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P2P investors told to get tax advice

Peer-to-peer investors should seek advice on their tax obligations before they start investing, Inland Revenue says.

Tuesday, February 9th 2016, 2:00PM

by Susan Edmunds

Questions had been asked over whether investors could claim peer-to-peer loan defaults and fees charged by the platforms against their investment income, for tax purposes.

One investor said: “As both service fees and charge-offs seemed to be becoming material amounts, it must be relevant for the return from a Harmoney investment if taxable income allows for them.”

Inland Revenue said the tax treatment would depend on the status of the investors but peer-to-peer investors had the same tax obligations as anyone else who was lending money.

“Generally, for the lender to be able to claim expenses relating to their lending, such as commissions and other fees, they would need to be in the business of lending.  As for defaults – generally if a loan is not repaid there is no deduction for the loss of capital,” a spokesperson said.

A capital loss in an investment in equities or bonds would not be deductible.

She said anyone who was considering getting into peer-to-peer lending should take advice from a tax adviser or accountant before doing so.

A borrower would need to have used the loan for business purposes if they were to claim a deduction of fees or interest paid.

John Bolton, of Squirrel Money said tax deductibility was not an issue for his investors because the reserve fund covered any capital losses.  Squirrel investors pay tax on the interest they receive net of the platform’s fees. “By definition the fees are deductible because they are taken off before the interest is paid.”

Tags: Peer to Peer Lending

« Harmoney switches to real-return reportingHarmoney signals need to change fees »

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ANZ 8.64 7.74 7.39 7.25
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BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
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CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
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Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
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Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
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Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
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Resimac - LVR < 80% 8.84 8.09 7.59 7.29
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Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
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