Running our block as a business

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10 years 5 months ago #474690 by Aquila
If you never make a profit, like most lsbs, you are adding to the national debt. You get 5 years to make a profit, I'd say that is a reasonable amount of time. As for pine blocks, there's no money in pines these days

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10 years 5 months ago #474691 by Aquila
Note also if you gst register, you have the intention of running a workplace so need to comply with all the osh laws

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10 years 5 months ago #474693 by eelcat

swaggie;477673 wrote: That isn't quite right for all situations. For instance a pre 1989 forestry property will have approx. 28 years of no income but claimable expenses, and then suddenly will have considerable (unless the forest owner has registered for carbon credits and all that crap which is a different kettle of fish again) bulk income, less any harvesting and possible re-planting/fencing costs.

Agree - not sure it is correct either. We run a business on our LSB, but do not run the LSB as a business, using the land for example to grow fruit, we haven't yet made a profit (we are now in our 6th year) but we try darned hard to do so and have not had anything from IRD to this effect. We both work off block commuting an hour each way, and run the business and run the block as a small farm, and we're not young, so you can do it all (though we don't get to sleep much [;)])

1 Border collie, 1 Huntaway, 2 Lhasa Apsos, Suffolk and arapawa ewe crosses, an Arapawa ram,an East Friesian ewe , 5 cats, 42 ducks , 1 rooster and 30 hens, 5 geese, 12 goats, 2 donkeys, 2 house cows, one heifer calf, one bull calf, 3 rabbits and lots and lots and lots of fruit trees...

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10 years 4 months ago #474730 by max2

Aquila;477710 wrote: If you never make a profit, like most lsbs, you are adding to the national debt. You get 5 years to make a profit, I'd say that is a reasonable amount of time. As for pine blocks, there's no money in pines these days

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We are doing well from of harvesting ours. Although I would certainly agree we would have made more had it been beef farming.

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10 years 4 months ago #474733 by igor
My parents recently enjoyed an extended tour of Britain and Europe on the proceeds of logging a pine block so I wouldn't exactly say that there is no money in pine trees. It does of course depend on the size of your block and whether or not you can afford to have a few acres out of production for 30-50 years.

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10 years 4 months ago #474735 by max2
OTT The key to forestry blocks is finding the right contractor to organise the harvesting and the selling of the logs. We investigated this for some years speaking with different companies and loggers and one name continually came back to us as being an honest and decent businessman in the industry. I cannot remember how many times we were continually let down when making our initial enquiries.

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10 years 4 months ago #474737 by igor
My dad says that there are a lot of thieves and rogues in the timber industry. Your experience, swaggie, would seem to confirm this.

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10 years 4 months ago #474765 by Blueberry

Farmersden;477690 wrote:

We do have the land and the potential to "make a profit" but are more working towards self sufficiency so that when we retire hopefully we can afford to stay on the farm!


then you must be doubly careful what you claim back - if you claim GST on the purchase of the farm, it is my understanding that the day you retire and want to de-register, the GST on the farm will become due.

or am I wrong there?

[;)] Blueberry
treading lightly on mother earth

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10 years 4 months ago #474769 by muri
Blueberry, I think you are right on that one and you can be hit with a huge amount of gst to pay back - end of retirement fund!
I run my business from my lsb and have just had to register for gst.
But I do not include the farm part of this in the business as i would utilise about 1/2 acre out of 10 1/2 for the business side of my plant business, but also all the savings you make on claiming back gst could turn into an albatross around your neck when selling or if you tone the business down or stop it altogether

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10 years 4 months ago #474770 by max2
Or look at it another way, claim the GST back on everything you can, park it up against your mortgage and when the time comes, not only have you chewed down the mortgage by a considerable amount, you would have massive savings on the interest and shortened the term as well.

No one says you have to spend the GST you claim back, there are better uses such as above as long as you are disciplined and know your limits/budgets.

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10 years 4 months ago #474771 by max2
But I am fairly sure the GST payable upon de-registration is not on purchases because you are offsetting them against income on a monthly basis but its on the original (if any) property purchase you have to pay back if you de-register.

Happy to be corrected on this by all means.

I do know if you sell an investment property you have to pay back the depreciation on the property claimed over the time owned.

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10 years 4 months ago #474777 by kindajojo
The problem becomes if you claim GST on the land, but not on the house, and run the land as a farming/LSB business.
If you do a lot of improvements to the land i.e. fencing tree planting etc then the land value increases and therefore you have to pay more GST back.
Admittedly, you claim the costs of the "beautification" but in general that includes a lot of unpaid labour.
In actual fact if you sell the property to someone also registered you can transfer GST neutral. but of course the price will be lower?

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10 years 4 months ago #474785 by max2
All good reasons to seek professional advice based on personal circumstances and projections.

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10 years 4 months ago #474817 by LongRidge
The only place that I have discovered that making a profit is a requirement of running a business and claiming for GST is on here. Our accountant has not told us that. In 23 years of trying to make a profit on this block, that has only happened one year (when we sold the pine trees). But I now have 14 hectares of pines growing, andd have the potential to make a profit in about 10 to 15 years. And when the animals that I have accumulated over the years are sold, when I retire, that too will make a profit. So I do not expect my unprofitable LSB to lose it's GST registration.
The huge problem with having the land GST registered is that I claimed back the 10% GST when we bought ..... but I'm going to have to pay 15% or whatever the rate is, when we sell.

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10 years 4 months ago #474916 by Aria

LongRidge;477853 wrote: The only place that I have discovered that making a profit is a requirement of running a business and claiming for GST is on here. Our accountant has not told us that. In 23 years of trying to make a profit on this block, that has only happened one year (when we sold the pine trees). But I now have 14 hectares of pines growing, andd have the potential to make a profit in about 10 to 15 years. And when the animals that I have accumulated over the years are sold, when I retire, that too will make a profit. So I do not expect my unprofitable LSB to lose it's GST registration.
The huge problem with having the land GST registered is that I claimed back the 10% GST when we bought ..... but I'm going to have to pay 15% or whatever the rate is, when we sell.


Perhaps we have the same accountant :) . Point is we also have a forest (24 hectares) - I think that might make a bit of difference as to the way IRD view the business; as forestry of course would likely be expected to make losses all the way up until harvest.

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