With the end of March on the horizon, so is the end of the first quarter. As it has for awhile, the property market is keeping us busy, but we've also got an eye on a few other matters, some of which we've got for you below. 

Relationship property matters also continue to be a big question for a lot of people out there, being one of the biggest things drawing people to our website. We'll be talking about that a bit more in April - keep an eye and an ear out for our prenuptial agreements campaign.

Is your Uber driver a contractor, or an employee? And what does that mean for employers and company owners?



Last year we talked about an Employment Court case which hinged on whether a courier driver was an employee or contractor of the defendant company. While that case was very much about the specific scenario in question, it did raise broader questions about what defines an employee, and what defines a contractor.

For companies, that can affect what rights and benefits they need to provide. And it showed that in some circumstances, a courier driver can be an employee, even if they’re referred to as a contractor. The label alone isn’t enough.

Where else is that question relevant? The ever-expanding gig economy, including services such as Uber. That’s why we’ve been all interested to hear the outcome of a case brought by Atapattu “Shane” Arachchige, a former Uber driver who sought an Employment Court declaration that he was an employee of Uber, rather than a contractor.

Unlike the courier case, Arachchige was found by the Employment Court to be an independent contractor. But again it shows that the wording of the relationship isn’t enough: the matters that determine whether someone is an employee or contractor will include the way a contract is actually being performed.

It’s likely most Uber drivers operate in a way similar to Mr. Arachchige, and would therefore also be considered contractors. But it serves as another reminder to both companies and contractors that they should pay careful attention to the way any contract relationship is carried out.

New tax year, a new tax rate - but not for trusts

The end of the financial year is almost upon us—but this year, it comes with some added food for thought. 31 March is the last day on which 33% is the highest personal income tax rate. From 1 April, a new tax rate of 39% comes in for income over $180,000.

So if you’re likely to fall into that tax bracket, you may wish to consider returning as much income in this financial year, and consider deferring tax write-offs to the next financial year.

What’s not changing yet is the top trustee tax rate of 33 cents—and it’s unlikely to change this side of the next election if the Government stands by its election promise of no new taxes this term.

We’ve highlighted this anomaly previously: if the personal income tax rate is going to 39%, it makes sense to use that trust rate if you can. For example, ensuring that the majority of your company’s shares are held by your trust prior to 31 March will put you in a good spot.
 
If you’ve paid attention to any headlines recently, or participated in the housing market yourself, it won’t come as a surprise that housing prices continue to rise. This might lead to new attempts to quell the market, particularly through the kinds of mortgages available to investors.

Corelogic data shows that in February, for the second month in a row, mortgaged investors’ share of property purchases was at a record high: 29% of the market. This was seemingly at the expense of first-home buyers, who at 22% of the market have dropped to a level not seen since early 2018. Those that did manage to buy paid 18% more than those a year ago.

And with that, some pundits are picking that the next measure to address things might be making interest-only mortgages a thing of the past.

Interest-only mortgages allow property buyers to pay only the interest on a loan, rather than reducing any of the principal. Coupled with a rising market, these kinds of mortgages give investors the ability to spread their capital further than they otherwise could.

It’ll be something to keep an eye on for all people considering new entries into the housing market.

Property manager's blunder binding on landlord

Speaking of property investors, a recent Tenancy Tribunal decision shows that picking the right property manager is particularly important.

A Wellington tenant in a fixed-term tenancy due to expire in June 2021 applied to end the tenancy early. The property manager said in writing that the owner agreed to it, so long as the tenant paid rent until a new tenant was found. By mutual agreement, the tenant advertised the property, and found about 20 prospective new tenants.

The problem? Turns out the property owner hadn’t actually agreed to it: the property manager had just assumed they would. The applications of those 20 prospective tenants weren’t processed, and the tenant faced the prospect of continuing to pay rent.

And where does that leave everyone? After weighing everything up, the Tribunal decided that because of the representation made by the property manager, the tenant was only liable for rent up to the point she vacated the premises in February, rather than the original June expiry date. It was reasonable for her to accept that the property manager was speaking with the authority of the landlord.

Had the property manager correctly told her that the landlord did not agree to breaking the tenancy, then it’s likely she would have had to keep paying rent until June.

A good reminder for all to make sure that when you commit to something, you’ve confirmed it properly with all parties—and when you have someone acting on your behalf, you both know when you need to agree on decisions.
 

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That’s it from us for March—and the first quarter of the year! As always, we’re just an email or phone call away for any questions, help or advice. We look forward to chatting next time.