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R2
27-07-2006, 10:51 PM
Just prior to the May 2005 budget I posted regarding the introduction of CGT on Real Estate. Got that a little mixed as the fact was a CGT on overseas shares that was introduced in that budget.

Nonetheless, as NZ requires taxation adjustment to retain/attract productive human resources and as the proportion of the population with assets to sell in place of income to earn transpires, it is fairly clear that wealth taxes will be introduced. Particularly CGT real estate, albeit with an element of grandfathering or single exemption such as applies in the US.

With this in mind what is the popular wisdom regarding property values:-

a. Build a portfolio of properties with grandfathering in mind.

b. Avoid property as it will become a less favored investment class.

Cooper
30-07-2006, 05:00 PM
Two other posters, skinny and Halebop, have had a discussion regarding the political feasibility of such policy on the NZX thread. Skinny concluded that the political feasibility of a CGT was low, regardless of whether the move was good policy or not. I agree that the current Govt seems keen to introduce "wealth taxes", but I'm sceptical in regards to whether CGT on property would be "allowed".

In regards to "popular wisdom", I'm afraid I can't comment as I'm neither popular or wise.

bigbear
09-08-2006, 06:38 PM
Labour thinks they may get away with imposing an unrealised CGT on offshore shares as it only impacts 'rich people' who don't vote for them anyway. The submissions received may well mean this goes back in too hard basket. CGT on residential property would be political suicide in NZ (Cullen would love it by Clark would never allow it). Having said that CGT on commercial and rural property might be worth a try (rich people again). Maybe bring back death duties (lawyers would love it). Fundamentaly I personaly do not have a propblem with CGT so long as is inflation adjusted and corresponds with a cut in all tax rates at the same time.

R2
09-08-2006, 10:19 PM
Hi BB - your's is the type of broadly growing point of view that I suggest is quite a major change in popular acceptance of CGT that didn't see the light of day 5 years ago - "don't think it will happen, but I wouldn't mind if it did"

CGT was mentioned in an article on home ownership in North & South magazine I read while in AKL last week, it related to young citizens wanting to buy their first house and finding babyboomers were snapping up the starters as rentals.

I don't believe taxing those stopping young NZ'rs from buying their first home would be unpopular; are landlords in fact ever popular ?

I would think that free student loans + cheaper house prices + lower income tax rates would grab votes of the <35 voters and possibly their parents who, on an emotional basis, want their spawn to stay in NZ and get ahead. Notwithstanding, if NZ tax base is narrower than OZ's then PAYE rates will be higher which is increasingly becoming less of an option.

Therefore, in the last year we have got CGT on foreign sale of NZ companies in April, CGT on foreign shares in May, no doubt followed by CGT on NZ/AU shares just to make it fair, and finally on non-resident owned real estate (as we did have in the 80's).

Seems I'm the only one that thinks it is coming which will be, hopefully, my gain.

For the record I don't personally don't agree with income tax at all - the rate should be zero; CGT, import duties, sales & company tax is all that is required. Here in Singapore there is no CGT and I think I pay about 18/20% income tax.

Halebop
09-08-2006, 11:32 PM
The introduction of capital gains taxes combined with income tax cuts would be both fair and positive. While investors might feel aggrieved at being taxed, there isn't a strong logical reason for their capital growth earnings being "less taxable" than other sources. On the flipside Investors would have the most to benefit from lower income tax rates and commensurately higher consumption from wage and salary earners (in terms of both higher company earnings and greater personal savings ability). A clear definition of "capital gain" vs "trade", probably based around time frames, would also simplify an investor's life.

bigbear
11-08-2006, 06:50 PM
One key point with any reasonable imposition of CGT is that it when actually realised (ie sold).

Worst point of proposed o/s tax IMHO is the unrealised aspect, 2nd worst is the disincentive to invest in equities which really should be encouraged.

If you do not sell the property then you defer the CGT for a long time, as such if it is truely a long term investment it is not a big deal in some ways. I personally would not favour a CGT in NZ as we simply do not need it. There are big enough tax surpluses already but I could understand it from an economic perspective.

Still belive politically not acceptable on residential property (rural property also would be tough to sell) but commercial side might be easier to sell to the voters.

Bear in mind that if everyone says 'fine i just won't sell it then' you can work out yourself what happens to prices in short term.

Agree with Halebop's comments, I personally would make more progress with lower tax rates even with CGT as I invest long term in commerical property only and would have more equity to contribute with lower income taxes.

As an aside GST in my view is a very efficeint tax as is impossible to avoid even if you avoid (evade) income tax. NZ has a broad based GST regime (very few exceptions) which is the way to go, Australaia is awful in this regard.

Dean Letfus
13-10-2006, 10:10 PM
Provided you keep your buy and holds in a buy nad hold entity and put your trading properties into a trading entity then CGT has absolutely no effect whatsoever on a property investor. The best time ot sell a property is never unless you are trading in which case you pay tax on the profit anyway. I often wonder why people are so conncerned about CGT unless they are not paying tax on trading now??

CJ
16-10-2006, 11:23 PM
quote:Originally posted by Dean Letfus

Provided you keep your buy and holds in a buy nad hold entity and put your trading properties into a trading entity then CGT has absolutely no effect whatsoever on a property investor. The best time ot sell a property is never unless you are trading in which case you pay tax on the profit anyway. I often wonder why people are so conncerned about CGT unless they are not paying tax on trading now??


Agreed.

Dean. When did you venture into this forum. Does Propertytalk not keep you busy?

Dean Letfus
18-10-2006, 08:05 AM
Hi CJ. I ventured in here after someone was running me down after my Herald article. Google picked it up for me!!