Capital Gains Tax [Archive] - Page 2

Aaron

11-02-2019, 09:37 AM

re Aaron quote:
The articles on Stuff are vague at best and don't tell the whole picture or impact of CGT. The TWG made no recommendation for tax concessions on CGT while most OECD nations that have a CGT do (in the form of inflation adjusted, or half the gain is only income taxable, etc.). The tricky part is if you apply an extreme point of CGT at the high end with no concessions, then you will see a flight of capital in NZ.

I haven't read the recommendations of the TWG so probably shouldn't be debating it until I do but, most other countries made concessions when they brought in goods and services tax to alleviate the regressive nature of the tax. NZ didn't which in my view makes it more unfair but this is outweighed by its simplicity which is great. I was disappointed to hear about proposals for exemptions for fresh veges, don't dick around complicating things, it may not be fair (what is?) but at least it is easy to understand. Just make sure it doesn't rise above 15%.

Make a capital gains tax as simple as possible too that way people will no where they stand and there is less wiggle room for the people wanting to avoid paying it.

777

11-02-2019, 11:16 AM

I haven't read the recommendations of the TWG so probably shouldn't be debating it until I do but, most other countries made concessions when they brought in goods and services tax to alleviate the regressive nature of the tax. NZ didn't which in my view makes it more unfair but this is outweighed by its simplicity which is great. I was disappointed to hear about proposals for exemptions for fresh veges, don't dick around complicating things, it may not be fair (what is?) but at least it is easy to understand. Just make sure it doesn't rise above 15%.

Make a capital gains tax as simple as possible too that way people will no where they stand and there is less wiggle room for the people wanting to avoid paying it.

What rubbish. When GST was introduced, probably before you were born, most(if not all) the sales taxes that used to apply were removed. On top of that the marginal income tax rates decreased substantially. The top rate down to 33c/$. At some later stage that top rate was raised to 39c/$ before being once again reduced to 33c/$ when GST was increased.

fungus pudding

11-02-2019, 11:27 AM

What rubbish. When GST was introduced, probably before you were born, most(if not all) the sales taxes that used to apply were removed. On top of that the marginal income tax rates decreased substantially. The top rate down to 33c/$. At some later stage that top rate was raised to 39c/$ before being once again reduced to 33c/$ when GST was increased.

Quite right. The sales taxes that were removed were the most higgeldy-piggeldy bunch of varying rates, inclusions and exclusions imaginable. All replaced with the simple and effective no exclusion GST system we have in NZ. Possibly the most sensible thing Labour has ever done.

Aaron

11-02-2019, 11:40 AM

What rubbish. When GST was introduced, probably before you were born, most(if not all) the sales taxes that used to apply were removed. On top of that the marginal income tax rates decreased substantially. The top rate down to 33c/$. At some later stage that top rate was raised to 39c/$ before being once again reduced to 33c/$ when GST was increased.

What is rubbish?? I am agreeing that GST is great for its simplicity. Make a capital gains tax as simple as possible as well.

I appreciate that agreeing with you can sometimes be rubbish but not in this case.

Aaron

11-02-2019, 11:43 AM

Quite right. The sales taxes that were removed were the most higgeldy-piggeldy bunch of varying rates, inclusions and exclusions imaginable. All replaced with the simple and effective no exclusion GST system we have in NZ. Possibly the most sensible thing Labour has ever done.

read my post again.
I think what you and 777 would like to say is that you don't think GST is a regressive tax. We have been over this before and will agree to disagree. What about capital gains tax. Would this be a progressive tax? Personally I believe it would be.

777

11-02-2019, 11:48 AM

"most other countries made concessions when they brought in goods and services tax to alleviate the regressive nature of the tax NZ didn't which in my view makes it more unfair "

Just as you typed.

777

11-02-2019, 11:52 AM

read my post again.
I think what you and 777 would like to say is that you don't think GST is a regressive tax. We have been over this before and will agree to disagree. What about capital gains tax. Would this be a progressive tax? Personally I believe it would be.

That never entered my mind.

Aaron

11-02-2019, 11:58 AM

That never entered my mind.

Sorry about making assumptions. What was rubbish then?

777

11-02-2019, 12:14 PM

Aaron

11-02-2019, 01:07 PM

Do I have to spell it out then. Read the whole of the re quote of your post I copied in post #256. Simple comprehension exercise. You stated NZ didn't make any concessions when GST was introduced and in fact they did as explained in my original reply and confirmed by FP.

Thanks for that. Maybe I should have said exemptions rather than concessions. NZ has one of the most pure GST regimes because we made very few exemptions to the tax. Most other countries exclude basic food stuffs and other essentials.

SBQ

11-02-2019, 01:13 PM

No doubt a CGT would be huge and the effects of introducing one may not be fully appreciated but as long as the reasons behind it are valid I say go for it. The reasons for a CGT would be to broaden the tax base. Reduce tax on labour, hard work and entrepreneurship (except when you sell the business for a capital gain).

I don't have a problem with CGT in NZ. But I do have a problem when CGT erodes and discourages investment in NZ. Without investments, you lose jobs, it's that simple. If you disadvantage those that have the $, then you will have what many other nations experience, a 'flight of capital' (Brexit is a good example)

Does NZ really want to encourage people with foreign trusts, on the whole they sound like a bunch of rotten, selfish self-centred scumbags should we really be helping them. Let them flee somewhere else.

Foreign capital investing that involves building or improving industry/assets in NZ is no doubt good for the country, not so sure if buying existing businesses and farms and taking the dividend offshore is a good idea or even worse thin capitalisation(see link below).
http://www.stuff.co.nz/business/opinion-analysis/10400785/We-need-to-talk-about-that-red-carpet-rollout

We're not trying to encourage foreign trusts in NZ. What we don't want is to signal the global investments community that NZ is anti-investment and pro-tax. Every OCED nation has foreign trusts laws and it was about time NZ tax laws had aligned to their level. But to talk of a CGT that is not aligned to how other nations treat CGT?

Also you have to stop thinking NZ is a major player in the global scheme. It has no real currency controls so $ can flow freely in and out. When you have something like a CGT that thwarts investment in NZ by foreigners, then it will impact everything. Your Kiwi Saver, your economy, jobs, nothing will escape, and sadly it translates to a lower standard of living. Anotherwords, do you understand how dependent NZ is on foreign trade and investment? Just because farmers can sell more product at lower exchange rates (makes them more competitive), on the other hand you have to import goods that NZ doesn't produce AT THE higher cost (as most trade is based in USD). Also how do you produce an income generating asset in NZ when locals alone don't have the funding? You realise that when the NZ gov't privatised it's assets, a lot of it went to foreign ownership. Ever questioned why?

Also came across a bit of history regarding this company while looking for the chalkie article.
http://www.stuff.co.nz/dominion-post/comment/6596585/When-we-sold-off-Wellingtons-power

I don't buy the capital flight threat, worst case scenario income generating assets and land become more affordable to NZers and a declining NZ dollar makes our productive exporters more competitive.

I think you can always put a negative or positive spin on something.

Again IMO, a very weak NZD is a drop of standard of living in NZ. Again quite simply because NZ is a very small country and is more dependent on international trade than what large nations can simply produce their own products. NZ will never be in that position.

As I said before, tax concessions are nothing new and almost every OCED nation has it. I do not believe it's an excuse that NZ needs to have a simplified tax roll for the sake that "the avg NZ person can't understand what concessions are and who don't believe accountants know what they're doing". It's a poor excuse. Not trying to be anti-CGT. It's just that the world has become a small place and if NZ sends the wrong message, the general population as a whole will suffer.

Bjauck

11-02-2019, 03:16 PM

I do not see how a tax when your purchase goods or services from your net income is any more justifiable than a tax when you sell an asset for a profit.

To keep it simple, CGT should not have an exemption for the “family home.” By creating such a major exemption, household capital investment decisions will be further distorted. Of course a CGT on the family home would mean tax cuts in other areas to maintain the neutrality on the amount of revenue raising. IMO It would be better not to introduce a CGT than to introduce one with such a major exemption.

The absence of stamp duty, capital and capital gains taxes with a resulting concentration on GST and Income tax is regressive in effect.

fungus pudding

11-02-2019, 03:34 PM

minimoke

11-02-2019, 03:50 PM

To keep it simple, CGT should not have an exemption for the “family home.” By creating such a major exemption, household capital investment decisions will be further distorted. Of course a CGT on the family home would mean tax cuts in other areas to maintain the neutrality on the amount of revenue raising. IMO It would be better not to introduce a CGT than to introduce one with such a major exemption.
.Its all a bit hard until we see the detail. I spent the weeknd putting in a couple of hundy worth of new irrigation lines and a hundy on a bucket of fence paint. I'd be expecting to put this onto the capital value of my home (plus the value of my labour) before getting taxed on any increase in value I might get when selling the home.

blackcap

11-02-2019, 03:52 PM

Its all a bit hard until we see the detail. I spent the weeknd putting in a couple of hundy worth of new irrigation lines and a hundy on a bucket of fence paint. I'd be expecting to put this onto the capital value of my home (plus the value of my labour) before getting taxed on any increase in value I might get when selling the home.

Great fun! Every home owner keeping receipts and books (might as well hire an accountant) for everything they do on their own home to satisfy the CTG police. As to how much you apportion to your labour, maybe the IRD can publish "labour rates" every years as they do for car mileage :)

Bjauck

11-02-2019, 04:10 PM

I agree Every tax involves compliance issues.
Imputed wages (deductibility and PAYE etc.) for the home-owner and the work she does on her own home would be great for Cullen to get his teeth into!

Bjauck

11-02-2019, 04:13 PM

Its all a bit hard until we see the detail. I spent the weeknd putting in a couple of hundy worth of new irrigation lines and a hundy on a bucket of fence paint. I'd be expecting to put this onto the capital value of my home (plus the value of my labour) before getting taxed on any increase in value I might get when selling the home. I am not sure about irrigation but Wouldn’t a lot of maintenance costs be expensed against income not capital? Which in relation to owner-occupation is not taxable as imputed rent in NZ is not taxable and imputed rent is an area that as far as I know has not been touched on by the tax review.

minimoke

11-02-2019, 04:29 PM

I am not sure about irrigation but Wouldn’t a lot of maintenance costs be expensed against income not capital? .I think my home is valued as land and improvements. At least that's how a value is derived for rating purposes.

I guess I could not paint the fence and see a depreciation of my capital - I wonder if the Working Party will allow for that.

Aaron

11-02-2019, 05:31 PM

It's a poor excuse. Not trying to be anti-CGT. It's just that the world has become a small place and if NZ sends the wrong message, the general population as a whole will suffer.

I don't disagree with all that you say, a lower dollar increases competitiveness and as you point out NZ is more dependent on international trade. A lower dollar is a drop in your standard of living and an increase in the price of imports. I have read economic textbooks that say this. How big a drop might be hard to measure.
I don't think NZ is a major player globally in anything (other than maybe rugby and sailing).

I just don't buy the argument that a CGT will cause capital flight and cause the ruination of our society. If the well-off are threatening the rest of society because their wealth is so great they can destroy a country pandering to them and letting them become even more powerful won't make society any better.

Did you read the example of the wellington electricity lines company above? Do you believe Asian investment in Auckland's housing market has been beneficial to anyone other than those selling up? How much went into new houses compared to existing. I don't know myself but don't see foreign investment as the be all and end all. I may be proven wrong but you will probably be gone long before you get a chance to say I told you so.

Aaron

11-02-2019, 05:34 PM

Its all a bit hard until we see the detail. I spent the weeknd putting in a couple of hundy worth of new irrigation lines and a hundy on a bucket of fence paint. I'd be expecting to put this onto the capital value of my home (plus the value of my labour) before getting taxed on any increase in value I might get when selling the home.

As long as you pay income tax on your labour I am sure you could add it as a cost against your capital gain.

SBQ

12-02-2019, 02:07 PM

The key to exempting CGT on the personal residence is the fact people need to have a roof over their head. It goes along the lines why Australia and Canada have exempt GST on fresh foods because these taxes are punitive to the low income families. Clearly not an issue about tax equalisation or for efficiency but rather, more to tax those that have $ FOR investments. We have 'Income" taxes. Why can't we have taxes for those that have "Capital Gain" ????

aaron: I just don't buy the argument that a CGT will cause capital flight and cause the ruination of our society. If the well-off are threatening the rest of society because their wealth is so great they can destroy a country pandering to them and letting them become even more powerful won't make society any better.

When you have a country where the top 5% owns like 80% of the wealth of the country, you can be sure they won't be stupid with their $. Brexit is a clear example. Yes NZ won't be destroyed but when you look across the seas how other nations have prospered, i'm in no doubt people in NZ don't have the same living standard as my friends that left to the USA or stayed in Canada or moved to Australia. I know there are exceptions but when I can see my friend that dropped out of highschool (growing up in Canada), moved to the US, he's amassed more wealth and lives in a far better house, driving the latest Tesla Model S P100, (and his wife an anesthetic RN at a hospital in Cali - she also dropped out of highschool) than any of my highly educated cousins that grew up in NZ with all the degrees. But you don't even have to look at the academic aspect, I look at how much timber costs to buy in NZ to build a house vs to buy at Home Depot in Canada or in the US ? It's very clear these differences in price are due to difference in standard of living. What we pay in taxation for social gov't health care is comparable to the Cadillac health care plans my friends pay in the US. Anyways i'm mumbling off topic.

re minimoke: any improvements like your irrigation and landscaping can be valued independently if you feel the CCC GV doesn't fully reflect your home property value. There's no need to keep receipts of how much hoses and pipework costs. But why let the accountants be busy? Exempt the family home and that's 1 easy way to say you've earned it. As for those that venture to owning several houses for rental properies, slap the CGT on them in every way.

The Asian investment in Auckland's market is nothing unique. I'm very well aware of it and being quite familiar with the Vancouver housing market in BC, Canada, I do feel the NZ Labour gov't is going a bit too aggressive but simply banning non-residents. When Trudeau was elected PM in Canada, one of the things he did was tacking the house prices in Vancouver and it's worked (not by banning them.. but by simply taxing the hell out of them). By no surprise, a lot of $ from China went into the real estate market ($ from questionable sources - laundering, etc). So rather than the Cdn gov't trying to enforce anti-laundering laws, they attacked these wealthy migrants parking their 'black' money into the real estate by using the "residency clause" in the Cdn ITA. You could say Canada is being half hearted when it comes to anti-laundering laws but IMO, I see no harm in the gov't taking that $ - ?? Why couldn't the NZ gov't do the same? Just send out investigations on these real estate investors from abroad and slam them tax on the gain or CGT. Because in Canada, what these rich migrants were doing is buying the house and claiming the house as their "personal residence" to be tax free, while their high income overseas was not taxed in Canada (like NZ residents are taxed on a world wide basis). Furthermore Vancouver slapped on a "Vacancy Tax" aiming at foreigners buying houses and leaving them empty (as vacation homes for the rich). Can you believe in the 1st year of introduction of that tax, the municipal gov't raked in over $30 MILLION !!!! That's not chump change and the NZ gov't could of done something similar. After all Winston Peters did visit Vancouver shortly after winning the coalition election in NZ so he should of learned some ideas.

Bjauck

12-02-2019, 08:28 PM

The key to exempting CGT on the personal residence is the fact people need to have a roof over their head. It goes along the lines why Australia and Canada have exempt GST on fresh foods because these taxes are punitive to the low income families..... People do need accommodation but we live in a dynamic society these days, where home ownership is not necessarily the best way to secure accommodation for every person. People have to move for work; there is not the same social inevitability of marriage and having children.

For example,some single people may wish to invest in their own businesses and shareholdings rather than having their own home. So why should they pay tax on capital gains as opposed to the single people who invested and earned capital gains on their capital invested in their own home instead, helping to beat up the price of land so that some families are priced out of the market?

Jay

12-02-2019, 09:10 PM

One (maybe small part) of why lots of things are cheaper in other countries like the US, Canada etc is population, what we may buy in 6 months of say timber is boughr every other week - somethiong along those lines
So a little less margin maybe all along the chain to the retailer???

Not a silly idea about taxing foreign investments as you mention sbq especially homes that are vacant for a certain period

SBQ

16-02-2019, 12:10 AM

People do need accommodation but we live in a dynamic society these days, where home ownership is not necessarily the best way to secure accommodation for every person. People have to move for work; there is not the same social inevitability of marriage and having children.

For example,some single people may wish to invest in their own businesses and shareholdings rather than having their own home. So why should they pay tax on capital gains as opposed to the single people who invested and earned capital gains on their capital invested in their own home instead, helping to beat up the price of land so that some families are priced out of the market?

I get that not everyone needs to own a home. That's why there are 1 bedroom apartments for rent in major cities. I also understand it may not be fair for the single person renting, to pay CGT or other taxes on their shareholdings or investments. The reason for such exemptions or concessions of CGT is because not ALL asset classes are the same. The person that owns a home as a primary residence shouldn't be owning to make a profit. This is the distinction I learned in NZ where if a person wants a better house, they sell their existing and buy a newer one vs spending $ to IMPROVE the house they live in. Then there's the other issue of mortgaging. The person wanting to buy their 1st home can get a mortgage and typically, their goal is to pay it off. The person that chooses to rent and invest their earnings CAN NOT simply leverage into their shareholdings ; and it's difficult for self employed small business owners to borrow from the banks if the risks are high. Typically real estate has a much lower risk than all other investments. Don't believe me? Go to the bank and ask them why mortgages are easy to obtain vs borrowing for corporate ventures, building projects, etc.

[QUOTE Jay: One (maybe small part) of why lots of things are cheaper in other countries like the US, Canada etc is population, what we may buy in 6 months of say timber is boughr every other week - somethiong along those lines
So a little less margin maybe all along the chain to the retailer??? [/QUOTE]

Not particularly. I had some friends visit from Singapore to do a short tour around NZ. they could not believe how expensive things are here and the biggest shocker was paying $10 for a Starbucks coffee. He simply could not believe it. In Singapore with a population of 1M more than NZ, food is quite affordable and they have to import most of everything. Why is this so? Yes car ownership is more expensive in Sg but that's a given considering how small the country is. But public transport is so good in Sg you really don't need to drive.

A more probable reason why everything is so expensive in NZ is their marketing approach. Stuff like at Briscoes and Katmandu where the retail price tag is marked up x 10 times. Then they have a big 50% or 70% sale discount and they're STILL making a profit on the item. That kind of model just doesn't work forever as people have fled to online buying from overseas ; but in usual fashion the NZ gov't put on GST at a much lower threshold as to discourage online buying and support local retailers. A big difference to say Costco in N. America that work on a consignment + 5 or 10% markup approach.

Bjauck

16-02-2019, 08:28 AM

I agree that not all asset classes are the same. The fact that it is relatively more secure and easier to raise finance makes home ownership so appealing even for those whose circumstances would otherwise not make home ownership the optimal way of securing accommodation. Exempting it from a CGT would make it even more appealing and reduce the appeal of investment in business and shares.

In NZ Home ownership has often been the default investment or pension scheme. The aim being to leverage capital profit, to trade up so that on retirement there is the ability to trade down to release retirement capital. For most NZ home owner-occupiers capital profit is an important if not the overriding goal of home ownership. It should not be given further preferential tax treatment from other investments unless you want to further encourage people into investing their capital into their housing and away from businesses and financial investments.

As home ownership rates continue to fall, CGT exemption would be a tax break for those on higher incomes and the wealthier - Unlike the example of GST exemption on some foods

macduffy

16-02-2019, 02:45 PM

Not particularly. I had some friends visit from Singapore to do a short tour around NZ. they could not believe how expensive things are here and the biggest shocker was paying $10 for a Starbucks coffee

I reckon that anyone buying Starbucks coffee, let alone paying $10 for it, deserves to be fleeced!

;)

(Sorry, nothing to do with the argument for or against a CGT.)

SBQ

17-02-2019, 10:09 AM

I reckon that anyone buying Starbucks coffee, let alone paying $10 for it, deserves to be fleeced!

;)

(Sorry, nothing to do with the argument for or against a CGT.)

Haha! well, not if that's the only place for coffee in a, high traffic, tourist riddled place :)
Let's not forget, minimum wage is on the rise so it won't be long that $10 coffees will be the norm. Plenty of ristos and food eateries closing up in downtown Christchurch because they can't make ends meet (fault of high regulation -> high building costs + higher wages). Bring on the inflation!!

Bjauck

17-02-2019, 03:05 PM

Haha! well, not if that's the only place for coffee in a, high traffic, tourist riddled place :)
Let's not forget, minimum wage is on the rise so it won't be long that $10 coffees will be the norm. Plenty of ristos and food eateries closing up in downtown Christchurch because they can't make ends meet (fault of high regulation -> high building costs + higher wages). Bring on the inflation!!
Yep accommodation costs gobble up so much after tax income.

Minimum wage may be on the rise but accommodation costs have risen so much more quickly owing to the fact that residential building has not kept up with the population increase.

In addition development profits have been made by catering for investors (who seek leveraged capital gains) by building upper quartile big houses on small sections. So the market for accommodation for those who earn minimum or near minimum wage has not been catered for and the low-paid rely on government subsidies. These subsidies (from tax revenues) are not paid for by those property investors whose leveraged returns have been from untaxed capital gains.

Aaron

18-02-2019, 08:36 AM

I don't have a problem with CGT in NZ. But I do have a problem when CGT erodes and discourages investment in NZ. Without investments, you lose jobs, it's that simple. If you disadvantage those that have the $, then you will have what many other nations experience, a 'flight of capital' (Brexit is a good example)
I guess the very well off will go where ever they get the best deal.
https://www.msn.com/en-nz/news/world/britains-richest-man-quits-the-uk-billionaire-brexiteer-sir-james-ratcliffe-relocates-to-monaco-in-a-bid-to-save-£4bn-in-tax/ar-BBTHwRz?ocid=spartandhp

SBQ

18-02-2019, 11:32 AM

I guess the very well off will go where ever they get the best deal.
https://www.msn.com/en-nz/news/world/britains-richest-man-quits-the-uk-billionaire-brexiteer-sir-james-ratcliffe-relocates-to-monaco-in-a-bid-to-save-£4bn-in-tax/ar-BBTHwRz?ocid=spartandhp

It's not just the UK. The world is full of places where the rich can choose to reside.
This is what I mean about a slow exodus of capital flight. The gov'ts don't understand the benefit rich people have to their economy.

Look what's happening in NY. Fortunately the US has plenty of other states. In NZ, our NZ1st/Labour coalition needs to understand what motivates the rich to leave?

https://www.marketwatch.com/story/charlie-munger-has-a-very-blunt-response-to-those-driving-rich-people-away-after-amazon-scraps-hq2-2019-02-15

The video of Munger says it all. “They’re old. They keep your hospitals busy. They don’t burden your schools, the police department, your prisons. They give a lot. Who wouldn’t want rich people?”

Yet somehow in NZ, if you own a lot of houses or some asset, you're frowned upon and the gov't is just trying to find ways to take that wealth away citing "it's not fair!!!".

Bjauck

18-02-2019, 12:07 PM

However If you bend over backwards to try to appeal to the globalised rich business people, who are prepared to travel from country to country, you may well end up with a backlash from the general population - and Brexit and Trump situations.

westerly

18-02-2019, 12:11 PM

SBQ

20-02-2019, 02:32 PM

THey are closing down because of competiion, just too many of them. No other reason

westerly

There are far fewer eateries and restaurants in downtown Chch today than pre-earthquake era. Far fewer businesses in the downtown core too = less workers = less meal plates and coffees to dish out.

However If you bend over backwards to try to appeal to the globalised rich business people, who are prepared to travel from country to country, you may well end up with a backlash from the general population - and Brexit and Trump situations.

I know this may be a bit off topic but what is exactly the cause of Brexit? From what I recall it's the mass invasion of migrants destabilizing the general population? Perhaps UK wanted to avoid the issues that Greece, Spain, & Italy experienced? In Trump's case, as Munger mentioned you have pro-democrat states in the US that have failed by turning their backs against wealthy businesses that create jobs. I mean you don't need a lot of common sense to see who generates the employment? or perhaps would the economy (and country) be in a more healthy state if the only jobs available was from the gov't?

Bjauck

21-02-2019, 08:12 AM

I know this may be a bit off topic but what is exactly the cause of Brexit? From what I recall it's the mass invasion of migrants destabilizing the general population? Perhaps UK wanted to avoid the issues that Greece, Spain, & Italy experienced? In Trump's case, as Munger mentioned you have pro-democrat states in the US that have failed by turning their backs against wealthy businesses that create jobs. I mean you don't need a lot of common sense to see who generates the employment? or perhaps would the economy (and country) be in a more healthy state if the only jobs available was from the gov't?
‘Mass invasion?”....’destabilisation” only if you believe the screaming tabloid headlines. Lots of causes and there are separate threads for those topics. Briefly many of the poorer people and communities who had been promised ‘Trickle down’” benefits from giving tax breaks to the wealthy, were left further behind by government policies. Many consequently were encouraged by populist politicians who urged the disaffected to vote for them with beguiling slogans such as “make America great again” and “bring back control”.

Bjauck

21-02-2019, 08:19 AM

fungus pudding

21-02-2019, 09:16 AM

First homes in Auckland only for wealthy buyers or from wealthy families who can contribute toward deposits?

Would exempting the family home from a CGT amount to a tax break for the wealthier?

Why not boost income tax thresholds, KiwiSaver tax breaks or introduce a tax break for those who earn up to a certain level of fixed interest?

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12205655

Why should interest differ from any other form of income? Surely if interest was not taxed, then dividends and rental income shouldn't be either. (Although I'd be all for it ;) )

Bjauck

21-02-2019, 09:43 AM

Why should interest differ from any other form of income? Surely if interest was not taxed, then dividends and rental income shouldn't be either. (Although I'd be all for it ;) ) Fixed interest, as a class of income, does tend to be the investment income that is earned by a broader cross-section of people.

However I do agree with you that all investment income and capital gains should be treated the same. If the family home is exempt from a CGT (and income tax as currently) then why shouldn’t there be tax free thresholds for business and investment income and capital gains - especially for those who do not want to own their own home.

For those who do not own (or cannot own) a family home, then they should have an exemption for their investments (up to a certain threshold?) For those that have a low value family home, then they should be given a CGT and Income tax allowance for other investments. Family home exemption (without a value limit) from a CGT could lead to a mansion effect in NZ.

Perhaps one way to replace the family home exemption from a CGT would be to give all adult taxpayers an annual CGT exemption allowance equivalent to say 5% of the average house price at the start of the year. This could accumulate if unused in a particular year. The exemption could then off-set taxable realised capital gains whether they be from the family home, investment real estate or other investments.

fungus pudding

21-02-2019, 11:00 AM

Fixed interest, as a class of income, does tend to be the investment income that is earned by a broader cross-section of people.

However I do agree with you that all investment income and capital gains should be treated the same.

I did not say capital gains should be treated the same as income. CGT needs to be carefully designed and I eagerly await details of the announcement.

iceman

21-02-2019, 11:05 AM

Winston has now told farmers that they should be exempted as CGT is only to stop short term speculation. This is getting better by the day !!

minimoke

21-02-2019, 11:26 AM

Might be time to sell the shares and buy the second family home.

fungus pudding

21-02-2019, 11:48 AM

Might be time to sell the shares and buy the second family home.

No point. There will be a valuation day (v day) which will set the starting line for CGT, effectively grandfathering gains prior to v day.

artemis

21-02-2019, 11:57 AM

Will a licence to occupy be subject to a CGT? If not, and hard to see if it will, expect the retirement village sector to explode as homeowners sell up sooner rather than later.

minimoke

21-02-2019, 11:58 AM

No point. There will be a valuation day (v day) which will set the starting line for CGT, effectively grandfathering gains prior to v day.How do you grandfather gains before v day if you don't know what teh value was prior to V day. Seems to me its about gains made onwards from V Day.

minimoke

21-02-2019, 12:02 PM

Will a licence to occupy be subject to a CGT? If not, and hard to see if it will, expect the retirement village sector to explode as homeowners sell up sooner rather than later.
I wouldn't expect it to as it isn't "capital" its just a right to live somewhere. You might be right - with a flight to retirement villages. The thing there is to, if you buy into them you know you are going to sell at a loss. So that loss would be a tax benefit to your estate. So lock in capital gain prior to V Day and reap a tax benefit later.

SBQ

21-02-2019, 01:43 PM

Fixed interest, as a class of income, does tend to be the investment income that is earned by a broader cross-section of people.

However I do agree with you that all investment income and capital gains should be treated the same. If the family home is exempt from a CGT (and income tax as currently) then why shouldn’t there be tax free thresholds for business and investment income and capital gains - especially for those who do not want to own their own home.

For those who do not own (or cannot own) a family home, then they should have an exemption for their investments (up to a certain threshold?) For those that have a low value family home, then they should be given a CGT and Income tax allowance for other investments. Family home exemption (without a value limit) from a CGT could lead to a mansion effect in NZ.

Perhaps one way to replace the family home exemption from a CGT would be to give all adult taxpayers an annual CGT exemption allowance equivalent to say 5% of the average house price at the start of the year. This could accumulate if unused in a particular year. The exemption could then off-set taxable realised capital gains whether they be from the family home, investment real estate or other investments.

You're missing the MAJOR distinction between taxing of necessities vs taxing of large size wealth. After all, pretty much EVERY OECD nation treats CGT differently to income tax rates. Why? Show me a country that applies CGT exemption limits each year? How would that be particularly useful to the person that owns no assets? Therefore, I don't see your argument that the principal resident should not be exempt as it would be the single source of asset a person can hold, and more importantly, not having to worry about selling for a capital LOSS (consider those that move from place to place every 5 or 10 years?) and then pay another round of CGT when the market rebounds.

I also do not buy into the argument about those choosing NOT to buy a house and instead, invest their savings elsewhere (ie managed funds). The fact is simple, those that can't afford to buy a house simply do NOT have the $ to save ; what % of those on minimum wage actually contribute to Kiwi Saver? Very few because that 3% they lose off their total annual income would be better spent in putting food on the table. The approach of CGT by other wealthy nations is aimed none other than the wealthy ; the NZ top 5% of the population that has parked their $ in real estate, banking it without having to worry about paying tax on the gain.

SBQ

21-02-2019, 01:48 PM

How do you grandfather gains before v day if you don't know what teh value was prior to V day. Seems to me its about gains made onwards from V Day.

I've mentioned before in the case of real estate, all properties have a "rates valuation" by the local city council. If you feel the assessment is not accurate (because of some fancy irrigation or building accessory installed), you can always get an independent valuation and the city will reflect that on your rates bill.

By the way, i've been working on my Mini Moke today re-adjusting the carburetor (needle jet air/fuel mixture). Next job is to readjust the valve tappet clearances. :)

SBQ

21-02-2019, 01:52 PM

Will a licence to occupy be subject to a CGT? If not, and hard to see if it will, expect the retirement village sector to explode as homeowners sell up sooner rather than later.

One good thing about a CGT against the real estate market is it will reduce the demand of houses. I mean does NZ really need 10,000 houses to be built 'right away' ? Also the idea of retirement villages does not sound appealing to me. But many choose to do reverse mortgages on their home.

minimoke

21-02-2019, 01:56 PM

I've mentioned before in the case of real estate, all properties have a "rates valuation" by the local city council. If you feel the assessment is not accurate (because of some fancy irrigation or building accessory installed), you can always get an independent valuation and the city will reflect that on your rates bill. There in lies the problem. There is a huge difference between a "rating" valuation and capital valuation. Eg when I renovated Council stuffed up. My rates valuation went up a smidge but not near the $300k of actual value. Needless to say I've kept quiet on that one. Then there's my Insurance Valuation. Somewhere in there will be a market value which is when the witch doctors come in and stir the ashes to value land and the improvements.

Pretty weird that in a "fair" scheme they exclude family home - that's where so much capital is tied up and used for other money making purposes.

By the way, i've been working on my Mini Moke today re-adjusting the carburetor (needle jet air/fuel mixture). Next job is to readjust the valve tappet clearances. :)Isnt it great having a car you can actually work on. Sadly I open my bonnet now and haven't a clue where to start.

minimoke

21-02-2019, 01:57 PM

One good thing about a CGT against the real estate market is it will reduce the demand of houses. I mean does NZ really need 10,000 houses to be built 'right away' ? Also the idea of retirement villages does not sound appealing to me. But many choose to do reverse mortgages on their home.I've lost the reference, but we actually have enough built houses to already to meet current demand. The problem is the location doesnt meet buyers expectations.

fungus pudding

21-02-2019, 02:22 PM

How do you grandfather gains before v day if you don't know what teh value was prior to V day. Seems to me its about gains made onwards from V Day.

Exactly what I said.You will only need to know valuation on V day. Prior to that date gain or loss will be irrelevant.

percy

21-02-2019, 03:50 PM

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.

artemis

21-02-2019, 04:26 PM

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.

We'll need a V day first. I notice that Mr Oliver, a member of the TWG, is one of the dissenters. Since he knows a wee bit about what it takes for IRD to set up and collect tax he might actually be listened to when the government puts its legislation together.

huxley

21-02-2019, 04:38 PM

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”.

777

21-02-2019, 04:39 PM

Well it will take the argument out of whether you are an investor or a trader.

macduffy

21-02-2019, 04:39 PM

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.

Perhaps an unintended consequence will be to reinforce the strategy of selling losers and keeping winners. Of course, it rather complicates a decision to sell a winner when the shareprice starts to trend downwards.

:(

elZorro

21-02-2019, 07:10 PM

Exactly what I said.You will only need to know valuation on V day. Prior to that date gain or loss will be irrelevant.

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.

couta1

21-02-2019, 07:15 PM

Well it will take the argument out of whether you are an investor or a trader. Only if the CGT is set at your marginal tax rate which is the most idiotic idea and is not the case in any other country with a CGT. If it's set around 15% as it should be then most traders will still pay more tax than investors.

GTM 3442

21-02-2019, 07:25 PM

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.

777

21-02-2019, 07:30 PM

Only if the CGT is set at your marginal tax rate which is the most idiotic idea and is not the case in any other country with a CGT. If it's set around 15% as it should be then most traders will still pay more tax than investors.

They have already stated that it is to be your marginal tax rate.

couta1

21-02-2019, 07:52 PM

They have already stated that it is to be your marginal tax rate. There is no way they will get this thing through at your marginal tax rate, I'd put money on it.

fungus pudding

21-02-2019, 09:05 PM

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.

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)

Baa_Baa

21-02-2019, 09:33 PM

[snip] 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)

Which includes capital gains on shares (assets). I wonder how people will feel about losing their marginal tax rate on their capital gains on shares when they sell them, or when their estate sells them. I think it sucks.

fungus pudding

21-02-2019, 09:59 PM

Which includes capital gains on shares (assets). I wonder how people will feel about losing their marginal tax rate on their capital gains on shares when they sell them, or when their estate sells them. I think it sucks.

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.

Baa_Baa

21-02-2019, 10:19 PM

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?

Bjauck

21-02-2019, 10:20 PM

You're missing the MAJOR distinction between taxing of necessities vs taxing of large size wealth. After all, pretty much EVERY OECD nation treats CGT differently to income tax rates. Why? Show me a country that applies CGT exemption limits each year? How would that be particularly useful to the person that owns no assets? Therefore, I don't see your argument that the principal resident should not be exempt as it would be the single source of asset a person can hold, and more importantly, not having to worry about selling for a capital LOSS (consider those that move from place to place every 5 or 10 years?) and then pay another round of CGT when the market rebounds.

I also do not buy into the argument about those choosing NOT to buy a house and instead, invest their savings elsewhere (ie managed funds). The fact is simple, those that can't afford to buy a house simply do NOT have the $ to save ; what % of those on minimum wage actually contribute to Kiwi Saver? Very few because that 3% they lose off their total annual income would be better spent in putting food on the table. The approach of CGT by other wealthy nations is aimed none other than the wealthy ; the NZ top 5% of the population that has parked their $ in real estate, banking it without having to worry about paying tax on the gain. 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.

777

21-02-2019, 10:43 PM

There is no way they will get this thing through at your marginal tax rate, I'd put money on it.

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.

fungus pudding

22-02-2019, 12:06 AM

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.

Very true. And if you own it with a mortgage, you're probably wealthier. The introduction of a CGT with the glaring omission of the primary home will inevitably lead to an explosion of luxury homes - or 'mansions'.

RTM

22-02-2019, 09:26 AM

minimoke

22-02-2019, 09:44 AM

fungus pudding

22-02-2019, 09:48 AM

Bjauck

22-02-2019, 10:07 AM

Very true. And if you own it with a mortgage, you're probably wealthier. The introduction of a CGT with the glaring omission of the primary home will inevitably lead to an explosion of luxury homes - or 'mansions'. 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.

Bjauck

22-02-2019, 10:25 AM

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.
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.

minimoke

22-02-2019, 10:41 AM

And if it fell below inflation - surely we should get a tax refund. :D
Your tax bill would be less if you sell at an asset at a loss. Could be handy with some of the dogs in my current share portfolio - might even encourage me to quit them sooner.

minimoke

22-02-2019, 10:47 AM

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%

iceman

22-02-2019, 12:15 PM

minimoke

22-02-2019, 12:31 PM

I read somewhere that the TWG suggested benefits should be raised in line with the increase in minimum wages, due to the raising of the 10.5% tax threshold. So WFF and other benefits should rise says Sir Cullen
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

SBQ

22-02-2019, 02:08 PM

And if it fell below inflation - surely we should get a tax refund. :D

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.

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.

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.

minimoke

22-02-2019, 02:28 PM

re: minimoke - unfortunately we don't live in a 'fair' world.
Fairness is supposed to be one of the principles behind tax policy. Something missed by the TWG. Obviously some things are more fair than others.

macduffy

22-02-2019, 02:51 PM

Fairness is supposed to be one of the principles behind tax policy. Something missed by the TWG. Obviously some things are more fair than others.

Fairness, like beauty, is in the eyes of the beholder.

(Apologies for mangling the original quote!)

Aaron

23-02-2019, 09:22 AM

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.

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.

RGR367

23-02-2019, 10:19 AM

iceman

23-02-2019, 12:46 PM

Jay

23-02-2019, 01:05 PM

it will not get passed as is, I would almost guarantee that, also if not you ,maybe right on your second point iceman

fungus pudding

23-02-2019, 02:46 PM

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.

And if NZ first somehow miraculously manages to get back in there'd be nothing to stop the unpredictable Winston from going into coalition with National to block it. Of course that depends on two things: how the numbers fall and Winston still being alive.

elZorro

23-02-2019, 06:56 PM

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 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.

Vaygor1

23-02-2019, 11:06 PM

And if NZ first somehow miraculously manages to get back in there'd be nothing to stop the unpredictable Winston from going into coalition with National to block it. Of course that depends on two things: how the numbers fall and Winston still being alive.
There's nothing stopping Winston from going into coalition with National right now.... except for the fact that currently Simon Bridges would become PM. That being the case, I'd stay put with Labour/Green too.

777

23-02-2019, 11:30 PM

SBQ

24-02-2019, 10:45 AM

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

Vaygor1

24-02-2019, 01:25 PM

.... I'm sick of hearing excuses that CGT with concessions or exemptions would be too complex for NZ

I'm with you SBQ.

They pulled the same stunt with GST.

Aussie's GST model far superior to NZ's and everyone over there copes easily with the GST exemptions that, by rights, New Zealand and New Zealanders should also have.

percy

24-02-2019, 01:30 PM

Bjauck

24-02-2019, 01:47 PM

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.

Bjauck

24-02-2019, 01:54 PM

My brother has lived in Australia for over 40 years.
He tells me working out his tax and CGT is a nightmare. Yeah it could be complex and would increase compliance work and costs. It needs to be a K.I.S.S. scheme unless the government wants taxpayers to boost accountants’ Income.

minimoke

24-02-2019, 02:24 PM

Tax systems and rules differ in each country. So it does not necessarily follow that the Australian CGT scheme should be implanted into NZ.

.Government did it with safety laws after Pike River

Bjauck

24-02-2019, 02:29 PM

Government did it with safety laws after Pike River
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.

fungus pudding

24-02-2019, 07:23 PM

I'm with you SBQ.

They pulled the same stunt with GST.

Aussie's GST model far superior to NZ's and everyone over there copes easily with the GST exemptions that, by rights, New Zealand and New Zealanders should also have.

Don't overlook the downside of CGT in Australia - particularly its effect on industrial properties.

FIsaver

25-02-2019, 07:36 AM

elZorro

25-02-2019, 08:27 AM

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...

10341

Interesting chart FIsaver. I saw this comment from David Slack on CGT in the SST yesterday.

https://www.stuff.co.nz/national/politics/opinion/110786321/capital-gains-tax-might-not-be-the-tax-you-want-but-its-the-tax-we-need

blackcap

25-02-2019, 08:47 AM

Oldie but a goodie why tax, especially a progressive tax system is unfair:

https://www.youtube.com/watch?v=S6HEH23W_bM

SBQ

25-02-2019, 10:01 AM

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?

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.

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).

Bjauck

25-02-2019, 10:14 AM

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...

10341

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?

Bjauck

25-02-2019, 10:23 AM

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.

SBQ

25-02-2019, 10:33 AM

Oldie but a goodie why tax, especially a progressive tax system is unfair:

https://www.youtube.com/watch?v=S6HEH23W_bM

Good video. Unfortunately most of the voters in NZ are lead to believe the top 10% still don't pair their fair share.

SBQ

25-02-2019, 10:40 AM

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).

Bjauck

25-02-2019, 11:22 AM

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.

westerly

25-02-2019, 02:26 PM

Oldie but a goodie why tax, especially a progressive tax system is unfair:

https://www.youtube.com/watch?v=S6HEH23W_bM

A one man neo con university ? Yeah right

westerly

blackcap

25-02-2019, 02:40 PM

A one man neo con university ? Yeah right

westerly

I'm not sure I follow. Just watch the video and tell me what is wrong with it. What does neo con even mean?

BlackPeter

25-02-2019, 03:01 PM

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).

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.

Jay

25-02-2019, 04:11 PM

BlackPeter

25-02-2019, 04:59 PM

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.

SBQ

25-02-2019, 07:37 PM

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.

westerly

25-02-2019, 07:42 PM

I'm not sure I follow. Just watch the video and tell me what is wrong with it. What does neo con even mean?

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

SBQ

25-02-2019, 08:23 PM

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.

BlackPeter

26-02-2019, 08:13 AM

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.

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.

blackcap

26-02-2019, 08:31 AM

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.

fungus pudding

26-02-2019, 08:42 AM

Interesting isn't it. My partner and I have recently had the disceven this motly lot wiussion 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.

Good luck, but I doubt that we will end up with anything more harsh than other countries. Even this motley lot know better.

winner69

26-02-2019, 08:45 AM

Good luck, but I doubt that we will end up with anything more harsh than other countries. Even this motley lot know better.

And Jacinda will be a hero saving farmers, business owners and many others from what Cullen suggested

minimoke

26-02-2019, 08:59 AM

And Jacinda will be a hero saving farmers, business owners and many others from what Cullen suggestedHow can it be "fair" if it excludes certain parts of the community?

Seems t me it is now an attack on high income earners, and about re-distributing the wealth to non-earners.

Jay

26-02-2019, 10:42 AM

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/news/article.cfm?c_id=3&objectid=12207150 ... if they have it right!

minimoke

26-02-2019, 10:51 AM

Bjauck

26-02-2019, 11:00 AM

Also if you take in flatmates. Which is an ideal way for getting people onto the property ladder - they can get others in to help with costs.

Labour clearly dont want people to own their own homes
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.

Baa_Baa

26-02-2019, 11:10 AM

How can it be "fair" if it excludes certain parts of the community?

Seems t me it is now an attack on high income earners, and about re-distributing the wealth to non-earners.

Classic Robin Hood tax from the “no more taxes” lying thieves.

SBQ

26-02-2019, 11:31 AM

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.

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.

couta1

26-02-2019, 02:19 PM

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.

777

26-02-2019, 03:53 PM

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.

Anybody with any brains would have known it would go down like a lead balloon. So that ruled them out to start with.

minimoke

26-02-2019, 03:58 PM

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.The worry is they will pick out the bits that suit them and end up making a real buggers muddle out of it.

Bjauck

26-02-2019, 04:46 PM

Labour clearly dont want people to own their own homes
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.

minimoke

26-02-2019, 04:52 PM

iceman

27-02-2019, 10:26 AM

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

macduffy

27-02-2019, 10:55 AM

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.

fungus pudding

27-02-2019, 11:54 AM

minimoke

27-02-2019, 12:07 PM

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. 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.

fungus pudding

27-02-2019, 12:33 PM

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)

I'd like to see income tax lowered and flattened and GST increased. There's a rainbow full of golden pots available from millions of tourists with an increase in GST.

macduffy

27-02-2019, 02:35 PM

Proposal from TWG is to allow losses to offset future gains in same asset class, as I understand it.

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.

macduffy

27-02-2019, 02:40 PM

I'd like to see income tax lowered and flattened and GST increased. There's a rainbow full of golden pots available from millions of tourists with an increase in GST.

No thanks. Increasing the tax on the day to day spending of 4.5m New Zealanders to catch that of a few thousand tourists who are here at any given time doesn't appeal!

Bjauck

27-02-2019, 03:30 PM

Bjauck

27-02-2019, 03:37 PM

...

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.
Fairness is determined by those who have the political control. At the moment that means income is taxed and capital gains on most residential property is not. So a big win for the long term landowner who leveraged themself into lots of residential properties.

fungus pudding

27-02-2019, 04:39 PM

No thanks. Increasing the tax on the day to day spending of 4.5m New Zealanders to catch that of a few thousand tourists who are here at any given time doesn't appeal!

Well, it appeals to me, and probably many others who pay income tax. 'Never punish earnings or earners - clobber them when they spend'. (Aristotle Pudding)

iceman

27-02-2019, 05:47 PM

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.

iceman

27-02-2019, 06:25 PM

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 ?

blackcap

27-02-2019, 06:57 PM

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.

percy

27-02-2019, 09:35 PM

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?

SBQ

27-02-2019, 09:41 PM

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

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.

iceman

27-02-2019, 10:43 PM

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.

minimoke

28-02-2019, 07:08 AM

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.
Pretty much just leaves those of us who hold shares

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.Thinking I might have to have a family home. My wife can have one two. And my kids

Bjauck

28-02-2019, 07:34 AM

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 ? Strengthening the NZ version of the apartheid system (“positive discrimination’”) will strengthen the opposition to the tax in other races?

Bjauck

28-02-2019, 07:41 AM

[LEFT]Pretty much just leaves those of us who hold shares

They may as well be done with it and just close the NZ share market and let overseas interests control all large NZ companies!

Jay

28-02-2019, 09:13 AM

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 ;)

minimoke

28-02-2019, 09:32 AM

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 ;)You would be subject to Brightline on the Rental and CGT on the home. Unless you are a Special Person - in which case Labour will be finding a way to exempt you.

SBQ

28-02-2019, 09:51 AM

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 (https://torontosun.com/2014/05/05/time-to-slash-income-tax-act-2/wcm/2e549a31-c946-4725-8328-562c33577d27)

"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.

fungus pudding

28-02-2019, 10:11 AM

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 ;)

IRD does not classify property investment as a business.

BlackPeter

28-02-2019, 10:23 AM

Just came across a Comment from Frank Newman on the Tax Working Group report (sorry - don't have it online, but I am sure the copied info is all public).

Interesting to note: 3 of the 11 members of the working group wrote a minority reprot, disagreeing with the findings of the others. Quite brave btw - don't expect them to stay on the Labour working goprup gravy train. They are former Bell Gully tax partner Joanne Hodge, Business NZ chief executive Kirk Hope, and former Inland Revenue deputy commissioner Robin Oliver.

Their main points: the huge compliance cost and significant disruptions to business could not be justified by quite minor increase in tax take.

In their report they state "the costs of extending the tax base clearly exceed the benefits...As additional asset
classes are included in the capital gains tax system, the issues become more complex and there is an
increasing need for exemptions and exceptions which are intended to reduce lock-in impacts and compliance
costs, but can cause the reverse. Including business assets (such as goodwill and other intangible assets) and
shares leads to complexity, high compliance costs and inconsistent rules characteristic of many overseas
capital gains tax systems. The need to value business assets such as goodwill on introduction date is one
illustration. Valuing such property is likely to impose high compliance costs on businesses."

Speaking on Radio New Zealand, Robin Oliver stated the compliance costs to value business assets "will
easily cost over a billion dollars".

Wow. Is there really nothing better we could do with this money than implementing a poorly designed envy tax and crush our economy?

The glaring flaw in the Tax Working Group’s proposal is that Labour promised a CGT would shift capital away from
unproductive assets like housing into productive investment like businesses. The TWG proposal will do exactly the
opposite.

Great stuff Cindy. Just remind me, which problem did you wanted to solve?

Jay

28-02-2019, 10:39 AM

IRD does not classify property investment as a business.

Just taking it to the extreme silliness about exemptions FP, you could argue why not, I get income from it, I have expenses to pay to make that income, how is it different to my friend the self employed electrician whom I may use to fix any electrical problems in said rental home.
Any how if believe what has been published, in doing so you would be expected to pay CGT related to the portion that you use your home for the/a business - similar to what SBQ was saying about Canada.

Too complex means too many loop holes

Zaphod

28-02-2019, 02:29 PM

Zaphod

28-02-2019, 02:30 PM

IRD does not classify property investment as a business.

That depends... if you own 20, buy and sell on a semi regulation basis and/or you derive most of your income from that, they might take a shine to you.

Marilyn Munroe

28-02-2019, 02:33 PM

Buying Kiwirail.

The Tax Working Group.

A future large earthquake while still the chairman of the Earthquake Commission.

Michael Cullen will get at least one of the three right won't he?

Boop boop de do
Marilyn

westerly

01-03-2019, 11:55 AM

minimoke

01-03-2019, 12:30 PM

Seems to me the top 20% who supposedly own 80% of the assets have little to complain about in NZ.

westerlyIf we want to complain it is our right to do so.

SBQ

01-03-2019, 02:30 PM

Maximum Tax Rates

NZ 33% +15% gst
Australia 45% +10% gst
USA 50% (37% Fed 13% State)
UK 47% + 20% vat

All of these countries except NZ have CGT plus death and property taxes of some sort.

Their share markets are thriving yet NZ with low taxes is excited because a locally owned port may list some of its shares. The wealthy immigrants buying sheep stations which are then run at a loss for taxation purposes are sure doing a lot for NZ.

Seems to me the top 20% who supposedly own 80% of the assets have little to complain about in NZ.

westerly

NZ does NOT have low taxes. Singapore would be a good example of low taxes.

You would have to put all those tax rates in respect of the tax brackets and more importantly, a base currency. Then compared that to the buying power of what $1 buys in each country. I'm quite certain NZ cost of living and choices can not compared to most other places with much larger population and size.

If you think investment from local NZ funds is dismal, just wait until CGT gets put in place. Show me the data where the top 20% holds their wealth? I can assure you they're not picking places like NZ. For starters, equity investment in NZ is "dividend" focused which means tax with-holding by the overseas investors. Compare that with 0% CGT if they bought an asset (ie like houses) which would be sold tax free in 5+ years?

We've already had a wave of capital leave NZ last year during the 'Foreign Trust' crack down (Panama Papers, etc.) There was like a 75% non-compliance rate (trustee not providing tax # status to those foreign trusts ; so in lieu, they close up the trust and send the funds abroad).

Jacinda's CGT will be Stage 2 of the exodus of NZ capital.

Joshuatree

01-03-2019, 02:33 PM

Good riddance to dodgy rip off tax avoiding users. A clean out of the trough is great.

777

01-03-2019, 02:38 PM

Joshuatree

01-03-2019, 02:45 PM

Many do just that ,thats a cert.
A set of cake knifes coming your way;)

SBQ

01-03-2019, 02:50 PM

Good riddance to dodgy rip off tax avoiding users. A clean out of the trough is great.

Are you implying the top 20% are tax dodgers? Have a reality check. We live in a globalised economy where currency flows freely. Should NZ be at the forefront of discouraging foreign investment? I'm not hopeful there's enough domestic $ to shake a stick. Anotherwords, can NZ survive without investment from abroad (albeit $ that is dirty or clean) ?

As 777 implied - not all rich people are out to rip off the system. I would say it would be a very very small %. If the farming operations of NZ were operating at a loss, i'm sure the results would be reflected well on Fonterra's books - it's just not the case.

Joshuatree

01-03-2019, 03:18 PM

Not all rich people are out to rip off the system but enough are and they employ experts to do just that with loopholes etc etc. Fact.

BlackPeter

01-03-2019, 03:33 PM

Not all rich people are out to rip off the system but enough are and they employ experts to do just that with loopholes etc etc. Fact.

People are not better or worse depending on their bank balance. There is a certain percentage of people trying to rip of the system, and this percentage does not change whether they are rich (tax avoidance) or poor (tax and benefit fraud). Plenty of poor people like to work without paying taxes "you don't need a tax receipt - do you?" - not different to a rich (wo)man trying to hide their income overseas. Not sure about the non-performers, though - they might be worse in terms of ripping off the system.

This constant rich people bashing is revolting and dumb. How do you think our (not so) Santa (but) Taxinda is paying all the lollies she distributed if the people paying the tax are going away?

fungus pudding

01-03-2019, 04:12 PM

Not all rich people are out to rip off the system but enough are and they employ experts to do just that with loopholes etc etc. Fact.

If a loophole exists it is perfectly legal to use it. It is not ripping off anything or anyone. It would be plain daft not to apply tax law to the best advantage, whether you are rich or poor.

777

01-03-2019, 04:41 PM

Many do just that ,thats a cert.
A set of cake knifes coming your way;)

Another moronic reply from you.

Joshuatree

01-03-2019, 05:55 PM

Share a little before you go it will come back in spades. Cake knives your way.Learn and use.Never too late to become a giver 777;)

777

01-03-2019, 07:05 PM

Share a little before you go it will come back in spades. Cake knives your way.Learn and use.Never too late to become a giver 777;)

What has your post got to do with the argument. You simply run off on a tangent to some weird part of your mind. Any way I can't be bothered continuing with this stupid exchange.

You have just become the second person on my ignore list. Congratulations.

westerly

01-03-2019, 07:34 PM

People are not better or worse depending on their bank balance. There is a certain percentage of people trying to rip of the system, and this percentage does not change whether they are rich (tax avoidance) or poor (tax and benefit fraud). Plenty of poor people like to work without paying taxes "you don't need a tax receipt - do you?" - not different to a rich (wo)man trying to hide their income overseas. Not sure about the non-performers, though - they might be worse in terms of ripping off the system.

This constant rich people bashing is revolting and dumb. How do you think our (not so) Santa (but) Taxinda is paying all the lollies she distributed if the people paying the tax are going away?

More revolting and dumb is your consistently snide comments re the PM as if she is personally responsible for all Labour policy. Criticise the policies not the messenger.

The discussion is about whether higher income earners should pay more tax and whether CGT should be paid on unearned income. Not about rubbishing rich people.
In my view NZ at the higher income levels has low taxation compared with other developed countries. As FP says loopholes in taxation are legitimate but wage and salary earners have little access to them. Whether wealthy immigrants are of value to NZ is questionable, A family with a couple of kids is possibly of more value.
Also I think most of the arguments about CGT have little foundation in fact and are more personal objections to CGT especially seeing nothing has been set in concrete.

westerly

iceman

01-03-2019, 07:41 PM

minimoke

01-03-2019, 07:42 PM

More revolting and dumb is your consistently snide comments re the PM as if she is personally responsible for all Labour policy. Criticise the policies not the messenger.

To be fair Labour has very little policy. Its all being made up on the hoof. 9 years in opposition and nothing to show for it - which is why Labour cant articulate their CGT policy. Leaving it instead to her hand puppet Cullen who is still trying to stick it to rich pricks.

elZorro

01-03-2019, 08:28 PM

May be worth remembering also westerly that about 75% of "taxpayers" in NZ get equal or more from the Government in various subsidies than they pay in tax. So the Government's income is nearly entirely borne by the top 20% of earners and businesses (they also pay most of the GST). It is ridiculous to claim as has been done on this thread that most of them don't pay tax. So I totally disagree with you and suggest they in fact do have something to complain about if their tax burden is to be increased even further.

I thought this had been covered before. National (Bill English) used to say that lower income households paid no tax. Maybe no net income tax, but they do pay GST on almost everything, plus fuel and alcohol, cigarette levies etc. Plus profits from power companies.. Handouts from govt to even things out will, to a large extent, end back with the govt as income from various sources. I would also dispute that the top 20% pay most of the GST (more than 50%), how about some figures? Also, if you're looking at businesses, for them GST is a neutral item removed form their books. If they sell stuff only in NZ, they should be paying GST across each period, but they first collect it from their customers, or end users. They don't pay the GST, they just collect it. Exporters don't have any GST on their overseas sales to collect, so they get all their GST costs back each period.

fungus pudding

01-03-2019, 09:08 PM

I thought this had been covered before. National (Bill English) used to say that lower income households paid no tax. Maybe no net income tax, but they do pay GST on almost everything, plus fuel and alcohol, cigarette levies etc. Plus profits from power companies.. Handouts from govt to even things out will, to a large extent, end back with the govt as income from various sources. I would also dispute that the top 20% pay most of the GST (more than 50%), how about some figures? Also, if you're looking at businesses, for them GST is a neutral item removed form their books. If they sell stuff only in NZ, they should be paying GST across each period, but they first collect it from their customers, or end users. They don't pay the GST, they just collect it. Exporters don't have any GST on their overseas sales to collect, so they get all their GST costs back each period.

Thanks for that eZ, but I think you'll find that most readers on this site are over the age of seven, and therefore understand how GST works.

SBQ

01-03-2019, 09:45 PM

More revolting and dumb is your consistently snide comments re the PM as if she is personally responsible for all Labour policy. Criticise the policies not the messenger.

The discussion is about whether higher income earners should pay more tax and whether CGT should be paid on unearned income. Not about rubbishing rich people.
In my view NZ at the higher income levels has low taxation compared with other developed countries. As FP says loopholes in taxation are legitimate but wage and salary earners have little access to them. Whether wealthy immigrants are of value to NZ is questionable, A family with a couple of kids is possibly of more value.
Also I think most of the arguments about CGT have little foundation in fact and are more personal objections to CGT especially seeing nothing has been set in concrete.

westerly

You're incorrect about NZ having lower taxes for high income earners. I would be glad to match NZ's income tax, GST, & ACC to Canada's taxation level. It's well regarded Canada is a country known for high taxation - a key reason why I left 20+ years ago. As I mentioned before, absolute #s don't tell the whole story. You need to work out the buying power that a NZD has vs a CAD or USD has in their country?

The problem I have with Jacinda is her BS talk about making NZ's tax system "fair". Like that video link 2 pages ago about the 3 characters who raised their own family and wanted to put up a fence in their community. If the highest earning family member all of a sudden left, moved abroad, then what would that leave for the other 2 resident families?

You would be a fool to believe domestic $ alone is enough to keep NZ afloat. Foreign investment plays a big part of NZ. Almost all the banks in NZ are foreign, they won't stick around if the investment wasn't in NZ. Do you really want to wish that everyone ends up working for the gov't? It's an argument I had at my last social party I went to where a person suggested rich people don't pay enough. He couldn't understand that rich people don't just leave their $ in a bank account and drive fancy cars. Most derived their income from businesses (or investing in businesses) which provide employment. Take away the after tax profit incentive and then what would you have at the end? Remember, this is NZ - $ can easily flow out. What are the reason for those that worked hard to stick around? Canada has plenty of mountains and fresh water lakes ; it's nothing that NZ has is unique around the world.

The question every NZ person should query is; How much of the tax revenue is paid by the rich or top 20%? and more importantly, how much MORE taxes do you expect the Labour Gov't to get from those top 20% before THEY start moving abroad? It's a very simple question.

Bjauck

02-03-2019, 10:42 AM

SBQ - is it a case of wealthy Global citizens choosing their country of residence according to how much tax they have to pay?

BlackPeter

02-03-2019, 11:08 AM

SBQ - is it a case of wealthy Global citizens choosing their country of residence according to how much tax they have to pay?

Most people try to avoid places where they are not welcome and go to places where they are.

NZ used to be an open and welcoming place attracting high performers who also wanted to have a life. The current government is swiftly changing that. It is curbing immigration - and it tries to tax performance. Wealthier people might feel that the government tries to extract more than their fair share out of them.

Obviously - this is a fine balance ... the people taking the taxes frequently have a different view on what is "fair" than the people paying them and many left whingers think that only taking everything from the wicked rich is fair - at the end eveybody should have as little as their neighbour, no matter how hard they work.

I think it makes sense to go away if you don't agree with the governemnt and you can't change it - doesn't it?

Joshuatree

02-03-2019, 01:43 PM

What has your post got to do with the argument. You simply run off on a tangent to some weird part of your mind. Any way I can't be bothered continuing with this stupid exchange.

You have just become the second person on my ignore list. Congratulations.

Yep i hit that sore selfish guilty spot.Fundamentally i think you have it in you to give, just need to change that early faulty childhood programming which most of us have despite our Parents doing the best they could with the knowledge they had at the time.Best wishes.

elZorro

02-03-2019, 06:43 PM

Thanks for that eZ, but I think you'll find that most readers on this site are over the age of seven, and therefore understand how GST works.

What does that say about Iceman? But to be truthful I often have to remind myself how GST works, and for products or charges towards ultimately exported goods, I would assume no net GST is ever collected by the govt. So that's a fair bit of the farming sector and all exporters, plus the supplies to them.

Farmers are well known as being very low in the ranking of income tax payments generally, as they trade with a low return on investment. But some of these same farmers do end up with a big cash settlement when the farm is eventually sold to external buyers, and that's tax free at the moment. Current average value of a dairy farm in NZ? $11million, % average ownership, about 70%. Some of that value is inflation, but some of it is a business profit on the land value and earning potential in a good year.

Vaygor1

02-03-2019, 09:20 PM

..Farmers are well known as being very low in the ranking of income tax payments generally, as they trade with a low return on investment. But some of these same farmers do end up with a big cash settlement when the farm is eventually sold to external buyers, and that's tax free at the moment. .....

And that is how the current model works. Break-even your whole life, just keeping your head above the water making nothing, and then finally, finally, get your reward at the end when selling the asset. Applies to farmers and landlords alike, and it has never been a choice; it is a result of natural market forces.

If CGT gets introduced the model will change as all landlords/farmers will need to acquire the eventual CG Taxable amount over the period of their ownership. i.e. make up for it by charging higher prices or charging higher rent to make bigger after-tax profits during the ownership period. So either (1) prices/rent will rise, or (2) the cost of housing and farms will drop. I wager 95% of the 'shift' will be seen in (1).

Introduction of CGT will be grossly unfair to those who have had to operate under the existing model for the last 10-40 years, which will not and can not have taken the introduction and impact of CGT into account. CGT will strip current-day landlords/farmers of their reward, compounded by mechanism (2) a reduced sale price for their farm or house.

You say 'some' of these farmers elZ... what about the rest of them... just collateral damage?

Vaygor1

02-03-2019, 09:33 PM

I found this February 2019 discussion on CGT with Roger Douglas very interesting.

https://www.facebook.com/magictalkradio/videos/359582031549755/

It is lengthy, but it is all worth listening to imho, in particular the first 24 minutes.

Disc: Not a Roger Douglas fan by any stretch. As interesting as this discussion is, I offer no view on it.

elZorro

02-03-2019, 09:46 PM

And that is how the current model works. Break-even your whole life, just keeping your head above the water making nothing, and then finally, finally, get your reward at the end when selling the asset. Applies to farmers and landlords alike, and it has never been a choice; it is a result of natural market forces.

If CGT gets introduced the model will change as all landlords/farmers will need to acquire the eventual CG Taxable amount over the period of their ownership. i.e. make up for it by charging higher prices or charging higher rent to make bigger after-tax profits during the ownership period. So either (1) prices/rent will rise, or (2) the cost of housing and farms will drop. I wager 95% of the 'shift' will be seen in (1).

Introduction of CGT will be grossly unfair to those who have had to operate under the existing model for the last 10-40 years, which will not and can not have taken the introduction and impact of CGT into account. CGT will strip current-day landlords/farmers of their reward, compounded by mechanism (2) a reduced sale price for their farm or house.

You say 'some' of these farmers elZ... what about the rest of them... just collateral damage?

Some farmers don't sell, the farm is passed on, so the CGT would roll over. I don't think this govt will bring in CGT without an allowance for inflation. Therefore the CGT should apply to all asset sales, businesses, property excluding the family home (limit on that value depending on location) and farms etc sold to an external party. Maybe the big difference between businesses and property/farming is that the land is a safe risk, it can't be tampered with generally, it doesn't become worthless over time if the business situation changes. So I'd agree with you that some business people break-even for a lot of the time, and at the end there might be no value left. That's not the case for land-owners. Hence they are a bit more aggro about a CGT than business people.

SBQ

02-03-2019, 11:49 PM

SBQ - is it a case of wealthy Global citizens choosing their country of residence according to how much tax they have to pay?

Definitely No. If you didn't understand my last question, the issue is somebody has to be in the top 20%. When gov't policy erodes the incentive to perform because said left population says it's unfair, then what do you think will happen? You don't have to be a rocket scientist to realise that all the extra effort and stress to run a business, or make investments, for the sake of being rewarded will no longer apply - people will just simply give up, and then you would end up with a top the 20% that doesn't have anything to tax.

Don't be concerned about the wealthy people moving $ around, they've already done so. Be concerned about the hard working businesses that employ people - when these owners are fed up and realise the gov't has slaved them with no reward, then watch out. It doesn't take much to go on the dole.

SBQ

02-03-2019, 11:55 PM

Some farmers don't sell, the farm is passed on, so the CGT would roll over. I don't think this govt will bring in CGT without an allowance for inflation. Therefore the CGT should apply to all asset sales, businesses, property excluding the family home (limit on that value depending on location) and farms etc sold to an external party. Maybe the big difference between businesses and property/farming is that the land is a safe risk, it can't be tampered with generally, it doesn't become worthless over time if the business situation changes. So I'd agree with you that some business people break-even for a lot of the time, and at the end there might be no value left. That's not the case for land-owners. Hence they are a bit more aggro about a CGT than business people.

As I mentioned before, all property sooner or later has to be sold (or exchanged hands). You can't "roll over a CGT" by passing on property. lol Upon death "Deemed Disposition" applies which is all assets are considered valued and eventually sold. This is why many OECD nations have exemptions to the CGT for farmland. It allows family members to pass on their land. Yes it's complicated but the reasons are clear.

The real winners in all this mess IMO, is the banks. They've loaned out all these mortgages, collected interest and not to ever worry about a CGT or any form of taxation on the property. Interest compounding has made the banks rich, but we're not seeing the gov't going after banks.

fungus pudding

03-03-2019, 09:55 AM

elZorro

03-03-2019, 10:31 AM

If CGT is brought in there is absolutely no case for excluding the family home.

Yes there is, the interest on private properties is an after-tax expense and not partly reclaimed in a set of books. Nor are any other costs like rates, insurance and upkeep/maintenance covered. Domestic and commercial rent/leases generally cover most or all of these costs. People living in their own homes may also spend any savings on house extensions or regular renovation, unlike rentiers. So their real capital gain will be minimal in most situations.

westerly

03-03-2019, 10:44 AM

For Iceman https://www.pundit.co.nz/content/tax-burdens-some-facts-for-a-change

For SBQ https://www.mileiq.com/en-ca/blog/2019-canada-tax-rates-tax-brackets/ Add on the provincial tax and NZ rates are low. Add on the state taxes in the USA also. The banks do exceedingly well as far as profits go in NZ
I also doubt there will be a rush exodus to overseas tax havens. NZ has relatively low tax rates for higher earners.
I don’t agree a farmer or business owner should be taxed on profits from selling but I prefer to wait and see the Govt. proposals.
Most of the discussion on CGT seems to be politically motivated which is to be expected.
There is a need for CGT particularly in the property area.

westerly

fungus pudding

03-03-2019, 10:48 AM

Yes there is, the interest on private properties is an after-tax expense and not partly reclaimed in a set of books. Nor are any other costs like rates, insurance and upkeep/maintenance covered. Domestic and commercial rent/leases generally cover most or all of these costs. People living in their own homes may also spend any savings on house extensions or regular renovation, unlike rentiers. So their real capital gain will be minimal in most situations.

Their real capital gain has hardly been minimal. You know as well as I do that it would be political suicide to tax the prime residence - that's the only reason to exclude it. You also know that home owners have a massive advantage over those who rent over time. Of course they face costs while they have the tax free benefit of a roof over their heads, while landlords receive an income, but are taxed on their profits.
A CGT that is poorly designed is no good to anyone. Properly designed and it would be hard to argue against, provided the revenue was used to lower income tax - the worst tax of all.

BlackPeter

03-03-2019, 11:19 AM

Who said the CGT impacts only on a small percentage of the population?

https://www.kiwiblog.co.nz/2019/02/who_will_be_affected_by_the_proposed_cgt.html

Think again ...

Joshuatree

03-03-2019, 12:04 PM

Kiwiblog is a national spin site. . Extreme bias.
I like the simplification of the Cullen cap gains tax it make s good sense but with all the misinformation and spin around it would be political suicide. Focus on property CGT is great start.

BlackPeter

03-03-2019, 01:45 PM

Kiwiblog is a national spin site. . Extreme bias.

Any facts you could contribute? What statement they made was wrong?

But I than I suppose anything you don't like you seem to call biased. Doesn't matter whether the facts are on their side, it is just about pushing your view - isn't it?

Labelling a publication "biassed" or worse just because you don't like the message is destroying any fruitful political discussion. Trumpesk.

Bjauck

03-03-2019, 02:21 PM

Definitely No. If you didn't understand my last question, the issue is somebody has to be in the top 20%. When gov't policy erodes the incentive to perform because said left population says it's unfair, then what do you think will happen? You don't have to be a rocket scientist to realise that all the extra effort and stress to run a business, or make investments, for the sake of being rewarded will no longer apply - people will just simply give up, and then you would end up with a top the 20% that doesn't have anything to tax.

Don't be concerned about the wealthy people moving $ around, they've already done so. Be concerned about the hard working businesses that employ people - when these owners are fed up and realise the gov't has slaved them with no reward, then watch out. It doesn't take much to go on the dole.
If you have a profitable business then you are already paying tax. If there is a cgt, and the cgt is neutral for total tax raised, then you and your business may not end up paying more in taxes. If company tax and income tax is adjusted down.

Start-ups may have bigger gripe, where it takes some time to establish the company. The first years may see the company building up good will whilst not earning any net income. In the TWG scenario income tax rates would apply to the increase in capital value, probably due to the build up of goodwill. I would be surprised if any political party policy would not include some sort of an time-limited exemption for start-ups.

Bjauck

03-03-2019, 02:30 PM

Any facts you could contribute? What statement they made was wrong?

But I than I suppose anything you don't like you seem to call biased. Doesn't matter whether the facts are on their side, it is just about pushing your view - isn't it?

Labelling a publication "biassed" or worse just because you don't like the message is destroying any fruitful political discussion. Trumpesk. it is a comprehensive list of whose assets will be subject to the TWG’s CGT.

After paring it to the minimum, They have only just kept the “family home” out of the list of assets subject to a cgt.

The last 20 years or so has seen a boom in non-commercial lifestyle sections > 0.45 ha on the edge of cities. Many of these lifestyle areas provide towns with a de facto “green belt”. Many of those owners will be surprised that only part of their property will be deemed to be their family home. Valuers and solicitors will have a field day!

Bjauck

03-03-2019, 03:03 PM

...
A CGT that is poorly designed is no good to anyone. Properly designed and it would be hard to argue against, provided the revenue was used to lower income tax - the worst tax of all. I agree it makes no sense to exempt the owner occupied primary residence. There is already no stamp tax in NZ. And it already has a tax-preferred status anyway.

The TWG has squeezed down the definition of the primary residence. So they may well have substantially scrapped the exemption of the primary residence for many people anyway.

The government insisted on the exclusion in the first place because it would have been political annihilation for them if it had been included. So Cullen made exceptions to the exclusion!

SBQ

03-03-2019, 11:04 PM

For SBQ https://www.mileiq.com/en-ca/blog/2019-canada-tax-rates-tax-brackets/ Add on the provincial tax and NZ rates are low. Add on the state taxes in the USA also. The banks do exceedingly well as far as profits go in NZ
I also doubt there will be a rush exodus to overseas tax havens. NZ has relatively low tax rates for higher earners.
I don’t agree a farmer or business owner should be taxed on profits from selling but I prefer to wait and see the Govt. proposals.
Most of the discussion on CGT seems to be politically motivated which is to be expected.
There is a need for CGT particularly in the property area.

westerly

Actually the tax take is pretty much the same for both places. For $150K income i've used:

https://brc1.ird.govt.nz/opa12/web-determinations/0/investigate/Tax_on_Annual_Income_Calculator/en-GB/ScreenOrder~Main~qs%24summary%24global%24global

and

https://simpletax.ca/calculator

Average tax rate for NZ you have to factor the ACC levy which is not added in the IRD's calculator. So factor a 3% would put the average tax at 30% vs 30.83% for Canada. However, in Canada that 30.83 comprises CPP/EI pension contribution / insurance coverage which NZ doesn't have. Higher rates may show NZ is slightly less but that won't be the deciding factor for one wanting to live in Canada vs NZ. Cdn residents also have ways to lower their taxable income such as investing in a pension fund (up to 18% of income which is nothing to ignore). The NZ approach of taxation is to pay the tax before you can invest vs Canada, delay the tax pay and collect it at retirement (for tax free compounding). This is why CGT in NZ is so messed up. You've got a scheme that has taxed the earnings, and if that's not good enough, IRD will also want the capital gains tax off the investments.

SBQ

03-03-2019, 11:20 PM

If you have a profitable business then you are already paying tax. If there is a cgt, and the cgt is neutral for total tax raised, then you and your business may not end up paying more in taxes. If company tax and income tax is adjusted down.

Start-ups may have bigger gripe, where it takes some time to establish the company. The first years may see the company building up good will whilst not earning any net income. In the TWG scenario income tax rates would apply to the increase in capital value, probably due to the build up of goodwill. I would be surprised if any political party policy would not include some sort of an time-limited exemption for start-ups.

Be more specific? Generally in accounting practices, GAAP rules, the after tax income of a business goes to retained earnings or shareholder's earnings. That amount gets reflected on the "Book Value" of the company. CGT is not an issue if the book value (which translates to share price of the company) does not go up. How do you determine goodwill for NZ companies? I would not expect for the vast majority of small businesses, goodwill would NOT even be part of their accounting because most of these businesses, when they get sold, they basically get sold at "book value" or basically what the asset side of the balance sheet is worth. Things like equipment in a restaurant, but for good will??? If no one is interested in buying the restaurant, then there is basically no good will. They might as well close up and no one would remember.

NZ has a practice to pay dividends. So when the after tax income of a company pays those disbursements, it keeps the retained earnings section the same (no change in book value and no change in share price). Since the gov't is looking for capital gains, there would be a clear incentive for all listed NZX companies to be cash poor (from paying out the dividends). When book values go up, so does the share price, which could mean IRD would double dip in tax on the company.

Of course in a proprietorship or partnership business, the after tax earnings are simply shared or kept on the books. The owner can withdraw the funds and pay no dividend tax or CGT.

Would be interesting to see the details on what kind of CGT Labout Gov't is really talking about.

elZorro

04-03-2019, 08:02 PM

Their real capital gain has hardly been minimal. You know as well as I do that it would be political suicide to tax the prime residence - that's the only reason to exclude it. You also know that home owners have a massive advantage over those who rent over time. Of course they face costs while they have the tax free benefit of a roof over their heads, while landlords receive an income, but are taxed on their profits.
A CGT that is poorly designed is no good to anyone. Properly designed and it would be hard to argue against, provided the revenue was used to lower income tax - the worst tax of all.

Pretty disingenuous of you to constantly say that private dwellings should be subject to CGT when you realise it's not politically possible, and for good reason. Here's a discussion on the benefits of home ownership vs renting.

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12019370

The point being made is that if a renter used the extra cash surplus each week to invest elsewhere, like in the stockmarket, they'd probably come out at the end in a better position than if they'd paid interest and capital, and have flexibility in their living arrangements the whole time. I think many of us follow the old thinking and buy a home if we can, because we're not especially good at saving. That's what I did, anyway. It doesn't mean that I made a massive capital gain on any property, I'm sure I didn't, unless money earned elsewhere paid it off quickly, saving interest. But equally I could have invested that surplus elsewhere. Inflation, interest, rates, insurance, upkeep and renovation expenses would surely take away most of the gains, without even adding in your own time upkeeping the property, which also has a value.

The example above doesn't look at it from the rentier's side, but on average I would expect most rentiers take a long time to get to cashflow positive situations, so they don't pay a lot of income tax as you imply, unless they are also paying off capital in their costs. There would be no need in most cycles, as inflation will pay it off. If, in the end, tenants have covered all ongoing costs from the bank and external costs associated with the property, there would be the difference between the original capital and the current capital value, less an allowance for inflation, which would be the true profit from the whole exercise, if any.

However the interesting point is that the risk of the borrowed money was held by the property as security, and covered ultimately by the tenant(s). If the rentier paid off no effective capital over the duration, their profit in this case is on a paper transaction that involved no real expense on their part to start with (leveraged against other property). So maybe Dr Cullen's idea of the CGT rate being the marginal rate, wasn't such a crazy idea.

SBQ

04-03-2019, 09:46 PM

@elZorro

The issue of CGT and banning foreign non-residents from buying NZ real estate, wouldn't be on the radar if the Auckland housing boom didn't get so out of control. Too many NZ people wanting their 1st home have been left behind; at what cost? - so only the rich & wealthy to make the gains? Now the gov't is targeting those that made massive gains in real estate, YET, can't discriminate between different asset classes so they would include sharemarket gains.

One thing certain with real estate is the banks have no quarrels at lending on those assets. But go and try to borrow the same amount (by going margin) in a brokerage account ? to invest in shares? Not a chance.

peat

04-03-2019, 10:03 PM

One thing certain with real estate is the banks have no quarrels at lending on those assets. But go and try to borrow the same amount (by going margin) in a brokerage account ? to invest in shares? Not a chance.

Ya reckon
I can easily leverage in shares , maybe not 95% as many would with property , but certainly enough to lose it all haha

JBmurc

04-03-2019, 11:07 PM

Ya reckon
I can easily leverage in shares , maybe not 95% as many would with property , but certainly enough to lose it all haha

Yes but as an asset to leverage off NZ RES homes Property just about as good as cash in the bank 80%+ ... aka why the property is priced so high to average to low yields now.. and asking prices well over GV-RV

commercial property around 50% prices much closer to RV

Shares / Bullion 5% (even if you own shares in the bank your trying to lend from)

couta1

05-03-2019, 08:29 AM

Ya reckon
I can easily leverage in shares , maybe not 95% as many would with property , but certainly enough to lose it all haha I've had an interest only loan at 80% of our house value for many years now to use in the market, can't get a margin call either.PS-Would not use a margin account for the share market, too risky IMO.

minimoke

05-03-2019, 09:03 AM

and asking prices well over GV-RV

GV (??) / RV are totally meaningless numbers. The only people who can use RV are your local council. And it has nothing to do with value but all to do with how much to charge you for rates.

Which is why RV cannot be used on Valuation Day.

Bjauck

05-03-2019, 09:19 AM

Pretty disingenuous of you to constantly say that private dwellings should be subject to CGT when you realise it's not politically possible, and for good reason. Here's a discussion on the benefits of home ownership vs renting.

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12019370

... Just because something is “not politically possible” at the current time does not mean that those who support a policy should keep quiet. Surely the essence of a free democracy would be then be lost? So many reforms were politically impossible when first mooted.

Besides as home ownership rates fall, the vested interest of home owners may also become less compelling. Add to the mix a continued divergence of ownership of wealth in NZ and social expediency may well dictate a re-examination of the possible.

minimoke

05-03-2019, 09:22 AM

Just because something is “not politically possible” at the current time does not mean that those who support a policy should keep quiet. .CGT is politically possible on the family home. Its just that, in the absence of any more compelling reasons to vote, it would be political suicide.

elZorro

05-03-2019, 09:46 AM

Just because something is “not politically possible” at the current time does not mean that those who support a policy should keep quiet. Surely the essence of a free democracy would be then be lost? So many reforms were politically impossible when first mooted.

Besides as home ownership rates fall, the vested interest of home owners may also become less compelling. Add to the mix a continued divergence of ownership of wealth in NZ and social expediency may well dictate a re-examination of the possible.

Even back in the day it was more expensive to slowly pay off a house each month, than rent. When you add in all the other risks and costs with home ownership, it's not altogether rosy, as that article said. Plus, this investment is by and large the family's only major investment, it's out of their tax-paid savings, and they cannot reclaim any of the costs.

The rentier is in an entirely different situation, where a paper transaction has been made using the property security and free capital from other sources like their own home, tax claims can be made offsetting other income, and the net amount of cashflow invested is low per month, dwindles away and quickly or eventually goes positive with rent increases. These same rentiers can be heard saying amongst themselves how easy it all is, they're smarter then the average bear. The big payoff is at the end years later, where all the inflation and any true capital gain on the property is theirs to have, free of any tax.

Bjauck

05-03-2019, 10:05 AM

Even back in the day it was more expensive to slowly pay off a house each month, than rent. When you add in all the other risks and costs with home ownership, it's not altogether rosy, as that article said. Plus, this investment is by and large the family's only major investment, it's out of their tax-paid savings, and they cannot reclaim any of the costs.

The rentier is in an entirely different situation... The home owner cannot reclaim costs as they are not assessed for IT on the net annual benefit of occupation and they are not assessed on the capital appreciation of the equity in their asset.

I agree, their situations are different. As is the situation of owners of shares and businesses. The owners of all assets face uncertainty and risks to greater or lesser extents.

The owners of shares have also paid for their investment out of tax-paid savings. They are less likely to be able to leverage to the same extent their investment on the collateral of the investment itself. The share prices are more volatile than the value of housing. The business in which they invested also pays tax on the net income generated (unlike the imputed rent or tax-free net benefit of the owner-occupied principal residence.)

SBQ

05-03-2019, 10:36 AM

How come the Labour Party coalition is being VERY silent on any DETAILS of this CGT? You would think National party would be able to dig in more details about the proposal?? Jacinda Ardern, please speak up!!!

fungus pudding

05-03-2019, 10:46 AM

Even back in the day it was more expensive to slowly pay off a house each month, than rent.

Only if you overlook that part of the regular payment was reducing the capital of the loan. IOW - paying yourself.

JBmurc

05-03-2019, 11:11 AM

GV (??) / RV are totally meaningless numbers. The only people who can use RV are your local council. And it has nothing to do with value but all to do with how much to charge you for rates.

Which is why RV cannot be used on Valuation Day.

Well, they are not meaningless even though I've heard the same from R.E Agents .... they certainly are not exact ... but I've had Banks use them in the past sometimes over reg. valuation as they didn't trust the valuer ... then using the banks approved valuer they would come in very closely to what sold over R.V in the area the property was listed ....

looking to buy another commercial property recently I was looking over sales to RV of the 5 most recent sales in the town all sold within 5% of the RV..

To date I've had 21x NZ Property transactions

minimoke

05-03-2019, 11:45 AM

looking to buy another commercial property recently I was looking over sales to RV of the 5 most recent sales in the town all sold within 5% of the RV..

That is coincidence.

Rating valuations are done each three years. So for a start you have a +/- between the time of the last valuation and the time of latest sale. Then add the time it takes for the valuation process to run - that may add another 6 months to your total cycle

Now add in the problem that the RV does not include the value of Chattels such as carpets and curtains.

Now add in anomalies in sales. For example an area may not have had any sales.

Now add in the problem with clerical errors - council staff not properly recording details (for example in my renovation they missed of 40sqm of additions)

Now add in natural variance of say +/- 10% for any desktop process.

All this adds up to a number that can be way removed from actual market value.

Add in a lack of back checking. For example two of my neighbours have exactly the same size of land. But there is a $50,000 difference between their two land values. I have 50% more land than these two and my land value is only 10% more.

My RV is about $500k less than current market value. Do I complain. No. Because I am happy paying rates based on this lower level.

But I do have another valuation - and that is for insurance purposes. That's my Sum Insured Value and is much closer to market value

Disc - cant comment on commercial property - But I would think same principles apply

Edit. Just checked Christchurch rates. Last exercise was done with effect from 1 August 2016. New valuations were released on 30 November 20i6. So it took the valuer 4 months to value 167,000 properties. That's going to be accurate. Yeah right!

JBmurc

05-03-2019, 04:45 PM

That is coincidence.

Rating valuations are done each three years. So for a start you have a +/- between the time of the last valuation and the time of latest sale. Then add the time it takes for the valuation process to run - that may add another 6 months to your total cycle

Now add in the problem that the RV does not include the value of Chattels such as carpets and curtains.

Now add in anomalies in sales. For example an area may not have had any sales.

Now add in the problem with clerical errors - council staff not properly recording details (for example in my renovation they missed of 40sqm of additions)

Now add in natural variance of say +/- 10% for any desktop process.

All this adds up to a number that can be way removed from actual market value.

Add in a lack of back checking. For example two of my neighbours have exactly the same size of land. But there is a $50,000 difference between their two land values. I have 50% more land than these two and my land value is only 10% more.

My RV is about $500k less than current market value. Do I complain. No. Because I am happy paying rates based on this lower level.

But I do have another valuation - and that is for insurance purposes. That's my Sum Insured Value and is much closer to market value

Disc - cant comment on commercial property - But I would think same principles apply

Edit. Just checked Christchurch rates. Last exercise was done with effect from 1 August 2016. New valuations were released on 30 November 20i6. So it took the valuer 4 months to value 167,000 properties. That's going to be accurate. Yeah right!

No seems to be different for Commercial as they haven't had the same price growth like RES has i.e I'm currently looking at one property 20k under RV .. asking price the same as what it sold for 4yrs ago .. R.V has increased asking price has not ..can't say I've come across many commercial way over like RES property in the AREAS I'm looking

we purchased property here in central otago during 2016 RV 550k we paid 560k now worth over 850k etc so yes old RV way off now ..but its all relative no doubt when next RV come out it will be much higher ... just like your property will be ..

I never have thought RV are accurate as like we know they only do them every so many years.. but I still like to see what it is when looking at property to compare to other properties R.V and then of course how high over sales have been recently ...

End of the day value is what someone is willing to pay .... I think many overpriced RES properties with hyped up REG valuations will come unstuck soon enough as the Building bOOM runs its course...

Brovendell

05-03-2019, 04:56 PM

Call me dumb but what is the exact definition of "Family home'?
Can a de facto partner have a family home? Can I have a family home also?. Can a family trust have a family home also?.

JBmurc

05-03-2019, 05:01 PM

Call me dumb but what is the exact definition of "Family home'?
Can a de facto partner have a family home? Can I have a family home also?. Can a family trust have a family home also?.

I'd think ones home address ...any property that's not being rented lived in by owners etc

minimoke

05-03-2019, 05:07 PM

we purchased property here in central otago during 2016 RV 550k we paid 560k now worth over 850k etc so yes old RV way off now ..but its all relative no doubt when next RV come out it will be much higher ... just like your property will be ..

Your RV will be higher as there will be actual sales data for that property. Where as mine has no sales data - so all they can do is tweak it by whatever % they reckon is right.

Edit. Heres a wee test. Flash house opposite me has just got a "sold" sign put on it. RV = $900,000. Went on the market Oct 2018 under auction - didn't sell. Then listed for $845,000 (around what I thought it would go for) and didn't sell. Now advertised at $798,000. I'll keep an eye out for actual sale price

JBmurc

05-03-2019, 09:20 PM

Your RV will be higher as there will be actual sales data for that property. Where as mine has no sales data - so all they can do is tweak it by whatever % they reckon is right.

Edit. Heres a wee test. Flash house opposite me has just got a "sold" sign put on it. RV = $900,000. Went on the market Oct 2018 under auction - didn't sell. Then listed for $845,000 (around what I thought it would go for) and didn't sell. Now advertised at $798,000. I'll keep an eye out for actual sale price

Yes we got new RV last year i think it was upto 690k I see these days the banks uses some online instant valuer I guess like QV.co.nz can do early last year the bank believed are property was worth $815k ...insane lift in value... if the misses would allow me I'd list it for $850k and if sold go back renting for a year or two as these values aren't going to last

iceman

06-03-2019, 09:15 AM

Yes we got new RV last year i think it was upto 690k I see these days the banks uses some online instant valuer I guess like QV.co.nz can do early last year the bank believed are property was worth $815k ...insane lift in value... if the misses would allow me I'd list it for $850k and if sold go back renting for a year or two as these values aren't going to last

I was at my bank the other day and they used www.homes.co.nz for instant valuations

artemis

06-03-2019, 09:34 AM

Only if you overlook that part of the regular payment was reducing the capital of the loan. IOW - paying yourself.

Agreed, and with amortisation over time 'paying yourself' exceeds the interest component.

minimoke

06-03-2019, 09:36 AM

I was at my bank the other day and they used www.homes.co.nz (http://www.homes.co.nz) for instant valuationsIts quite a good site - but there is about a six month lag between sale and the new records being shown on the property. I use it as a broad guide - but to try and get a firmer idea on value you need a few more sales. Fine if you are in an area with lots of sales. Not so good if they are infrequent.

artemis

06-03-2019, 09:37 AM

Call me dumb but what is the exact definition of "Family home'?
Can a de facto partner have a family home? Can I have a family home also?. Can a family trust have a family home also?.

The rules for the bright-line test include detail of the 'main home'. I expect something similar to be used in the government CGT policy, maybe tweaked but makes no sense to have a different set of tax rules.

iceman

06-03-2019, 09:37 AM

Its quite a good site - but there is about a six month lag between sale and the new records being shown on the property. I use it as a broad guide - but to try and get a firmer idea on value you need a few more sales. Fine if you are in an area with lots of sales. Not so good if they are infrequent.

I know. My area goes up and down quite a lot on this site due to infrequent sales and a mix of older less expensive homes and a newer part of the suburb with much more expensive homes. But I suppose all online tools will have that same issue

artemis

06-03-2019, 09:48 AM

Its quite a good site - but there is about a six month lag between sale and the new records being shown on the property. I use it as a broad guide - but to try and get a firmer idea on value you need a few more sales. Fine if you are in an area with lots of sales. Not so good if they are infrequent.

Can also get property estimates from Trademe, including rent estimates, where the sources of data are clearly spelt out. Not sure how the data sources compare to homes.co.nz but easy to compare anyway. Trademe has a lot of data from their many thousands of listings, and also produce quite comprehensive sale and rent analyses each month.

SBQ

06-03-2019, 09:48 AM

Call me dumb but what is the exact definition of "Family home'?
Can a de facto partner have a family home? Can I have a family home also?. Can a family trust have a family home also?.

Family Home would be simply "Primary Residence" - that's the term the Cdn Income Tax Act defines. You can NOT have more than 1 primary residence. The common sense "reasonable person test" applies. Such as a married couple is expected to be living in ONE place together. A "reasonable person" would not choose to live in SEPARATE houses where each partner has their own home in their name. This has been tried many times in Canada for the sake of avoiding capital gains tax but with mandatory tax filing, the CRA computers use AI to match tax returns to the land information data base. If IRD has any inclination to be smart about implementing new taxation like CGT, they better do a good job copying the wording of the tax acts in places like Canada.

As for the previous recent replies about setting a "Valuation Date", I don't think it's a problem at all. Sure there will be some that may disagree with valuations but as far as CGT goes, in 5 or 10 years time these valuations will be reset by actual "Cost Base" figures (simply the figure that the price of the house was traded at). You will find those that want to pay less CGT would want to have the highest valuation as possible. While those that own their primary residence, would prefer to have the lowest valuation as to minimise the amount of rates / property taxes to pay.

JBmurc

06-03-2019, 01:05 PM

I was at my bank the other day and they used www.homes.co.nz for instant valuations

right that's why the bank is open to lending me more funds as looks like homes.co.nz values property even higher than I did>>

minimoke

06-03-2019, 01:22 PM

right that's why the bank is open to lending me more funds as looks like homes.co.nz values property even higher than I did>>Getting a bit off topic here but HSBC have got two years at 3.69% Loan needs to be for $500k though.

JBmurc

06-03-2019, 04:36 PM

Getting a bit off topic here but HSBC have got two years at 3.69% Loan needs to be for $500k though.

Yes just brought that up on PT forum >>> and did call HSBC up to see how hard it would be to shift waiting on a callback...

be good to least be able to take the offer to the current bank and see if they can match the deal ..on current loans 3.69% would be a saving of over $3k pa

Brovendell

06-03-2019, 05:10 PM

Thanks SBQ and Artemis
I knew I was trying to be too clever!!:t_up:

GTM 3442

06-03-2019, 07:22 PM

Out of idle curiosity, how do the TWG's proposals align with other countries GCT regimes?

Which countries tax what, at what rate, with what exemptions? What's the treatment of losses? What is or isn't ring-fenced? Are they simple? Are they complicated? What's the compliance burden? What's the workload like for the various versions of IRD? What sort of a contribution does it make to the overall tax take?

Something a little bit deeper than the TWG's report, or the parroting of "Other countries have a CGT so New Zealand should too" would be a welcome addition to the debate.

minimoke

06-03-2019, 09:22 PM

Out of idle curiosity, how do the TWG's proposals align with other countries GCT regimes?
A bit of a pointless exercise - because you really need to look at the tax system as a whole. And that is way too complex for a post on a forum

SBQ

06-03-2019, 09:29 PM

@ GTM_3442 - I can speak about Canada as I grew up in Canada.

In short, the Cdn income tax system is extremely complex and I mean virtually all filers would most be unaware of any tax laws they've broken. Even accountants and lawyers have a tough time deciphering the act. My tax prof (back in the 90s) explained the excessive complication was simply due to lawyers and accountants fighting in court and the wording to plug up loop holes which resulted in the ITA being over 1 million words long.

Generally speaking, Canada has 3 types of income for taxation; (A) working income, interest income, royalties, & bonuses, (B) Dividend Income, & (C) Capital Gains. The latter attracts the lowest form of taxation. The calculation for CGT in Canada is very straight forward. You take the sale price minus the 'adjusted cost base' which is the sale price (or FMV) less expenses related. For eg. buying stocks on the share market you can deduct commissions or related expense. When a person dies, deemed disposition applies which means 'fair market value' is factored. In the case of stocks, they just take the day's trading price. For real estate, generally the CRA will accept any reputable valuation if the GV or RV is disputed by the tax filer. After you calculate the gain, THEN you take HALF of that gain and pocket it. The OTHER HALF is what goes towards 'taxable income'. The reason why you pocket half of the gain as tax free is due to factoring inflation (and also saves a lot of computing of inflation rates over the years).

The most remarkable advantage Cdn residents have in terms of taxation is their ability to structure their income for taxation. Generally the rich and wealthy have like 90% of their income in the form of capital gains (very similar to the US model of how much tax the very rich pay). But it's not all for the rich that benefit, the working class (middle class) have ways to forego taxation on their income through investments like Kiwi Saver (called RRSPs). Up to 18% of the person's income can be allocated to a pension fund similar to Kiwi Saver. Then upon retirement, the pensioner can structure their fund to pay tax on those gains in the form of CGT (and typically most pensioners don't have working wage income so they would be on the low tax bracket). This is a VERY different model to NZ and i'm not sure how IRD would fit this model?

I can understand why so many in NZ are against CGT. Because they've paid tax on their earnings and then get taxed on the gains when they invest their after tax income. Perhaps it's the fault of NZ's simplistic income tax approach? Like having no exceptions with GST vs Canada has no GST on essential services (doctors / medical / fresh foods /etc), no CGT on principal dwelling home.

The TWG talks of a 'broad base tax' which is different to Canada where you have many exemptions that cater to specific special groups like 1st Nations. IMO a fair tax system should have exemptions because people are not all the same. Some have special high earning abilities, some groups are disadvantaged from birth, and this is the nature of being human and so taxation should be more adaptive than being a 1 size fits all approach.

minimoke

06-03-2019, 09:45 PM

The TWG talks of a 'broad base tax' which is different to Canada where you have many exemptions that cater to specific special groups like 1st Nations. IMO a fair tax system should have exemptions because people are not all the same. Some have special high earning abilities, some groups are disadvantaged from birth, and this is the nature of being human and so taxation should be more adaptive than being a 1 size fits all approach.That may be so. But everyone has capital. Or not. In which case a fair system is to tax all those with capital equally, without exception. Obviously those with no capital arent affected.

JBmurc

07-03-2019, 10:31 AM

This week it emerged that while the Tax Working Group has disbanded, Cullen has had his contract extended by the Government.
Cabinet papers show Cullen was to be paid $1062 a day in his role as chairman of the TWG.
“We extended his appointment as the chair of the TWG to 30 June because we were aware there would be extended public discussion on the report, and this has played out,” Finance Minister Grant Robertson said in a statement

https://www.kiwiblog.co.nz/2019/03/cullen_being_paid_1000_a_day_to_attack_national.ht ml

minimoke

07-03-2019, 10:38 AM

This week it emerged that while the Tax Working Group has disbanded, Cullen has had his contract extended by the Government.l (https://www.kiwiblog.co.nz/2019/03/cullen_being_paid_1000_a_day_to_attack_national.ht ml)Thats because Adern and Robertson are clueless. They clearly haven't read the report (like Adern yesterday not knowing about the greenhouse taxes in the report), Adern has lied about her small business experience so has no clue how a CGT might impact Small businesses and the best she can say about farmers is she lived in Morrinsville. Given these two are the best chance Labour has of understanding a CGT ( the rest of them are simply gormless), they need all the help they can get. Hence Cullen staying on to help develop the policy.

To be fair they are both probably trying to fight the Kiwibuild fires since Twyford id so out of his depth and the hole he is digging only keeps getting deeper.

Joshuatree

07-03-2019, 10:57 AM

Interesting that national had all the answers and conjured up figures prepared before they could have read the tax working group. report. Attempting to spread fear and misinformation and fake news around in advance. This is what this party has morphed into divisiveness, power at any cost, a polar opposite to where we need to be heading inclusive ness, fairness, well being, narrowing gaps, Global warming action, strong economy etc.

It will be transparent to voters next election and voting for the Mercenary Party will be limited to an ever diminishing self inflicted sense of entitlement group whittling away to irrelevancy. Boy is there a complete rebuild needed for this fakery.

BlackPeter

07-03-2019, 10:57 AM

iceman

07-03-2019, 10:58 AM

Toulouse - Luzern

07-03-2019, 11:33 AM

[QUOTE=JBmurc;750420]This week it emerged that while the Tax Working Group has disbanded, Cullen has had his contract extended by the Government. Cabinet papers show Cullen was to be paid $1062 a day in his role as chairman of the TWG. “We extended his appointment as the chair of the TWG to 30 June because we were aware there would be extended public discussion on the report, and this has played out,” Finance Minister Grant Robertson said in a statement

https://www.kiwiblog.co.nz/2019/03/cullen_being_paid_1000_a_day_to_attack_national.ht ml[/url

Thanks JBMurc

I understand the Government is interested in feedback on CGT from voters.

If this was not a costly, error fraught issue for kiwis and taxpayers, I would not comment on a political matter.

However on this I feel we all should provide feedback as we see it - any shade any side of the arguments - our authentic views

I agree with those TWG members who considered some plans unworkable and complex and are against a Cullen CGT tax.

A few of my de Bono type "white facts" or musings.

Cullen in 18 years in Parliament, some as Minister of Finance, did not see any merit - however at $1000+ a day he is happy to present options.
Robertson and Adern are financially inexperienced - if they make enough mistakes, like CGT on the scale outlined they may learn something ...
If there are problems with a small % with extensive property who pay little tax this can be addressed with current tax laws.
When the last Tax Law rewrite started the goal was to simplify the Act and reduce the size. That worthy goal was abandoned.
Politicians, Coalition Governments and bureaucrats as usual will likely create a new CGT monster ...
If more revenue is the issue Jacinda needs the courage to increase tax and GST with transparency or cut Govt expenditure & give up the "CGT rabbit out of the hat" trick with "someboby else" paying for the feel good stuff"
Uncertainty is costly, time lost can never be regained, and the Government is clearly uncertain - why get Cullen yesterdays man to advise ...
The Govt should do their job ... just better than Kiwibuild ...
A simple tax system is always best
While Jacinda is one of the best Spin presenters in the world her arguments / illusions such as Norway and Canada have a CGT, implied therefore NZ ...
I am sure we all remember "correllation is not causation"

What do you think?

minimoke

07-03-2019, 11:57 AM

Interesting that national had all the answers and conjured up figures prepared before they could have read the tax working group. report.Again an example of Labour not getting off their lazy arse. An interim report came out in Sept 2018 so plenty of time (including extended summer holidays) for both parties to get their heads around the likely issues and come up with some numbers. What particular numbers dont you like?

Attempting to spread fear and misinformation and fake news around in advance. What "Fake news" about CGT have they spread?

This is what this party has morphed into divisiveness, power at any cost, a polar opposite to where we need to be heading inclusive ness, fairness, well being, narrowing gaps, Global warming action, strong economy etc. I know you will only have 9 years of Labour in opposition to see what an opposition party does in opposition - not very much. Obviously. National is simply showing you what any good opposition party should be doing - and that is laying open any potential flaws in government thinking

It will be transparent to voters next election and voting for the Mercenary Party will be limited to an ever diminishing self inflicted sense of entitlement group whittling away to irrelevancy. Boy is there a complete rebuild needed for this fakery. Start knocking your average Kiwi Battler in their Kiwisaver account as well as their limited investment opportunities and you'll likely see a ground swell of support for any opposition.

Bjauck

07-03-2019, 04:27 PM

A bit of a pointless exercise - because you really need to look at the tax system as a whole. And that is way too complex for a post on a forum
I ageee. That is why it is folly to justify a CGT with primary residence and other exemptions simply on the basis that is what happens in other jurisdictions. You need to look at all the taxes and imposts (or lack therof.)

Joshuatree

07-03-2019, 09:24 PM

Again an example of Labour not getting off their lazy arse. An interim report came out in Sept 2018 so plenty of time (including extended summer holidays) for both parties to get their heads around the likely issues and come up with some numbers. What particular numbers dont you like?

What "Fake news" about CGT have they spread?

I know you will only have 9 years of Labour in opposition to see what an opposition party does in opposition - not very much. Obviously. National is simply showing you what any good opposition party should be doing - and that is laying open any potential flaws in government thinking

Start knocking your average Kiwi Battler in their Kiwisaver account as well as their limited investment opportunities and you'll likely see a ground swell of support for any opposition.

Attempted groundswell spin and fear from National . We will see what the Govt takes up, im thinking the property cap gains tax myself and good job too, its been an unfair situ for far too long and National would never do anything that may be the slightest threat to their base thats all they care about.A thorough cleanout and reset is what they need to have any chance down the line.The removal of power avarice and snouts in the trough.

As i said there are also good people in the national party too but they are being tarred with the same egotistical brush welded by their leader and his cronies.They need to remove this destructive rump asap imo..

minimoke

08-03-2019, 06:20 AM

Attempted groundswell spin and fear from National . We will see what the Govt takes up, im thinking the property cap gains tax myself and good job too, its been an unfair situ for far too long
There is already a tax on rentalproperty that is bought then flicked. Are you suggesting a SGT on teh family home?

and National would never do anything that may be the slightest threat to their base thats all they care about.A thorough cleanout and reset is what they need to have any chance down the line.The removal of power avarice and snouts in the trough.It was National who bought in the rental capital gains tax and removed a few tax "incentives" as well

As i said there are also good people in the national party too but they are being tarred with the same egotistical brush welded by their leader and his cronies.They need to remove this destructive rump asap imo..Any person entering parliament is likely to have a large ego. They think they can lead a country afteralll,

elZorro

08-03-2019, 08:41 AM

minimoke

08-03-2019, 11:26 AM

Recent article on property investment, their example assumed the property was also paid off over 25 years. Even on conservative return settings, it's way better than a standard fund, because of leverage and tax being defrayed until the end.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12209227&utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Friday+8+Ma rch+2019Seems to be a few things missing. Like the GST paid on 1% of property value each year on repairs and maintenance.

And at 3% capital gain, 2% is simply due to inflation. Leaving just 1% true capital gain.

And this is where it gets complex and where Robertson cant figure things out. Say there is a $99 capital gain. $66 is due to inflation and has nothing to do with the property owner. $33 is the gain the property owner makes on taking the risk in owning property.

Now, what labour wants to do is tax the gain at the nominal tax rate. So the $99 is going to be taxed at 33%. Meaning $33 comes off the $99 gain.

So essentially the government wants to tax 100% of any gain the property owner makes on taking a risk.

Thats what happens when you vote for a "fair" government!

Bjauck

08-03-2019, 12:14 PM

Attempted groundswell spin and fear from National . We will see what the Govt takes up, im thinking the property cap gains tax myself and good job too, its been an unfair situ for far too long and National would never do anything that may be the slightest threat to their base thats all they care about.A thorough cleanout and reset is what they need to have any chance down the line.The removal of power avarice and snouts in the trough.

As i said there are also good people in the national party too but they are being tarred with the same egotistical brush welded by their leader and his cronies.They need to remove this destructive rump asap imo..

It would be interesting to see the type of assets owned by the voters for National and Labour. Whilst, National voters on average are probably wealthier, I suspect the middle class Labour voters would tend to rely more on public sector pension schemes and rental housing investments rather than shares or business assets. However this is just my guesstimate and I have not seen anything to corroborate it! Perhaps the MP’s list of pecuniary and real interests could be an indication.

SBQ

08-03-2019, 12:44 PM

Seems to be a few things missing. Like the GST paid on 1% of property value each year on repairs and maintenance.

And at 3% capital gain, 2% is simply due to inflation. Leaving just 1% true capital gain.

And this is where it gets complex and where Robertson cant figure things out. Say there is a $99 capital gain. $66 is due to inflation and has nothing to do with the property owner. $33 is the gain the property owner makes on taking the risk in owning property.

Now, what labour wants to do is tax the gain at the nominal tax rate. So the $99 is going to be taxed at 33%. Meaning $33 comes off the $99 gain.

So essentially the government wants to tax 100% of any gain the property owner makes on taking a risk.

Thats what happens when you vote for a "fair" government!

I still fail to see the complexities of CGT. In the past posts you mentioned determining the correct 'valuation' for CGT would be a major problem. But it doesn't seem an issue in countries that have CGT.

'Inflation' it's not added in the picture in terms of comparing different investments assets because inflation is compared equally across everything. It's the fault of the person that chooses to earn income from ie. cash term deposit than instead of higher risk ventures like stocks or rental properties, when it's clear the former gets the person less after tax income.

Again GST is a non-issue if you're rental property runs like a business where you claim the maintenance expenses off the rental income. If the person is not declaring the rental income as taxable income, then it's fair they absorb the GST cost.

If a person had $100 in gain and they're in the 33% tax bracket, (for simplicity) they would be paying $33 in tax. How complicated is that? In Canada and Australia, $50 of that gain is only taxable income so the take take would be only $16.50

If Jacinda chooses a CGT to be a tax no different to wage income (or interest deposit income), then I would expect a huge shift of $ leaving NZ as places like Australia and abroad would be more welcoming for investments that incur capital gain. A rise in non-residency status by the wealthy, but unfortunately for the avg rental property investor, leaving NZ is just not convenient or possible.

minimoke

08-03-2019, 01:15 PM

I still fail to see the complexities of CGT. In the past posts you mentioned determining the correct 'valuation' for CGT would be a major problem. But it doesn't seem an issue in countries that have CGT.
Its not just me. The NZIER says, of valuation "This can become very complicated when, for example,assets have not been traded for a very long time. Inevitably, averages of one sort oranother are applied. This means some assets will be under-taxed and others overtaxed."

'Inflation' it's not added in the picture in terms of comparing different investments assets because inflation is compared equally across everything. It's the fault of the person that chooses to earn income from ie. cash term deposit than instead of higher risk ventures like stocks or rental properties, when it's clear the former gets the person less after tax income. The later is only positively impacted if there is a gain from the risk. And thats not always the case - thats why its called risk

Again GST is a non-issue if you're rental property runs like a business where you claim the maintenance expenses off the rental income. If the person is not declaring the rental income as taxable income, then it's fair they absorb the GST cost. Its an issue with the asset class. If you have your capital in a property GST is generated. If you have it in say shares there is no GST because no money is being spent on the upkeep of the capital

If a person had $100 in gain and they're in the 33% tax bracket, (for simplicity) they would be paying $33 in tax. How complicated is that? In Canada and Australia, $50 of that gain is only taxable income so the take take would be only $16.50As I pointed out, that is taxing 100% of the non inflation gain.

If Jacinda chooses a CGT to be a tax no different to wage income (or interest deposit income), then I would expect a huge shift of $ leaving NZ as places like Australia and abroad would be more welcoming for investments that incur capital gain. A rise in non-residency status by the wealthy, but unfortunately for the avg rental property investor, leaving NZ is just not convenient or possible.There will be a pile of known and unintended consequences. Is it really worth it for the $1b or so in extra tax they hope to generate.

Bjauck

08-03-2019, 03:25 PM

...

Its an issue with the asset class. If you have your capital in a property GST is generated. If you have it in say shares there is no GST because no money is being spent on the upkeep of the capital

As I pointed out, that is taxing 100% of the non inflation gain.

There will be a pile of known and unintended consequences. Is it really worth it for the $1b or so in extra tax they hope to generate.
Some investors in shares have their shares in a custodial service sometimes with fees paid either at a flat rate or as a % of the value for the custody and sometimes an extra % paid for additional “advice”. So they also pay GST.

Currently investors in fixed interest investments have all the return taxed as income (including the inflation component.)

minimoke

08-03-2019, 04:43 PM

Some investors in shares have their shares in a custodial service sometimes with fees paid either at a flat rate or as a % of the value for the custody and sometimes an extra % paid for additional “advice”. So they also pay GST.

No matter what system there will always be exceptions. And with those exceptions come opportunities to avoid - which is every tax payers responsibility.

Bjauck

09-03-2019, 05:42 PM

No matter what system there will always be exceptions. And with those exceptions come opportunities to avoid - which is every tax payers responsibility. Isn’t that a reason behind the tax review in the first place.

Leveraged investment in residential real estate had provided the opportunity to minimise income tax (by minimising the income from rent) whilst maximising the leveraged return from untaxed capital gain. With that opportunity also being a big factor in there being less household capital available for NZ shares resulting in the small share market and many listings crossing the Tasman.

fungus pudding

09-03-2019, 05:48 PM

Isn’t that a reason behind the tax review in the first place.

Leveraged investment in residential real estate had provided the opportunity to minimise income tax (by minimising the income from rent) whilst maximising the leveraged return from untaxed capital gain.

In what way does that differ from a leveraged investment in shares?

minimoke

09-03-2019, 05:58 PM

Isn’t that a reason behind the tax review in the first place.

.No. Labour is hell bent on introducing a CGT under the misguided principle of "fairness" (definition = wealth re-distribution

JBmurc

09-03-2019, 10:49 PM

Overall the CGT in its current form is going hurt the average kiwi battler(esp the new investors looking to make their first investments in property) more so than the well-off they think will take the brunt of the extra TAX...

For me personally, this CGT plan won't affect us much at all.. I don't have a Kiwi saver ... I trade shares within a company structure so pay tax anyway as does anyone they trades shares or crytpo / bullion /art etc..

and have speculated with property in the past so tainted anyway now and bright line test is 5yrs so speculators are caught these days anyway...

And you add in the fact Capital values of most of NZ property is at record highs in this long bull cycle more likely those selling over the next decade may well take a loss and need tax rebates ,,

in 2016 the US-based Tax Foundation ranked New Zealand’s overall tax system as second in the developed world for its competitiveness - and top for its individual (personal) taxes.

then along comes Cindy >>>