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No tax write-offs for investors

Most investors will not be able to write off finance company losses, the Inland Revenue Department warns.

Tuesday, March 18th 2008, 11:29AM

by Neill Briss

Capital losses are out. Nor can they make claims for bad debt on interest income they have already been paid, says IRD group tax counsel Graham Tubb.

This applies to most mum and dad investors – those with total interest income of less than $100,000 a year. They are on a cash accounting basis.

"As a guide, if resident withholding tax has been deducted from interest payments, the interest has been paid to the investor, so it cannot be claimed as a bad debt."

A few investors who have accrued interest may be eligible, however. They have been taxed on interest income they expected to earn but haven't received may be able to claim a reduction, but they need to act now.

This group includes investors who earn more than $100,000 in total interest a year, suggesting total investments comfortably over half a million dollars. Others in the group include companies and trusts.

People who think they may be able to make a claim must act before the end of the month. They should contact their accountant or other professional adviser, and create a paper trail. This can be as simple as writing out details of investment and losses, explaining why the investor has concluded the debt is lost and must be written off. The document should be signed and dated. Supporting documentation from the liquidator or receiver about the loss should be stapled to the document. This needs to be done before March 31. These investors must claim the deduction in the year in which they write off the debt.

« Debenture holders unable to write off losses: IRDTSB gets a ratings upgrade »

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