Mary Holm: Small business idea is better than chasing a fast buck

Feeding chickens and other animals might not make you rich - but at least it's not high-risk. Photo / Getty Images

OPINION:

Q: I'm on a benefit and I also am starting a small business in which I go out and feed cats, rabbits, guinea pigs, chickens and ducks. It's more of a passion of mine than to make loads of money. I'm 58 so I'm not young and I also have health problems.

I'm not good at anything such as maths or anything really as I was a very sick child with kidney problems, and I didn't get to go to school much. I have club feet and have had an operation to correct one foot but it didn't work and leaves me in pain. I have a lot of other health problems too. I can't do much physically as I'm in pain.

I desperately want my own home like I had when I was young. How can I get on the property ladder with zero money? I rent with a flatmate and don't even own a car.

How can I make my life better? It sucks renting. I can't put pictures up or own any more animals such as chickens and rabbits. I have two cats. Please can you suggest maybe a get rich quick scheme?

I just feel like crap and stuck in a rut. I want to leave something for my son and two grandchildren. Please can you help me Mary?

A: First things first: please stay away from any so-called get rich quick schemes. They will almost certainly make the promoter rich and you poorer.

Even in legitimate investments that can produce high returns — such as borrowing to invest in shares — you have to take lots of risk, and can end up with debt and no assets.

It seems to me that your chance of improving your lot is through your animal minding business. You're clearly an animal lover, and I bet that shows when you talk to clients.

Put your energy into getting the word out — perhaps via social media and other people's recommendations — that you can be trusted with people's precious pets, and they should be willing to pay you fairly.

Obviously all that is limited at the moment with Covid-19 restrictions. But surely that will pass.

A few more thoughts:

• Have you explored whether you can get more benefits, social housing or help from the Government with developing your business? There seems to be lots on workandincome.govt.nz.

• There's also a variety of help on moneytalks.co.nz. As their website says, "We connect people and whānau with their local foodbanks, help them find their way through Work and Income processes and entitlements and support people to manage their money." Working with one of their free financial mentors might really help you. MoneyTalks is run by FinCap, a non-government organisation.

• It doesn't seem right that you should be in pain after your operation didn't work. Ask your GP for help with that. If she or he doesn't respond, try another GP.

• You may not be in a position to negotiate with your landlord, but maybe he or she is reading this column.

So here's a message for all landlords: please let tenants put up pictures. It's such an important part of making a place your home. If a tenant leaves holes in your walls, the next tenant will probably cover them up with their pictures.

Let me know how you go with the business.

When banks paid 25%

Q: In your column two weeks ago, mention was made of a bank term deposit paying 10.25 per cent in 1977. Attached is a copy of my Westpac term deposit paying 25 per cent in March 1987.

We had just sold our property and the money was in a short-term deposit before we repurchased. At that particular time the $30,540 yearly interest we earned was equal to my salary at work. As you know, at that same time mortgage rates were high as well.

I still have term deposits with Westpac. Unfortunately they cannot match the 1987 rate!

A: Indeed. You won't get one-tenth of 25 per cent these days.

But even back then you were extraordinarily lucky to get 25 per cent — which would more than double your money in three years. Wow.

Reserve Bank figures show six-month returns averaged around 18 per cent at that time, and so did inflation.

I like your observation that the interest you earned on your house sale proceeds equalled your salary. Since then, house prices have soared but interest has shrunk even more.

These days you might get $1 million for your house, but earn only 1.3 per cent on it — which comes to $13,000. That's hardly a year's pay.

Missing money

Q: I suggest last week's writer tries the following sites to search for lost/missing money from bank accounts, if he thinks his father might have had an account in any of these countries.

After money lies dormant for a set number of years it becomes "unclaimed money" and the banks have to send it to the government or state department that holds these unclaimed funds.

• tinyurl.com/UnMoneyAust
• https://tinyurl.com/UnMoneyCanada
• https://tinyurl.com/UnMoneyUSA
• https://tinyurl.com/UnMoneyUK

I hope this may help him if his father did have a bank account out there, but if not, it's good to know his mother was able to manage to set herself up financially anyway without it.

A: Thanks for this. Several other readers wrote along similar lines. Some points that other readers made:

• If you are looking in a country other than in our list, Google "unclaimed money" and the country's name.
• In the US you can also search state by state. For example, New York has the "Office of the New York State Comptroller" at www.osc.state.ny.us.
• A reader who has used the above UK link says, "The service is free and you can make the application remotely.

"I used that website successfully, although I used it to retrieve an account which I knew about, but which the bank had closed (I didn't consider it lost, and still had details of it, but the bank closed it after seven years of inactivity).

"There was some work involved in getting the money paid out in terms of supplying appropriate AML (anti-money laundering) documents as the UK bank was very fussy. It had to be proof of address from a utility company (an insurance company letter wasn't accepted). But it worked."

Hunting for gold

Q: Interesting item on overseas unclaimed money in last week's column.
Some observations:

• Banking back then was paper based so it is a little odd that no statements or letters were found in his papers. However, he was likely travelling during the period of foreign exchange controls, so he may not have kept any records here of the account, so that it wouldn't get found if IRD came looking. Who knows?

• The family may enjoy hunting for what they hope is a pot of gold, but even if they strike something, it may be more like a gold flake. The account would have become dormant for bank purposes during the 1990s, and once transferred to revenue authorities probably stopped earning interest.

• Even if they do find some money being held somewhere, there will be some costs. Mum cannot just say "I'm his widow; please send the money". If it were that easy, scammers would have got hold of the money years ago.

The family probably will need to show a trail — at least his death certificate, a probated will, identity of executors (if any are dead, proof of that) and proof of her identity (assuming she is an executor) and the identity of any other living executors, or their renunciation of probate.

Those documents will probably have to be notarised (even for Australia) and that could cost up to $150 per document, then couriered to the overseas authority.

They should not be too discouraged though. If experience with the NZ equivalent is any guide, the administrators take pride in finding the true owners of unclaimed money.

Once bona fides are established, they are helpful. And if asked nicely, would likely indicate whether the amount means it is worthwhile going through the process.

A: Thanks to you too. And as a lawyer, you speak with some authority.

Note to the writer of the original letter: Do tell us how you go with this.

Tax and Timaru

Q: Last week you wrote about a young couple returning from overseas to settle in Timaru, wishing to sell their rented property in Auckland and buy in Timaru.

The Auckland sale would result in a great deal of capital gain — so wouldn't that attract tax on the gain? There's no mention of it in your reply, so I was curious to know.

A: It depends.

I noted last week that because the young woman had bought her house before October 2015, the bright line rules don't apply.

Under those rules, gains on the sale of rental property are taxed if the property is held for less than a certain period. From 2015 that was two years, then it increased to five years, and — since March 27 this year — 10 years.

However, before October 2015 there was another law, which is still in effect. It says that gains on assets bought with the purpose or intent of selling at a gain are taxable.
The trouble is it can be tricky to establish what someone's intent was at the time of purchase.

"Inland Revenue when considering a person's intent will seek to obtain copies of mortgage applications made at the time of purchase and also the notes of the real estate agents involved," says tax consultant Terry Baucher.

"Any hint revealed by these of a purpose to sell will mean the gain becomes taxable, regardless of how long it's been held."

He points out that we don't know the daughter's intent when she bought the Auckland house. But given that the mother wrote about the daughter "selling her house (in Auckland, currently rented)" I assumed the house was originally the daughter's home, and not bought with an eye on selling at a gain.

If I'm wrong about that, then yes, the gain on the house sale would be taxable.

Capital gains

Q: One point you didn't raise in your answer about the couple returning to New Zealand was the daughter's overseas tax position.

Many overseas tax authorities tax capital gains. I doubt she has remained a New Zealand tax resident since her departure.

Perhaps an expert could let us know if she would be best to return to New Zealand first before selling her Auckland house.

Paying maybe 40 per cent tax in (say) Australia would hurt. Then she would return to New Zealand with a lot less available to live on.

A: You raise a really good point. Most other countries we compare ourselves with tax capital gains. And while I doubt if any of these taxes are as high as 40 per cent, they can certainly bite.

I haven't taken up your suggestion of asking a tax expert what would apply in this situation. Tax can be complicated enough — as the previous Q&A suggests — without wading into the crocodile-infested waters of cross-border taxation.

Let's just say that the daughter should look into this before making her decision.

Another reader wrote similarly. What a lot of generous readers you are — taking the trouble to raise points or pass on info to one another. It's heart warming in these difficult times. Next week we'll have another idea for the couple.

- 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's 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. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.