pounds to dollars by 30th June ( house purchase) and the best we have been offered by foreign exchange dealers over the last two weeks is $2.54,but that quickly dropped to $2.5315 Apparently there is some talk of the dollar strengthing to $2.50.

In our case we are watching it daily and have now settled on $2.54 as being a rate we will accept, if we are lucky enough to see it reach that figure in the next 10 days.

The trade off seems to be is it worth risking a 2 to 3 cent drop in the hope of gaining 1 or 2 cents. The problem is when you are talking in many thousands of pounds that can equate to a lot of lost/gained dollars.

Pam & Dave

[veronica]

open a sterling account and leave it in there in £ until you need it. if you aren't planning to buy a house straight away, it can just sit there until either you need the money or the rate gets more favourable

[jo b]

What the blummin 'eck is happening to the NZ dollar. It is going through the roof.

At this rate we'll be living in a car in NZ :eek

Jo

[Biddy]

Same here - and a bloomin small car too!

[markkellaway]

Hi All,

I, like everyone else I'm sure, look at the exchange rates every day, get excited when it weakens and cheesed off when it gets stronger. All the "experts" still point to a weakening dollar this year, the NZ economy isn't looking anywhere near as strong as it was, just taking a while for that to filter through. If you can afford to, hang in there! :nice1

Having said all of the above, I really hope it starts to come down soon!!!!!!!

Mark. :P

[foolsgold99]

I had to bring over $50K today to pay the deposit on our house, we got $2.53. We only have 2 weeks until we need to bring over the bulk of our cash to complete on the house. We're hopping for even a few cents before then, even $2.60 would be great.

We thought about holding off from buying, until the rate improved, but the concern was that we might be priced out of a still rising market, and rental money was a waste, I saw no point in paying rent to pay off someone elses mortgage for them.

After this we're going to keep the remainder of our funds iin the UK for about a year to see where the rate goes.

Depressing isn't it.

[acisman]

We have been here since April and during that time we have been looking to bring over £200K. In April we were hoping for a rate of $2.70, but the best available at that time was $2.62. We therefore decide to bring some across at that rate and since then we have watched the dollar strengthen. We had to bring some more over for the deposit on the house and at that time got $2.5350, with a suggestion that the rate could drop to $2.50 :wah :wah

We now need to bring over the balance to pay for the house and today the interbank rate stands at $2.5510 which relates to $2.5315 as the best rate we can get. Have told our traders (HIFX) that I am looking for $2.54 or more, but with Monday being our deadline, I don't hold our much hope. :wah :wah

Pam & Dave

[Wannaway]

Can I post a warning to people bringing over funds and converting - you may be subject to New Zealand income tax on conversion.

It basically works like this, if you have a funds overseas denominated in a foreign currency (ie not NZ$), when you convert it and bring it over at a time when you are NZ resident, you have to report any foreign exchange movement on those funds on your NZ tax return. The amount you report is the difference between the amount you would have had had you converted all your foreign currency on the day you arrived and became resident in NZ and the actual amount you convert into. For some people this could be beneficial, because of the high NZ$ you may actually create a loss you which you can set against other taxable income in NZ. But be warned, if you are here already and waiting for the rate to improve you may get stung for tax on any foreign exchange "gain" you make.

This is different to, say, the UK, where foreign exchange on funds held for personal use do not fall into the tax net.

[Bubbles]

Good bit of info there Wannaway

Thanks

[markkellaway]

Great bit of info, I'd rather pay tax on the difference than not have the difference though!! :nice1

Looks like the current account deficit has had an effect on the currency this morning, let's hope things "improve" enough to help us with the dollar but not impact jobs in the economy too much. :?

Mark. :P

[richard]

We now need to bring over the balance to pay for the house and today the interbank rate stands at $2.5510 which relates to $2.5315 as the best rate we can get. Have told our traders (HIFX) that I am looking for $2.54 or more, but with Monday being our deadline, I don't hold our much hope. :wah :wah

Pam & Dave

If you haven't already done it now would be a good time as the interbank rate has just spiked over 2.57 in the last hour.

[jo b]

Surely if you put your money in an off shore account and transfer when the dollar weakens then transfer to your NZ bank account in NZ dollars you wouldn;t incur tax??

Am I right??

Jo

[Wannaway]

Jo,

If you are resident in New Zealand (and that is resident for tax purposes rather than for immigration purposes - different concept), you are subject to NZ income tax on your worldwide income. So whatever you do offshore when you are NZ resident will get caught (and this is similar to most tax systems in Europe).

Lee

[jo b]

Just to clarify the word funds. Does this cover all assets eg shares, insurance polices property etc or just money in the bank.

It looks like that when we get to NZ we would not have sold our house (not for want of trying). So for instance if it takes us 12 months to sell the house we will not be taking those fund as personal monies when we arrive, but possible transferring those funds up to 12 months after arriving. Would that still be applicable for tax?

Hope you can answer this one Wannaway!!!

Thanks Ian (Jo B's better half)

[jo b]

Sorry double posted

[Wannaway]

Jo,

I'll try and answer your question as best I can.

Firstly the sale of UK property (house, shares etc) should not be subject to tax in NZ if it occurs when you are resident in NZ. This is because, as a general rule, there is no capital gains tax in NZ.

Cash funds are "financial arrangements" in NZ tax parlance. Interest on such funds earned whilst you are NZ resident will be sbject to NZ income tax. If those funds are held in a currency other than NZ$ then you will be subject to NZ income tax on any foreign exchange gain (or loss) you realise when those funds switch currency (ie this does not just apply to switching sterling to NZ$, it can apply if you switch sterling to US$, then again when you switch US$ to Aus$ and so on until you end up in the home currency of NZ$).

Now, pension schemes, life insurance policies, endowment policies etc, this is where it gets really complicated. :laugh These are subject to something called the "Foreign Investment Fund" rules. They are horribly complicated, ridiculously regressive and I haven't yet fully worked out what they mean. However, the good news (and there is some good news!) is there are some exemptions from the regime, including the fact that new residents are not subject to the rules for the first four years following arrival in NZ (actually it can work out to almost five years depending on when you arrive), which is why I haven't looked into too much so far.

Some proposals were made in this years NZ Budget to exempt from NZ tax overseas income of migrants. However, this would not include interest income or dividend income (or earnings from outside NZ). The question therefore for most migrants would be "what exactly will be exempt from NZ tax then?".

Phew, sorry but the NZ tax system is a much more pernicious little beast than I was used to in the UK.

Lee

[debnjohn]

Lee,
this is such EXCELLENT information, thanks so much for taking the trouble to post it :nice1
Just gotta figure it out now :?
Cheers,
John

[jo b]

Lee

Thanks for that very informative

Jo

[jubjub]

That tax thing could be very interesting as the house sold after hubby had arrived in NZ he is the taxpayer, not me!

Anyhow, back to the dollar, its getting there, 2.595, so close to the magic 2.6 fingers crossed it keeps going for a week more as thats our deadline for our currency exchange.....

[baboonworld]

2.58 - soz jub!

[jubjub]

Ok, you know how in time of drought people do a rain dance?

Is there a dollar equivalent? Our transfer gets done next Thursday, drastic action needs to be taken, even if it means naked at midnight in the middle of winter dancing round a tree!! :laugh (hmm maybe not, that is not a pleasant image) :exit

[jubjub]

I promise I have not been out dancing, but its reached 2.60 today, can it keep going for another couple of days???? Please?????

[jo b]

Jubjub

can you not ask your bank to transfer before when it hits 2.60??

Or are you waiting for the money?

Good news anyway it seems to be going in the right direction.

Jo

[jubjub]

Not really Jo, it depends when it actually hits the bank, the money is in mid air in UK at the mo. Should hit transfer account tomorrow or Friday, and they just transfer at that days rate, well nearly, if rates 2.57 we get 2.55 roughly

Fingers crossed, its back down a bit today :(

[sarahw]

Jub Jub - I'm hoping you should be OK - we shipped our money over here earlier this week via Natwest Bank - it arrived on Thursday- ft.com rate was 2.594 and we got 2.57. I really thought after the bombings in London it would send the markets crashing but it was even higher when I got up this morning - keeping my fingers crossed for you!!

[jubjub]

Well it turned up today, we got 2.585, which was not bad, I did wake up today wondering if last nights events would have seen a big rise and therefore leave us totally skint, but we have been lucky.

Just need to take a bit more out of the cashpoint (from UK a/c) to top up our account to pay sols fees, may get a slightly better rate on these small amounts next week.

Not a disaster anyway, about what we were expecting.

[Bailers]

Whoops! Looks like the pound's in free-fall again, 2.534 approaching the 52 week low.

[jo b]

:wah :wah :wah :wah :wah :wah

[Moorf]

Just revisited this thread and from the last post (July) to todays there's not much of a shift - xe.com has it at 2.56 today :(

[captainxmas]

It was 2.6 last night while I waited for our funds to hit the UK, now they have and I bounced them on it has dropped to 2.55

Amazing how a few pence can affect your plans...oh well :(

[jubjub]

Blimey its gone down again, its only 2.54 now. thats what you get for interest rates going up over hrre..

Hope you get enough money for what you need by the time it makes it over here Captain. We shall just need to do the dollar dance and hope it goes back up by Monday.

I was going to go to the cashpoint and get some out of the UK account today, not sure whether to chance it till Monday and see if it improves, or just get it now in case it gets worse!

[Bailers]

OK. Who pulled the plug out again?

[Moorf]

2.52 :wah

[jubjub]

OK. Who pulled the plug out again?

Dunno but wish they would put it back in, we are trying to bring money over to buy our baby stuff!!!!! Grandparents have kindly made a donation each to the cause and we would like to get the best value we can from it!