I guess the NZ sharemarket will have a 25% spike up on V day, on record low volume.?
Then the paper war will start in ernest.
At this stage I am wondering what's the point of saving to invest.
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I guess the NZ sharemarket will have a 25% spike up on V day, on record low volume.?
Then the paper war will start in ernest.
At this stage I am wondering what's the point of saving to invest.
Well.. looks like house prices will continue to rise since this will be the only tax free place to park capital, such a stupid recommendation. Why save to invest in shares, you’d do better leveraging up and buying a bigger “family home”.
Well it will take the argument out of whether you are an investor or a trader.
FP, thought you'd like the idea of a rollover being mooted (perhaps have to reinvest in a similar area). Can't see how they'll ever collect any CGT if that is the case. Maybe you'd be allowed to buy a vintage car or other asset that is likely to still increase in value. Or even put the capital gain into a savings account? Labour must be worried about having National undo it all. Sounds to me like the tax accountants will be happy to provide answers here.
Personally, I have concerns about IRD's capacity to administer a CGT.
And if, as p17 of the executive summary suggests, it will be necessary to undertake a series of test cases, then adequate clarity might well lie some distance in the future.
As far as I know the roll over tax so far is only suggested for business sales.(I think the common term where it exists is 'a repatriation clause') It should apply to all assert classes where CGT is proposed in my opinion, so CGT would only apply on exiting that class of investment. There are good reasons for that, but that's covering old ground. I don't think National would ever undo CGT if it gets established as evidenced by their about turn on their hinted intention of undoing Labour's GST. No doubt you remember Bolger waffling about a transfer tax. Fortunately that's long forgotten, and I for one hope our GST remains in its current simple form. Govt's don't abandon tax schemes - they just try and find better ways to spend it. Forget vintage cars, art and similar nonsense - rest assured it will only apply to income earning assets with the one exemption being a holiday or second home)
Plenty of people pay income tax on shares they sell now, and of course that's at marginal tax rates. If you are deemed to be a trader you will pay tax on profits, whether it's cars, houses, shares, second hand furniture, holes to put in swiss-cheese, or widgets you're selling.
Fair comment, re dividends tax, but you cleverly avoided the investor who didn't intend to sell (when they bought) but for some some reason they eventually were sold. Boom .. CGT rips a massive 'marginal tax rate' hole in your/their capital gains.
Interested in what investors think about this. If you take for example a high capital growth share like XRO or ATM, and say you put $50k in the early days and make a few millions out of it, how do you feel about a tax bill of a few $ hundred thousands or a million or so when you or your estate sell it?
There are people who have decided to invest in and build up businesses rather than buying their own homes. Why not give them a tax break too as good as home-owners get?
If you own a mortgage-free $3m home you are indeed wealthy. Every country that exempts the “family home” applies a CGT exemption. Exempting what can be a multi-million dollar asset, is an exemption for the wealthy.
The whole thing is going to fail. Too many hurdles to get over. The first being Winston. If it is still proposed by the election then they will be out. The concern is if they say that it won't happen, then get re elected with the kermits, they will just do it anyway.
Pretty sure I read that it is not inflation adjusted. This seems to be a major flaw. e.g. Say you owned a rental house for 10 years then sold it and it only appreciated at the rate of inflation.
The CGT would then put you miles behind when you sold it as you would lose the tax part of your "inflation" gain.
Correct - its not inflation adjusted. And its not adjusted to reflect the value of your person, un-charged labour, that goes into it.
Problem with this of course is that government has the job of managing inflation. So coffers get a bit low, just tweak inflation levers to give it a boost.
True, If you were able to borrow to leverage yourself into a million Dollar Auckland home some years ago, then being in the right place at the right time, you would have enjoyed handsome returns on the equity you put in
With the CGT as recommended, it would be even more appealing to leverage yourself into a mansion rather than taking a risk in investing in a income-taxed company or start-up or slogging at building up a business to achieve a similar return on capital - only to have the capital gain then taxed.
An “unfairness” in revenue raising. Many countries provide a threshold before there is liability for capital gains tax and then tax capital gains at a lower rate than their income tax rates partly to off-set the inflation effect.
Fixed interest investments are currently taxed on the “inflation component” of their return. Many fixed interest term investments provide zero return after tax and after inflation.
Presumably net rental payments should provide return to the investor as well. Perhaps many investors have relied on the expected capital gains returns because they have been tax-free unlike the taxable net rental returns, which they have minimised.
The thing I found surprising about this Report is there is no mention of Working for Families. Now would have been a good time to look at how to stop this mechanism turning NZ'ers into beneficiaries.
A "fair" scheme has to include privately held property such as the family home and art.
A "fair" scheme would have one rate of tax - which would be the lower tax level - 10.5% payable by all. Or alternatively the same as the corporate tax rate of 28%
To be "fair" Maori entities would pay the same as everyone else, not 17.5%
Cant see that in the report
It mentions adjusting WFF if the marginal tax rates are tweaked ("suggests that if this higher tax rate is adopted, the Government consider a reduction of the abatement rate of Working for Families tax credits to offset the impact of the increase.")
For Minimum wage, the TWG reckons its better to look at lowing marginal tax rates to improve incomes. ("If the Government wishes to improve incomes for certain groups of low- to middle-income earners, such as full-time workers on the minimum wage, the Group considers changes to personal income taxation may be a better option.")
Other than that I haven't found anything on Benefits
This is what i've questioned all along. During the public inquiry i've submitted where countries that have CGT, they also allow for 'Capital Losses'. So the gains and losses can be applied to future years (just like a business loss can be claimed in IRD to a future year). But the anti-CGT camp says that's too complicated and will just make the accountants rich.
Providing if there's a market for big expensive mansions? In Vancouver that market has simply collapsed after the CRA has investigated all of them. You can be sure such mansions are owned by overseas non-residents (something that NZ has banned).
A CGT on the 'book value' of a company is difficult but I would imagine in NZ's case, there will be no CGT if the business itself has been paying taxes (or dividends). Meaning, you don't 'double tax'. You have corporate tax at 28% and when the company issues a dividend, the shareholders get taxed (but the 'dividend credit' is applied to negate any double taxation). I'm pretty certain IRD would not treat CGT on businesses in a double taxed way.
re: minimoke - unfortunately we don't live in a 'fair' world.
Like I said Minimoke as long as you pay income tax on your labour I am sure it could be treated as a deduction from your capital gain.
Also you are right about inflation. It is a deceptive tool being used to fool everyone and keep them spending and consuming. It runs counter to concerns about climate change and over consumption and it also appears to be playing a big part in the rising inequality between the haves and have nots. Targeted inflation in the current environment is a dumb idea that should be scrapped. Central Banks should provide price stability and certainty. Inflation at 0% would not be a bad thing in my opinion.
All those that believe in this gov't should be cautioning their Labour MP's about introducing this CGT with caution as it would surely lose them the next election.
And to the idea that narrowing the gap between the rich and the poor with another tax is just not proper. There's no guarantee that CGT will even attain that aim.
I don't think there is any chance of this legislation going through Parliament in 2020 as wished for by Labour and the Greens. NZF and National will vote against it. The concern is that this may well mean Labour will not have it as a policy in the next election campaign but introduce it anyway should they be able to form a Government with the Greens after NZF disappears.
it will not get passed as is, I would almost guarantee that, also if not you ,maybe right on your second point iceman
I would bend the ear of my local Labour MP about the marginal tax rate being suggested across the board. Capital gains appear on average over a few years or decades, and some of that gain is only inflation, so it's not real. If you earn pay in a given week and pay the PAYE tax on it, there's no inflation affecting that transaction. It might mean more maths, but to be fair inflation has to be taken into account for longer term asset holdings somehow.
But there are no excuses for other good reasons to impose a CGT in some form. Most other countries have it already, and not having a CGT means that many of our landholders are probably lazy with their assets, they're not as productive as they could be. Sometimes that's a deliberate attempt to avoid extra annual taxation on income, knowing there's a big tax-free payoff down the track. i could summarise that further but I think you'd get the drift.
You also have some spectacular business success stores like TradeMe, where the Morgans and others sold out once their trading profits would have required some whopping income tax payments, and paid no tax on the capital gain they'd achieved in a few short years. In that case, a rate close to the marginal tax rate would have been suitable to impose.
Australia taxes capital gains at marginal tax rates. After holding for longer than 12 months the capital gain is reduced by 50%. This would cover inflation and any other variables in valuations that may otherwise create problems.
I've learned something new and it seems Australia copied the Canadian CGT model of allowing 50% of the gain only taxable. Previously Australia use to 'index rated' the gain with inflation. I suppose it was too much checking with tables and seemed more simple to apply a 50% cut factor.
All in all, if Canada and Australia have a decent working CGT model, then why would such models be considered "complicated" for NZ? I mean are NZ accountants unable to manage? Is the Australian person more capable of understanding CGT than the Kiwi? I'm sick of hearing excuses that CGT with concessions or exemptions would be too complex for NZ
Tax systems and rules differ in each country. So it does not necessarily follow that the Australian CGT scheme should be implanted into NZ.
For example Australian pension account balances are taxed at a concessionary 15% rate for both income and capital gains. (NZ KiwiSaver balances are taxed at the taxpayer’s full PIE rate which could be 28%). So for NZ to exempt the family home from a CGT without offering reduced taxation rates on KiwiSaver balances, could well see a greater move into over-investing in the family home as a de facto pension scheme - more so than in Australia.
Australia and the UK have stamp duty regimes on house transfers. NZ does not. I think In Australia the stamp duty for a $900,000 home for an owner-occupier is $36,000. So if we follow Australia in exempting the family home from a CGT, perhaps we would need also to introduce their type of stamp duty scheme on home sales.
Do you think we should introduce the Australian tax system to replace the NZ tax system?
There are ways in which the NZ tax system already taxes as income some capital gains and indeed wealth.
So to introduce just the Australian capital gains tax regime would be blunt and without significant review of existing tax provisions, it would involve double taxation.
Compared to Oz, implanting the OzCGT scheme into NZ would also make trading up the housing home ownership ladder with owner-occupied home ownership significantly more tax efficient to other investments taking into account the absence of stamp duties on NZ house transfers and lack of concessionary tax rates on the income from KiwiSaver pension balances in NZ.
This is pretty much my summary of why I'm happy for a CGT. Regardless of $1 or $5Million I see no reason for why income & capital gains shouldn't be taxed to make it more fair for all. Yes it's going to be tough for the middle class but fairs fairs...
Attachment 10341
Interesting chart FIsaver. I saw this comment from David Slack on CGT in the SST yesterday.
https://www.stuff.co.nz/national/pol...he-tax-we-need
Oldie but a goodie why tax, especially a progressive tax system is unfair:
https://www.youtube.com/watch?v=S6HEH23W_bM
Here we go again (and i'm being sarcastic) . The NZ voice speaking out that what other large nations are doing is not so good, and NZ can go and try and do it better. So their CGT (or tax system) isn't so "fair" and NZ is out to try and reinvent the wheel (among many other things). After all, "We have a population of 4.5M people, we're SURELY to do better than the 350M people in N. America or the 23M in Australia" or perhaps all of Europe?
Perhaps question why so many are able to invest in NZ real estate and ABLE to pay not a single dime of tax on the gain of the asset upon time of sale??? When I first came to NZ, I thought it was VERY "blunt" that such an asset class was left untouched of any taxation. The excuse I was told then was NZ is a small country and deserves some perks.
Trading up the house home ownership? You mean it's a bad idea for people to value and treat their primary residence as a prized asset (for where they will make improvements), than an asset of financial gain? It's goes to show when Kiwis want a better home, they don't improve the house they live in, instead they sell the house and buy a NEWER house that has the improvements. It's a behaviour no different to changing cars.
Stamp duty is essentially no different to a GST on the sale of the house. But why do most houses in NZ don't have GST on them? Other countries have some form of 'sales tax' when it's changed hands. In Canada many provinces have a tax on the 2nd hand cars that get sold (PST). Are you saying that NZ already has enough taxes? I say NZ has been too generous to the top 10%.
Again, am I led to believe that the average Australia, Canadian, or American is smarter, more understanding about taxation and finance, then the typical Kiwi? My experience from speaking to various NZ financial advisors is, they fail to give me a straight answer regarding taxation & finance. When I grew up, CFA exams require all financial advisors to be fully updated with taxation laws. In fact, in almost every case all the finance advisors (N. America) have to give advice from the point of taxation. But in NZ, i'm compelled to believe they can not give advice from a tax point of view and say "you must also seek a tax accountant specialist". How complicated is that? As complicated as building a multistory house because all I see in NZ new sub-division builds is the same single story houses (can blame the NZ RMA for that).
That chart applies to the USA. The primary residence is a much much greater component of NZ household wealth with shares and retirement savings comprising a much smaller component of household wealth in all wealth bands. A CGT in NZ would bring in much less tax as the primary residence exclusion would remove a much greater percent of capital assets.
Add to that the facts that the lack of property transfer stamp duties and the NZ share market is so comparatively small for the size of the economy, then a CGT on investment housing would probably just mean that more middle class wealth will end being diverted into the primary residence (especially for those that do not need to earn taxable income from their wealth).
So it would not be fair for those who invest their capital in productive assets instead of a primary residence. In NZ do we really need the primary residence to be given another tax break?
SBQ - I have no issue with a CGT. I do have issue with a CGT exempting the primary residence. Especially since the primary residence comprises so much of household wealth in NZ. In the NZ context with NZ having no stamp duties and an unsophisticated equities market - I think that it may mean than even more wealthy people would divert more of their wealth into their primary residences. So the approach in overseas jurisdictions may not be appropriate in NZ.
Bjauck - as the chart FISaver linked, it's natural the primary residence will be the biggest asset for at least say 80% ? of the population. The vast majority of people would not be affected by CGT. But since they hold the voting power, it seems what will happen is a Robin Hood effect. Labout Gov't going after those who work harder, earn more $, invested more, and so now it's time for the CGT to take it away (err.. take those CGT on houses away).
I'm not putting my bet that with CGT more people will invest into their primary residence. The vast wealthy top 10% already have a ritzy house. What would be more compelling is the exodus flow of capital leaving NZ. A weakening of the NZD. A lower standard of living. and most likely, little or no change of tax revenue over the long term (as the wealthy have ways to move their assets abroad). We may see housing prices correcting lower as the wealthy exit the real estate market (a good thing for those that can't afford houses).
SBQ - The chart used was an analysis of wealth in the USA. It has a more limited relevancy to the composition of wealth in NZ. The NZ investment environment differs from that in the USA.
I agree that that with the introduction of CGT (with primary residence exemption) there could be a risk a run of overseas owners selling their NZ residential housing investments with a possible destabilising effect.
As far as wealthier resident owners are concerned - I disagree with you insofar as I think there may be greater movement to further invest in the primary residence as a tax haven as the opportunities in NZ are more limited as far as equities are concerned or have fewer tax breaks (compared with other jusrisdiction) as far as pension schemes are concerned.
Home ownership (including those with mortgages) rates are dropping in NZ. In Auckland about 50% of households are owner-occupied; about 65% nationally.
NZ used to be (and probably still is) one of the countries with the lowest compliance costs to do business. And while I hear the lefties shouting "tax them to the hilt" - it is good for all of us if the compliance costs for business are low. This helps particularly small companies and they are the life blood of our economy. Lower compliance cost - more SME's, more jobs.
So - even if our government would manage to change the taxes in a way which does not increse the overall tax take (pull the other one ;)) - it drastically would increase compliance costs for business. They do have to pay people to value regularly their assets - and the accounting to calculate the tax burden gets much more expensive. Given that business (and the consumer) are paying this burden - we all will lose without gaining a cent - unless for tax accountants, of course - they would gain a lot!
Is it worth it? I seriously doubt it. Will Labour try to push it through? They probalby will despite understanding that it will damage the country. It might increase poverty and unemployment, which is good for them (more beneficiaries, more Labour voters).
Can't trust Labour to do the right thing (which would be ditching this proposal) - better make sure we get the next time the right people back into government.
BP while I think it will not go thru as it stands and maybe not at all if Labour voted out (as we all know governments are voted out not in generally), currently does the tax only come about once the asset is sold, so no on-going valuations required, and even that is then open to abuse, paper work says one thing actual money exchanged could be another in some circumstances. Though thinking about it not beneficial to new buyer when they want to sell!
Even if no regular evaluation would be required - everybody would need to pay for their initial valuation - or what do you think they take as starting value of this new tax?
And there are so many other sides to this proposal which are blatantly unfair ...
Somebody who owns a 4499 sqm luxus beach villa in Auckland (on less than 4500 sqm :) would not need to pay CGT for their family home.
Somebody who owns a 4501 sqm "supermini"-lifestyle block close to Invercargill however would need to pay full CGT on any capital gains on their family home.
What happens if your parents die? Would you need to get a valuation of their business or property and pay CGT?
Suppose you work at a different place than your family home (happens not just to PM's). You buy a small second home to live there and sell that after 10 years to move into a more suitable one. Suddenly you can't anymore afford to buy in the same market you sold into, because you just had to pay one third of the "capital gains" to the tax man. You need to downgrade.
Assume you buy at the moment a wee house in Auckland for $1m. Lets assume we have modest inflation (less than 4% pa) through this time and inflation adjusted property values don't change over the next 2 decades. You sell the house after 20 years for $2m (which has the same purchasing power than now $1m). You pay $333k to the taxman for the benefit of having no (in real terms) capital gain at all.
No way how you look at it - this tax proposal is made from non performers for non performers. It is unfair, it is expensive and it will constrain any growth. Typical Labour - can't do.
I don't think valuation is an issue. When I studied tax in Canada the tax act accepted many ways to determine the Fair Market Value (FMV). Houses are particularly easy as the owner can simply accept the local city rates valuation. Those that think their homes were undervalued could simply get revaluations privately (ie by a real estate agent etc.) - but what it meant at the time of owning the property depended on those wanting to sell vs those that wanted buy. Those wanting to sell wanted a higher valuation ; those wanted to own for long periods of time wanted a LOW valuation so they would pay lower property taxes. Eitherway, valuation was never an issue when it came to CGT calculations - neither side (tax dept. vs tax payer) came from the view of unfair FMV.
In Canada (and i'm assuming IRD would follow a similar model), when a person dies "Deemed Disposition" applies. That is at the time of death, ALL assets are valued and considered sold. Like NZ, Canada has no estate or death tax. Again FMV aren't a problem upon death. If the death causes problems in estate asset sales, well then that's the fault of the deceased person for not moving the assets into a 'trust' while their were alive. But then any time you move assets to a trust (that is also considered a sale).
"Primary Residence" means just that. Moving elsewhere because of the job and owning that new 2nd house for 10 years can not be deemed as a primary residence. Why should it? Realize most people barely have funds to buy their 1st home, let alone buying a 2nd home. I know some people buying their 5th rental home and it's very clear, they've held a real estate portfolio that is fully exempt of paying tax on the gain of their house (starting well over 10 years ago). How is this fair when if they invested in any OTHER asset class, they would be expected to pay tax on the gain? Anotherwords, why should real estate exempt any form of taxation other than paying rates? You can argue that the price of houses goes up in line of inflation but I beg to differ, especially in Auckland.
As for how CGT would constrain growth and deter investment, yes I agree with that. Fortunately i'm able to keep my options open on the impact of CGT in the next 5 or 10 years and when I can see the effects (ie. my children having little chance of employment / lower standard of living / etc) we would be quick to move abroad.
You are right, neo con https://en.wikipedia.org/wiki/Neoconservatism is not the policy of the one man university more likely "neo liberalism" is more correct.
Found the comments amusing. The video is questionable in its asumptions.
westerly
I'm still confused why you would think the video is questionable? What the video tells me is a clear example of basic economics of "Paretal Optimal" (or Paretal Efficiency) where 1 person's benefit can NOT be achieved without the other person (or persons) losing. The person in the video that did the least work appeared to benefit from the loss of the harder working person of the much higher income.
Interesting statement in the context of your post. I take it as a vote of confidence into this proposal.
Just remember - many of Labour's core clientele would not have this option - and while they might enjoy in the short term seeing their "rich" neighbours taxed over the hilt - they might less enjoy when their welfare benefits are cut because the state is running out of money if the larger taxpayers are leaving the country in droves.
Interesting isn't it. My partner and I have recently had the discussion about moving our capital out of NZ if a CGT is imposed by this government. She has Australian and UK passports and I have a European passport so plenty of opportunities to go and put our money and capital in other jurisdictions that are more friendly to investment. Labour need to be careful what they wish for.
GCT may apply to the family home - as it stands at present
if you use a room(s) as an "office" and claim the expenses for it, you have a choice, don't claim the expenses and no GCT or claim them and you pay GCT - albeit based on the % of your home used say 1 room = 20% so you would pay GCT on 20% of the gain I presume - something like that
More detail here https://www.nzherald.co.nz/business/...ectid=12207150 ... if they have it right!
What is or is not a family home makes the family home exclusion a nightmare. Near where I live there are plenty of lifestyle blocks bigger than the 4500m threshold. Many have panted their sections with native bush - and to have smaller sections would spoil the environment. Many are newly reitired and would not want the hassle of having to value and apportion costs between exempt and non-exempt areas of their property.
it would be better to have no exemption and then to give a generous threshold to taxpayers.
During the National led party I saw their focus of welcoming migrants to NZ. Their immigration policy made it clear that those abroad (and many who are wealthy) to "Give NZ a Try". They passed tax laws that exempted income for 4 years upon residency / arrival in NZ. It was clear, NZ at that time welcomed investment and people into NZ. Now, it seems the Labour wants to do a 180 turn. Labour gov't needs to remember the very same people that brought $ to NZ as migrants, can easily leave back to their home country. I mean after all, when you balance things up, if the benefits are no longer available in NZ, then why stay? As for myself, the very things I hated about Canada, (long ago), i'm starting to see them happen in NZ now (regarding around taxation).
What i'm most concerned about is the details of the CGT. It's very simple. If the tax bite is too high.. excessive compared to other countries with no concessions or exemptions (that is common in other OCED nations), then I would be a fool to keep my family in NZ. I mean at the moment, it seems that the CGT proposed for NZ doesn't compare well to where I grew up in Canada (and Canada is a country well known for excessive taxation). My wife would in a heartbeat would give up her high paying job in NZ just to move to Canada. I do not believe my situation would be unique in NZ.
If this thing goes ahead it will be only a shadow of the current recommendations put forward by the tax working group, I think the current Govt has underestimated the resistance to a CGT.
Au contraire - A big part of the reason for investigating a CGT was because home ownership rates have been falling due to rising prices. One of the big reasons for that is that investors have been prepared to receive low taxable net rent returns in the expectation that they will receive untaxed capiital gains.
We are the only country in the OECD that does not have a formal CGT although we have the Brightline tax which of course is CGT in disguise. Most of other OECD have a CGT with many exemptions and lower rates than normal income tax. But it has not stopped them from having exactly the same issues as NZ with run away house prices and high rents. The idea that CGT will be a guarantee to lower house prices and lower rent is simply not supported by any evidence
I've probably missed something here but do the TWG recommendations include allowing tax deductions in respect of capital losses? Tax loss selling of doggy shares in the weeks leading up to the end of the financial year is a feature of the Aussie market.
We dont have stamp duty either, or inheritance tax. There musty be loads of taxes we don't have in NZ. Doesn't make introducing new one right.
There is only thing to consider. Does the current tax regime raise enough revenue to cover govt expenditure. If so then no change required.
From there you ask how efficiently you can raise those taxes and look for improvements (whole also trying to reduce govt expenditure)
And then from there you try to figure out a relatively fair scheme where each person pays there fair share. This is where it gets hard because nothing in life is fair. No point trying to make it dead fair cos such a thing is impossible.
In any tax system there will be winners and losers. Is it fair that those on minimum incomes and pay less tax get to enjoy most of the government expenditure. No. But that's the way it is.
Is it fair that people work hard and invest in the hope of bettering themselves (and paying taxes along the way) reap some capital gain (when times are good). No. but that helps offset the other unfairnesses.
Thanks, fungus. But offsetting future gains isn't quite the same thing as allowing losses to offset current year's tax on current other realised capital gains which is what I think the Aussie system is.
In any case, I expect the coalition to cherry-pick what suits it from the recommendations.
yep there are ways in which capital gains are already captured. Brightline is one such way if you buy and sell within five years.
Of course a cgt will not guarantee affordable housing especially since the family home did not form part of the review and NZ does not have the stamp duties that other countries have.
NZ has amongst the most unaffordable housing in The OECD with residential property comprising a very large share of household wealth. So I would think it would make sense to try to encourage the diversification of household wealth away from residential housing. As a Sharetrader poster, It would be nice if NZ shares featured more prominently as household investment and helped stop the exodus of NZ listings...
However the point I was responding to was that “Labour clearly do not want people to own their own homes”. I have yet to know why that accusation was made.
Of course the same wild accusation could have been made of previous governments that allowed the housing shortage to get out of hand and sat on their hands as home ownership rates dropped and unaffordability climbed.
We agree on most points, but I think what is always overlooked in the house price debate is the fact that Councils, particularly Auckland City Council, have been appallingly bad in planning and releasing land for building on. Minister Twyford is finding this out real quick. This is the main reason for our too high house prices and no CGT needed to fix it.
So on the 6 o’clock news we see Taxinda’s Chief Taxman Cullen say he agrees with Iwi they should be exempt from CGT. So Labour wants our tax system based on race. Can this get any worse ?
Well its about time this white cracker starts finding some Iwi or tribal affiliation. One only need to identify as Maori these days anyway to be considered Maori so it should not be that difficult. Been to a Marae many times, and know the odd phrase of Te Reo. Could come in handy when the IRD inspector comes for a visit.
Well I am certainly not going to put my assets in my Maori grand daughter's name.She has a lot of her father "Gunna" in her.
Not going to buy a big flash house either.
So not sure what I am going to do yet.
Maybe sell my specs and add to my income stocks.
Yet those specs are small companies that need capital to expand.But why bother?
John Key (National) during his time when CGT was talked about, he said "I'm not convinced CGT would prevent housing prices from sky rocketing". He made references to places like Sydney where housing prices had gone out of control in the past.
The brightline 5 year hold for real estate is a wash. I know of no person with a real estate portfolio having the intent of selling a house they've just purchased within 5 years. I would not be surprised if IRD gets much revenue from those that buy & sell within 5 years. It's similar to investing in equities or the ETF, the emphasis is long term holds.
My stance has kinda changed on the view of CGT in NZ. I think NZ is too small of a country to have such equitable policies as our larger brother (Aus) or elsewhere. Accountants have told me when I 1st came to NZ about 20 years ago that NZ needed these "perks" for wealthy investors to keep $ in NZ. I questioned back then why a NZ resident didn't have to declare the gains from their overseas stock trading (of course that's changed now with FIF) but the trend i'm seeing is simple:
More and more tax incentive BENEFITS that NZ had (which attracted many wealthy investors from abroad ; and don't forget, preventing local wealthy investors from moving their wealth abroad) is vanishing.
I'm not buying the statement by Jacinda Ardern that NZ needs a "Fair tax system". Like what the hell was the tax system like for the past 20 or 50 years? Is she saying NZ's tax system was never fair to begin with? C'mon Labour Gov't. It reminds me the argument by the tax auditor told me when we were being audited back in Canada, "It's about paying your fair share...." And Canada has plenty of politicians with offshore trusts in numbered Swiss bank accounts.
I'm more concerned that people get brain washed thinking that it's ok for NZ to have most of it's wealth dashed away abroad as they assume taxing those that can invest = not paying their fair share.
Yes that's how it is SBQ. Labour is now backtracking full speed and promising "family home", "farmers", "small businesses", "Maori" and who knows what else, exemptions. This thing simply will not fly here in NZ.
I do think agood, low, flat CGT has a part to play in a sensible tax system, but it would have to be like NZ's (world beating) GST, flat rate without exemptions. I have several properties in a European country that has a CGT, yet I've never paid any (except on bank balances and FX gains) because of all the exemptions on "homes" and the totally reasonable "repatriation" clauses.
Here Labour wants to exempt the "family home". Just momentarily think how much that term and the definitions of it can be stretched. My idea would be to sell my shares and buy a couple of acres sections to build my home on with "extensions" (AKA different abodes) for the rest of my family and charge them rent.
If I owned a rental property and ran it from home, is that a small business, sounds like one to me, so I would be exempt as well ;)
That's been tried well long ago in the past in Canada. Just as a comparison for conversation, Canada's tax system is extremely complex. After all, IRD did come to Canada in the early years to "copy their GST" system so I would not be surprised if they will copy most of their CGT system. Here's an interesting read how Canada dealt with 'loop holes':
https://torontosun.com/2014/05/05/ti...8-562c33577d27
"Now? The Income Tax Act is 3,206 pages — 1,038,162 words long."
Have a think about it. We are in NZ. Should IRD go down this path? I'm not even sure the NZ laws books have that many pages or words? Over 1 Million words to interpret??? Is that reasonable for a population of 4.5M ? Remember, Canada's tax system was never that complex ; When I studied tax at uni our prof told us the reason why the Cdn ITA book is so big and complex is all to do with the "lawyers" & "accountants" fighting in courts, so the politicians had to re-word the writings in the tax act, by covering loop hole after loop hole. On most part, a lot of it has been modeled off the US IRS tax system. But that's not to say, NZ should follow the same regime?
Jay: I'm well aware of the complexities of CGT in Canada. What you explained doesn't fly there and the way they treat things is IMO, very elaborate to say the least. As an example, my friend back in Canada bought a brand new Mc Mansion house in 2015. As you may not know, new construction Cdn houses are massive to say the lease (typically 1/2 in ground + 2 stories up = effective 3 living levels detached with garage, none of this single story stuff we see in NZ). They only have 1 child so the house was obviously big. The following year, he renovated the basement into a separate dwelling (as these new house have separate 'side door' entrance). His accountant told him that it would be a good $ stream however, my friend did not realise that the portion he rents out "you could say for business" will not be ACCOUNTED for as exemption from CGT. So basically 1/3rd of his house for as long as he owns it, will count as taxable in terms of CGT. He sold his house few months ago to move in a BIGGER house.
Exemptions are one thing. But loops holes are another. Recent news about NZ IWI being exempt from CGT again, is nothing new in Canada. Their 1st Nations "on reserve" are exempt on most forms of taxation (income and sales tax). But when you look at over 90% of the 1st Nations in Canada, their reserves are run down, neglected, with countless of failed so called 'business ventures'. At least the Maori in NZ are by far, more business focused with far more successes. Perhaps it's environmental or genetics.
I just want to say that SHOULD NZ have a complicated tax system like our big OECD nations? If so, then that path will be a nasty one and inefficient for our small level of population. Too many politicians and lawyers in the country but not enough for those that do anything.