Picture this: You're ready to hand over a sizable inheritance to your kids, say $150,000 each, only to discover potential tax pitfalls lurking in the shadows. It's a dream many parents have, but navigating the financial maze can be daunting. But here's where it gets controversial – is giving money away really as simple as it seems? Let's dive into some real questions from listeners, breaking down the answers in a way that's easy to grasp, even if you're new to personal finance. We'll explore everything from gifting strategies to debunking myths about government contributions and why New Zealand's mortgage options fall short compared to the US. Stick around, because this is the part most people miss that could save you thousands.
Got burning questions about money and the economy? RNZ's new podcast, 'No Stupid Questions,' hosted by Susan Edmunds, is your go-to spot. Check it out here: https://www.rnz.co.nz/podcast/no-stupid-questions. We'd love to hear from you – send written queries or even voice memos to questions@rnz.co.nz. Plus, sign up for Susan's weekly newsletter, 'Money with Susan Edmunds,' for the latest on spending, saving, and investing: https://rnz.us6.list-manage.com/subscribe?u=211a938dcf3e634ba2427dde9&id=b4c9a30ed6.
Let's start with a common scenario: After remarrying, you hold onto your home, rent it out to cover the mortgage, and end up with losses due to major repairs on an older property. For two years now, your son and his partner have been the tenants. As you approach retirement with limited superannuation (that's New Zealand's term for retirement savings), you're wondering how to sell the house next year and distribute $150,000 to each child without triggering any taxes. The good news? You won't owe taxes on gifts to your kids. New Zealand abolished gift duty long ago, so transferring money or assets freely is straightforward. But here's where it gets tricky – this generosity might impact you later if you need a rest home subsidy (government support for aged care costs). The rules cap how much you can give away in the five years before applying: up to $8,000 per person annually in those recent years, or $27,000 if it was five years ago. We covered this in a recent podcast episode – tune in for more details if you're concerned. Consulting a lawyer could help you strategize around this, perhaps by spacing out the gifts or exploring trusts to protect your eligibility. After all, planning ahead ensures your hard-earned money benefits everyone without unintended consequences.
Curious about what happens if the housing bubble pops? Listen to the latest episode: https://www.rnz.co.nz/podcast/no-stupid-questions/2025/What-do-I-do-if-the-bubble-bursts.
Shifting gears to another myth-busting moment: With many juggling multiple low-paying jobs, there's confusion over qualifying for full government super contributions. You might think splitting contributions across employers disqualifies you, but that's not true. Inland Revenue (our tax authority) confirms it's 'totally untrue.' You can accumulate contributions from various sources – multiple jobs, direct payments – and they all add up toward the annual calculation. Just remember, employer contributions don't count toward the $1,042 minimum you need to contribute yourself for the full match. For beginners, this means if your personal contributions from different jobs total at least that amount, you're eligible, regardless of how many paychecks they're from. It's designed to encourage saving, but misinformation like this can leave people shortchanged. And this is the part most people miss – have you ever been told something similar that turned out wrong? It highlights how financial advice needs to be verified.
Finally, let's talk mortgages: Why don't New Zealand banks offer 30-year fixed terms like in the US, where you can lock in one rate for the whole loan? It's a stability many crave, especially during refixes when rates fluctuate. In the States, you can secure that long-term peace of mind, paying the same rate unless you sell. Here, we're limited to five-year fixes at best, with one or two years being more common. The reasons boil down to market size and logistics. Brad Olsen, CEO of Infometrics, explains that New Zealand's home-loan market is too small for banks to manage the risks of long-term lending without hiking prices. They hedge against potential rate changes over decades, which drives up costs. Unlike the US, where entities like Freddie Mac and Fannie Mae bundle loans into securities to mitigate risks, we lack that infrastructure. Occasionally, banks here have tried seven or 10-year options, but uptake is low – too much hassle for minimal interest. People want stability, but the market just doesn't support it affordably. Other countries shy away from this too, making the US an outlier. But here's where it gets controversial – should New Zealand push for similar systems, even if it means higher rates? Is the stability worth the extra cost, or are shorter terms better for our dynamic economy? What do you think – do we need to rethink our mortgage landscape? Share your opinions in the comments below; we'd love to hear agreements, disagreements, or your own experiences!
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