Capital Gains Tax [Archive] - Page 3

elZorro

11-03-2019, 07:01 PM

I have done likewise to Grant Robertson. Specifically pointing out if CGT does proceed and also covers the family home, it would raise meaningful revenue, thus allowing a meaningful drop in income tax - and if it's considered fair to tax gains from property, then treat all property equally rather than just play with it.

Do you think they are crazy enough to give solid weighting to disingenuous advice from property investors FP? The standard household home was never in the CGT equation in any case. And I don't think that would lead to any investor worth their salt, over-investing in the family home, as it would be a waste of good capital. All property is being treated fairly, unless you'd consider not being able to add interest paid and other ownership costs into your annual tax return for your property portfolio.

Other dastardly options for landlords:

https://www.newshub.co.nz/home/politics/2019/02/i-ll-raise-rents-if-capital-gains-tax-is-introduced-mark-richardson.html

https://www.newshub.co.nz/home/politics/2019/03/landlord-s-call-to-scare-tenants-into-not-voting-for-labour.html

minimoke

11-03-2019, 07:38 PM

Other dastardly options for landlords:

https://www.newshub.co.nz/home/politics/2019/02/i-ll-raise-rents-if-capital-gains-tax-is-introduced-mark-richardson.html

https://www.newshub.co.nz/home/politics/2019/03/landlord-s-call-to-scare-tenants-into-not-voting-for-labour.htmlRenters just have to look forward to increases. Labour has changed how property management fees are charged - so loading up rent. They are insisting on minimum housing standards so cost will be loaded onto rent. Nothing wrong with landlords now wanting to manage their capital risks by cashing up any potential gain by loading up rents.

elZorro

11-03-2019, 08:22 PM

Renters just have to look forward to increases. Labour has changed how property management fees are charged - so loading up rent. They are insisting on minimum housing standards so cost will be loaded onto rent. Nothing wrong with landlords now wanting to manage their capital risks by cashing up any potential gain by loading up rents.

I can see you have the mantra spot-on, MM. It's only fair that the tenants will pay for every last cent of your investment, and more.

10386

Bjauck

11-03-2019, 08:27 PM

Do you think they are crazy enough to give solid weighting to disingenuous advice from property investors FP? The standard household home was never in the CGT equation in any case. And I don't think that would lead to any investor worth their salt, over-investing in the family home, as it would be a waste of good capital. All property is being treated fairly, unless you'd consider not being able to add interest paid and other ownership costs into your annual tax return for your property portfolio.

Other dastardly options for landlords:

https://www.newshub.co.nz/home/politics/2019/02/i-ll-raise-rents-if-capital-gains-tax-is-introduced-mark-richardson.html

https://www.newshub.co.nz/home/politics/2019/03/landlord-s-call-to-scare-tenants-into-not-voting-for-labour.html

In the NZ context, the fact that the principal household home was not part of the TRG’s terms of reference exempts a significant proportion of household wealth. Nothing should have been off-limits. Our political masters would have decided what to ignore in the report anyway. Just as they are going to do with the actual report.

Why shouldn’t those who, instead of investing their equity and the banks money in a house, invest their equity in a business that earns taxable income and employs other people also have their capital gains on their equity exempted?

Why wouldn’t people over-invest in the exempt household residence? It could be more tax efficient (no income tax or capital gains) than KiwiSaver in its current form.

minimoke

11-03-2019, 08:40 PM

I can see you have the mantra spot-on, MM. It's only fair that the tenants will pay for every last cent of your investment, and more.

The tenants are paying for a service - why would they not pay for the costs associated with that service. Who else would?

elZorro

11-03-2019, 08:42 PM

In the NZ context, the fact that the principal household home was not part of the TRG’s terms of reference exempts a significant proportion of household wealth. Nothing should have been off-limits. Our political masters would have decided what to ignore in the report anyway. Just as they are going to do with the actual report.

Why shouldn’t those who, instead of investing their equity and the banks money in a house, invest their equity in a business that earns taxable income and employs other people also have their capital gains on their equity exempted?

Why wouldn’t people over-invest in the exempt household residence? It could be more tax efficient (no income tax or capital gains) than KiwiSaver in its current form.

My point is that the household residence isn't such a great investment, on paper. Running a business or property investment portfolio does allow some tax benefits along the way. But I certainly agree that a business has a harder road to success, and wouldn't want to see the marginal tax rate on that gain, unless it was at some quite high threshold, and/or generated over a short time, as Labour proposed years ago.

Bjauck

11-03-2019, 09:10 PM

My point is that the household residence isn't such a great investment, on paper. Running a business or property investment portfolio does allow some tax benefits along the way. But I certainly agree that a business has a harder road to success, and wouldn't want to see the marginal tax rate on that gain, unless it was at some quite high threshold, and/or generated over a short time, as Labour proposed years ago. I disagree in relation to the principal household residence. It is a great investment. Your annual benefit is tax free. By investing in the house it means that you do not have to pay rent out of tax-paid income. You can obtain a mortgage to leverage capital gain or obtain a retirement capital release at reasonable rates, the funds from which enable your purchase of other assets if you want. If there is a CGT and the principal home is exempt, that would be an extra benefit.

Also with asset testing for long-term care, the owner-occupied main home is exempt if there is a spouse not in care. That could mean a substantial nest egg available for the surviving spouse, which may not be available if the couple had invested in financial assets, shares or a business instead and which would not have been exempted from asset testing.

minimoke

11-03-2019, 09:23 PM

My point is that the household residence isn't such a great investment, on paper. .I bought my original residence for $52,000. my Current one is significantly much more than that - and that has been a deliberate plan to buy / sell upwards on the property "ladder". Of course there have been costs along the way. But the capital gain has been huge.

I havent given it a lot of thought yet because I need to see the final CGT policy. But I will look art the option of cashing up some lesser performing investments and trading up to a new "expensive" home and then look at reverse equity loans to release the capital. Who owns the family home will depend on the most efficient tax structure - I may sell it into a company.

elZorro

11-03-2019, 09:24 PM

I disagree in relation to the principal household residence. It is a great investment. Your annual benefit is tax free. By investing in the house it means that you do not have to pay rent out of tax-paid income. You can obtain a mortgage to leverage capital gain or obtain a retirement capital release at reasonable rates, the funds from which enable your purchase of other assets if you want. If there is a CGT and the principal home is exempt, that would be an extra benefit.

Also with asset testing for long-term care, the owner-occupied main home is exempt if there is a spouse not in care. That could mean a substantial nest egg available for the surviving spouse, which may not be available if the couple had invested in financial assets, shares or a business instead and which would not have been exempted from asset testing.

In that case, why not do things the normal way, and buy a home first (or get into a leveraged home) and then start a business with the home as security? It would be less flexible and more expensive per week than renting, but maybe it would be better overall, as you say. Would you then think differently about working on that home, constantly improving it with tax-paid income and paying all that interest with tax-paid income, if the capital gain on the home that you also used for business finance security was to be taxed?

Bjauck

11-03-2019, 09:47 PM

In that case, why not do things the normal way, and buy a home first (or get into a leveraged home) and then start a business with the home as security? It would be less flexible and more expensive per week than renting, but maybe it would be better overall, as you say. Would you then think differently about working on that home, constantly improving it with tax-paid income and paying all that interest with tax-paid income, if the capital gain on the home that you also used for business finance security was to be taxed?

It may have been normal back in the day to buy a home when still young and then use that asset as collateral for a business. Certainly in Auckland that Avenue is more for the wealthy family member or for those on high incomes and good luck in trying to obtain a mortgage with sufficient funds available to invest in a business in addition to being able to afford the house itself.

A business or shares bought and added to with tax paid income should have the net income taxed and capital gains taxed but an owner-occupied home that is not liable to tax on net imputed rent should also not be liable for capital gains? I do not see the logic or fairness in that.

SBQ

11-03-2019, 10:36 PM

Yeh i'll have to agree that the banks are not stupid when it comes to lending. They know it's FAR less riskier to lend on residential homes than on commercial (which only have a business focus and having more risk).

I don't buy into the argument of funneling all your $ into your home by buying a mansion size expensive home. That recipe just doesn't work because higher end / pricier homes are far and few and attract less capital gain over the long term. The reality what makes prices go is simply location. The largest house with the largest investment of it's kinds means nothing if it's in a poor location. Even in a new sub-divisions one would be foolish to build extravagant when there's no knowing what the demand will be in 10 or 20 years time (ie. Pegasus area north of Christchurch). While i'm all for home owners to improve the value of their own home, I don't believe CGT exemption on the principle residence would cause many to up-scale their house (especially when it's a common trend for seniors to 'down scale' by selling their 4 bedroom home to a small 2 bedroom 'elderly person unit' type housing). and if you want to get rid of your house by doing a 'reverse-equity' mortgage ; each to their own.

NZ's tax system is not like the US where are no exemption of CGT on the principle residence. But then they're allowed all sorts of goodies like deducting their mortgage interest rate off their income, and capital losses that can be applied forward and back (again something the TWG has not talked about). Therefore, it would be more prudent for NZ to have a more comparable tax system such as in Australia (or UK colonies) where they allow a CGT exemption on the principle residence.

I would not be surprised if Princess Leia is looking for a CGT model like Australia or Canada. The simplicity of NZ's tax system penalises the low and middle class and makes the equality gap wider. I'll reiterate, a simple tax on all people is not just for those that are not able. Those who are disabled clearly have the right to make a decent living and get into their own home without being a rental tenant for the rest of their lives. Those who are more skilled and affluent deserve to pay more taxes but do so by structuring their assets in the form of paying CGT (of course this approach is meaningless if the tax rate on CGT = the person's tax bracket).

minimoke

12-03-2019, 06:53 AM

I don't buy into the argument of funneling all your $ into your home by buying a mansion size expensive home. That recipe just doesn't work because higher end / pricier homes are far and few and attract less capital gain over the long term. The reality what makes prices go is simply location. The largest house with the largest investment of it's kinds means nothing if it's in a poor location.
Location, or more specifically future demand is the key to the recipe - and it will help ensure the recipe work

Even in a new sub-divisions one would be foolish to build extravagant when there's no knowing what the demand will be in 10 or 20 years time (ie. Pegasus area north of Christchurch).
A golden rule is to avoid new subdivisions - simply because you dont know who your neighbours are going to be.

While i'm all for home owners to improve the value of their own home, I don't believe CGT exemption on the principle residence would cause many to up-scale their house
People will be wise to put their money in places that secure their capital it the most effective way.

(especially when it's a common trend for seniors to 'down scale' by selling their 4 bedroom home to a small 2 bedroom 'elderly person unit' type housing). and if you want to get rid of your house by doing a 'reverse-equity' mortgage ; each to their own.
All these people are doing is releasing their own capital for their own benefit

NZ's tax system is not like the US where are no exemption of CGT on the principle residence. But then they're allowed all sorts of goodies like deducting their mortgage interest rate off their income, and capital losses that can be applied forward and back (again something the TWG has not talked about).
Comparing others tax system is only of academic interest - and not part of this governments agenda. They apparently want a "Fairer" system

Therefore, it would be more prudent for NZ to have a more comparable tax system such as in Australia (or UK colonies) where they allow a CGT exemption on the principle residence.
Other than trade, we dont need a comparable system. We need one that is efficient - like NZ's GST

I would not be surprised if Princess Leia is looking for a CGT model like Australia or Canada. The simplicity of NZ's tax system penalises the low and middle class and makes the equality gap wider. I'll reiterate, a simple tax on all people is not just for those that are not able.
A tax system should apply equally to all people - that is fair. The more you profit teh more tax you will pay. That is fair.

Those who are disabled clearly have the right to make a decent living and get into their own home without being a rental tenant for the rest of their lives.
They dont have a right at all. They have an opportunity. As does everyone else.

Those who are more skilled and affluent deserve to pay more taxes but do so by structuring their assets in the form of paying CGT (of course this approach is meaningless if the tax rate on CGT = the person's tax bracket).No-one deserves to pay tax. It is simply a burden we must all bear and we should all bear it equally and fairly.

One thing is sure in life - we need a roof over our heads when we stop earning - ie retire.

How is it fair I can put my money into an eventual mortgage free residential property and pay no capital gain as I release that capital. Compared with a renter, who ought to be putting their non-housing savings into a Superannuation, Kiiwsaver or other capital investment scheme , only to be taxed when they release that capital to pay for that roof in retirement

Bjauck

12-03-2019, 08:29 AM

…
How is it fair I can put my money into an eventual mortgage free residential property and pay no capital gain as I release that capital. Compared with a renter, who ought to be putting their non-housing savings into a Superannuation, Kiiwsaver or other capital investment scheme , only to be taxed when they release that capital to pay for that roof in retirement
I agree. To exempt the family home from CGT and income tax on imputed rent, whilst subjecting other investments, business, shares and KiwiSaver investments to a CGT and Tax on income earned will make the purchase of a family home the de facto tax efficient pension scheme for those that can afford it. How long would it be before the NZX would close up shop?

minimoke

12-03-2019, 08:47 AM

I agree. To exempt the family home from CGT and income tax on imputed rent, whilst subjecting other investments, business, shares and KiwiSaver investments to a CGT and Tax on income earned will make the purchase of a family home the de facto tax efficient pension scheme for those that can afford it. How long would it be before the NZX would close up shop?
Two consequences.

NZ'ers will look for capital investment opportunities overseas on, say, ASX.

Second usual supply demand principle will see increased demand for upscale residential housing which will push up prices which will see holders in NZ residential property get larger tax free capital gain.

elZorro

12-03-2019, 09:05 AM

It may have been normal back in the day to buy a home when still young and then use that asset as collateral for a business. Certainly in Auckland that Avenue is more for the wealthy family member or for those on high incomes and good luck in trying to obtain a mortgage with sufficient funds available to invest in a business in addition to being able to afford the house itself.

A business or shares bought and added to with tax paid income should have the net income taxed and capital gains taxed but an owner-occupied home that is not liable to tax on net imputed rent should also not be liable for capital gains? I do not see the logic or fairness in that.

I don't think they'll use the marginal tax rates with the CGT, and they'll have to be very careful around businesses and share portfolios, as you say.

But the difference between a landlord's rented house and a private dwelling is stark. In the first situation a paper transaction can be made, leveraged against other property, and over the full term the landlord pays nothing to hold that asset, they even derive a small income from each property. Tax losses from earlier years defray their income tax. The private dwelling is more expensive to hold onto than renting something equivalent, for the average household. They might not pay rent, but they have to pay interest and usually some capital too, out of tax-paid income. If you really look hard at all the costs associated with owning a home and redecorating or adding on, in many cycles there really is no return on that spending and effort. But, that home is worthy capital to borrow against for other projects, and it gives the household stability.

The govt cannot undo that incentive to home ownership by imposing a CGT on it.

fungus pudding

12-03-2019, 09:45 AM

I don't think they'll use the marginal tax rates with the CGT, and they'll have to be very careful around businesses and share portfolios, as you say.

But the difference between a landlord's rented house and a private dwelling is stark. In the first situation a paper transaction can be made, leveraged against other property, and over the full term the landlord pays nothing to hold that asset, they even derive a small income from each property. Tax losses from earlier years defray their income tax. The private dwelling is more expensive to hold onto than renting something equivalent, for the average household. They might not pay rent, but they have to pay interest and usually some capital too, out of tax-paid income. If you really look hard at all the costs associated with owning a home and redecorating or adding on, in many cycles there really is no return on that spending and effort.

That pretty much sums up renting out residential property. The owner occupier however gets the return of rent-free accommodation.

777

12-03-2019, 10:03 AM

I don't think they'll use the marginal tax rates with the CGT, and they'll have to be very careful around businesses and share portfolios, as you say.

Marginal rates is what they want and what the TWG came up with. Remember the TWG was told what the result was to be.

minimoke

12-03-2019, 10:49 AM

Marginal rates is what they want and what the TWG came up with. Remember the TWG was told what the result was to be.Which will only be another shot at the "poor" people as they are elevated into the next tax bracket on the sale of what little capital they may have.

SBQ

12-03-2019, 12:03 PM

NZ is in a unique situation. Canada's high taxation throughout the 90s and 2000 created a "brain drain" (i'm part of it). The response was so great PM Harper had created a fast track immigration program to attract expat Cdns (who married abroad with children) that they can easily move back to Canada. NZ doesn't have this problem because residents & wealth can easily move to Australia (no immigration requirement). A move that a Cdn can't do by moving to the USA.

The NZ gov't may be too blind to wealth moving abroad, and looking to upscale into a high end house is not wise when the buyers of those houses have... moved abroad.

minimoke

12-03-2019, 12:28 PM

NZ doesn't have this problem because residents & wealth can easily move to Australia (no immigration requirement). A move that a Cdn can't do by moving to the USA. It may be easy to move but as a NZ citizen you do not get any of the benefits Australians receive as an Australian citizen. Its all good until things start to go wrong.

The NZ gov't may be too blind to wealth moving abroad, and looking to upscale into a high end house is not wise when the buyers of those houses have... moved abroad.The vacuum left by departing high wealth NZ'ers could be filled by high wealth migrants.

Bjauck

12-03-2019, 06:29 PM

....
The govt cannot undo that incentive to home ownership by imposing a CGT on it. As home ownership rates fall (in Auckland it is down to close to 50% of homes) the “incentive to home ownership” tax breaks for owner-occupiers is a form of a benefit for the middle class.

Those who rely on KiwiSaver for their pension fund either through choice (for some, home ownership may not be appropriate) or because they simply cannot raise the deposit or finance to buy a home (and consequent ascent of the principal residence property ladder) end up helping to pay the tax that is not levied on owner-occupiers. So the young and the poor end up paying higher tax on their wages, term deposits and KiwiSaver whilst the old and wealthier enjoy their tax-exempt homes which they are able to trade down or use for a reverse mortgage in retirement?

Perhaps The tax foregone as a result of the exemptions for owner-occupied housing should be costed and published as a subsidy or benefit in the same way as other benefits paid by the government.

SBQ

12-03-2019, 10:01 PM

It may be easy to move but as a NZ citizen you do not get any of the benefits Australians receive as an Australian citizen. Its all good until things start to go wrong.

The vacuum left by departing high wealth NZ'ers could be filled by high wealth migrants.

Wealthy people that move don't look for benefits. As Charlie Munger recently talked about at his Daily News AGM 2 weeks ago, paraphrasing that "Why would you not want rich people in your neighbourhood? They're not a burden to society, they don't fill up the jails.... they don't line up for gov't hands outs...". Many NZ citizens use private medical insurance for faster and better care despite - how would that be different to NZ citizens paying for private medical insurance in Australia?

High wealth migrants moving to NZ? That boat was long gone pre-2000 when overseas assets and equities could be sold tax free by a NZ resident. We have a ban on non-residents buying real estate in NZ (with exception of Sg and S. Korea). Vastly different to how Aus or Canada treats non-resident ownership of real estate. Australia allows foreign investment into NEW development and newly built houses. Canada's door is wide open as a trap so they can tax your overseas income if you make too much of a presence / tie with the country. But there's no need to just read the news, just ask the real estate agents on where are the high net worth individuals coming to NZ? We have a Thai neighbour down the street that has chosen to put their house up for sale (after all they spent most of their time in Thailand). But deep down, the reason is they can't form a tie in NZ anymore from the real estate ban and decided to just simply stay in Thailand.

Just look in the past 2 years where global capital outflows have gone? Brexit and EU issues... they've moved their wealth to the USA because they're the friendliest to foreign investment. (it's apparent by the strong USD currency).

elZorro

13-03-2019, 09:31 PM

It may have been normal back in the day to buy a home when still young and then use that asset as collateral for a business. Certainly in Auckland that Avenue is more for the wealthy family member or for those on high incomes and good luck in trying to obtain a mortgage with sufficient funds available to invest in a business in addition to being able to afford the house itself.

A business or shares bought and added to with tax paid income should have the net income taxed and capital gains taxed but an owner-occupied home that is not liable to tax on net imputed rent should also not be liable for capital gains? I do not see the logic or fairness in that.

A bach may also be subject to CGT under the new regime, in that case there is no imputed rent really (and assuming it's not rented out at any stage). I did some numbers on ours, and based on the last 13 years, with a paper transaction to kick it off, if we sell it now at a new market high it has still cost us the thick end of $80,000 in cashflow plus the use of all that money over the years (interest we could have accrued instead of paying). We don't use it much and haven't spent a lot on renovations. I wouldn't want to pay a CGT on the so-called capital gain in that situation. If we'd decided to just rent the place out fulltime we'd have a cashflow positive situation plus the use of the money that was tied up, and tax benefits.

I think I'm coming to the conclusion that when you run a business with these assets, be it shareholding, commercial or residential property, a general business, then a CGT is likely and appropriate in some form. In other words, an effort is being made to have someone else pay off or cover the costs of that asset. But the bach, principal home, other personally owned assets can be a lot trickier to justify.

minimoke

13-03-2019, 10:04 PM

A bach may also be subject to CGT under the new regime, .If its not the family home then it would be subject to CGT. Non performing assets like this and land banks ought to be dealt to because they sit idle adding nothing to anyone for such a long time. Thats not fair

fungus pudding

13-03-2019, 11:05 PM

A bach may also be subject to CGT under the new regime, in that case there is no imputed rent really (and assuming it's not rented out at any stage). I did some numbers on ours, and based on the last 13 years, with a paper transaction to kick it off, if we sell it now at a new market high it has still cost us the thick end of $80,000 in cashflow plus the use of all that money over the years (interest we could have accrued instead of paying). We don't use it much and haven't spent a lot on renovations. I wouldn't want to pay a CGT on the so-called capital gain in that situation. If we'd decided to just rent the place out fulltime we'd have a cashflow positive situation plus the use of the money that was tied up, and tax benefits.

I think I'm coming to the conclusion that when you run a business with these assets, be it shareholding, commercial or residential property, a general business, then a CGT is likely and appropriate in some form. In other words, an effort is being made to have someone else pay off or cover the costs of that asset. But the bach, principal home, other personally owned assets can be a lot trickier to justify.

A CGT scheme should be all or nothing. Or perhaps reinstate death duties - which solves a lot of problems as it becomes an exit tax, and it's simple.

westerly

14-03-2019, 09:32 AM

A CGT scheme should be all or nothing. Or perhaps reinstate death duties - which solves a lot of problems as it becomes an exit tax, and it's simple.

Death Duties -- At last a good idea.

westerly

jmsnz

14-03-2019, 09:50 AM

A bach may also be subject to CGT under the new regime, in that case there is no imputed rent really (and assuming it's not rented out at any stage). I did some numbers on ours, and based on the last 13 years, with a paper transaction to kick it off, if we sell it now at a new market high it has still cost us the thick end of $80,000 in cashflow plus the use of all that money over the years (interest we could have accrued instead of paying). We don't use it much and haven't spent a lot on renovations. I wouldn't want to pay a CGT on the so-called capital gain in that situation. If we'd decided to just rent the place out fulltime we'd have a cashflow positive situation plus the use of the money that was tied up, and tax benefits.

I think I'm coming to the conclusion that when you run a business with these assets, be it shareholding, commercial or residential property, a general business, then a CGT is likely and appropriate in some form. In other words, an effort is being made to have someone else pay off or cover the costs of that asset. But the bach, principal home, other personally owned assets can be a lot trickier to justify.

Is my understanding correct then, you are suggesting that if I:
1) Buy a property in Auckland to use as my bach and don't rent it out it is all good and regardless of any gain I pay no tax
2) Buy a property in Auckland to use as my bach and rent it out occasionally and cover rates, insurance and some maintenance, I now pay tax on any gain
3) Buy a property in Auckland and run a business as a residential landlord renting that property I immediately turn into a 3 headed monster that has to be taxed within an inch of my life, not to mention a continual raft of legislation around running that business

minimoke

14-03-2019, 10:12 AM

Is my understanding correct then, you are suggesting that if I:
1) Buy a property in Auckland to use as my bach and don't rent it out it is all good and regardless of any gain I pay no taxYou would be liable for CGT as its not the family home

2) Buy a property in Auckland to use as my bach and rent it out occasionally and cover rates, insurance and some maintenance, I now pay tax on any gainyou would be liable for income tax on any rental profit and CGT

3) Buy a property in Auckland and run a business as a residential landlord renting that property I immediately turn into a 3 headed monster that has to be taxed within an inch of my life, not to mention a continual raft of legislation around running that businessyou would be liable for income tax on any rental profit and CGT on the rental property. And if you claim home office expense liable for CGT on your family home

777

14-03-2019, 11:09 AM

Death duties are easily avoided by holding assets in a trust.

Bjauck

14-03-2019, 02:48 PM

…

I think I'm coming to the conclusion that when you run a business with these assets, be it shareholding, commercial or residential property, a general business, then a CGT is likely and appropriate in some form. In other words, an effort is being made to have someone else pay off or cover the costs of that asset. But the bach, principal home, other personally owned assets can be a lot trickier to justify. Sure the value of the owner’s use of personally owned assets can be more difficult to assess than if the owner actually charges a third party for the use of those assets.

The owner of a Bach or second home already enjoys the benefit of its use tax-free. After all the owner’s imputed rent does not have to be paid for out of taxed income. So baches already have a tax advantage to that effect. However the Labour government did not extend the primary residence CGT Exemption protection to other owner-occupied real estate.

Unless there is other major more general change to the NZ tax and investment environment, We will have to agree to disagree on the justification (or lack of it) of excluding the primary residence not only from income tax on the net annual benefit of owning the equity in the home, but also excluding it from a CGT. In my opinion This double tax efficiency would be a major reason why household wealth would be further diverted from other investments and KiwiSaver.

Bjauck

14-03-2019, 02:57 PM

Death duties are easily avoided by holding assets in a trust. As family trusts are so popular in NZ the reintroduction of death duties would not be very effective in earning duty for the government?

Bjauck

14-03-2019, 03:43 PM

artemis

14-03-2019, 04:38 PM

As family trusts are so popular in NZ the reintroduction of death duties would not be very effective in earning duty for the government?

A few years ago the Law Commission did a big review of trust law. They conservatively estimated over half a mill trusts in NZ. Big number compared to the population.

elZorro

14-03-2019, 07:33 PM

it sounds like your equity has been used inefficiently. Many others would be in your position too I guess. A CGT could deter such inefficiency and hopefully it would benefit the country and the owners of equity too. Plus who knows maybe land would become more affordable for those wanting a principal home to live in.

I have to agree, we used our capital very inefficiently, it was a dog of an investment really, but we did enjoy the holidays. I was making the point though, that once I figured out all the interest and other costs, I saw it for what it was. But many people just say they've made money because the resale value has gone up. Not true in many cases. A CGT on the bach would fix it for me, we'll sell it in advance, and if I wasn't a leftie I'd have brutally rented it out every chance I could over the previous years. So is a CGT justified on a family bach like ours? Probably, because it was an inefficent asset and in any case the capital gain has been low historically, so it's not that important if it kicks off in 2020.

elZorro

14-03-2019, 07:41 PM

Is my understanding correct then, you are suggesting that if I:
1) Buy a property in Auckland to use as my bach and don't rent it out it is all good and regardless of any gain I pay no tax
2) Buy a property in Auckland to use as my bach and rent it out occasionally and cover rates, insurance and some maintenance, I now pay tax on any gain
3) Buy a property in Auckland and run a business as a residential landlord renting that property I immediately turn into a 3 headed monster that has to be taxed within an inch of my life, not to mention a continual raft of legislation around running that business

All those situations are very different, aren't they? So maybe a flat rule would be a bit cruel. Option 2 is not much different to 1, as the interest cost can swamp out other costs. But in Option 3 the effort is being made to have the tenant cover all costs for the landlord over the term of ownership.

minimoke

14-03-2019, 09:09 PM

So is a CGT justified on a family bach like ours? Probably, because it was an inefficent asset and in any case the capital gain has been low historically, so it's not that important if it kicks off in 2020.It may be an inefficient asset, but is your asset and it should be solely up to you what you do with it. If its a family bach I would have thought it ought to be treated in the same way as all other family property.

elZorro

15-03-2019, 08:32 AM

It may be an inefficient asset, but is your asset and it should be solely up to you what you do with it. If its a family bach I would have thought it ought to be treated in the same way as all other family property.

I guess we thought that the capital gain alone would cover interest and costs, and that didn't happen with this bach to date. Average of about 2.5% gain p.a. over 13 years but the interest rate was a lot higher. Any CGT regime should try to be fair in all the diverse situations, if that is possible. We were of course lucky to have the bach at all, it wasn't too much of a drain ultimately on our finances, but there is no true leftover capital gain, it is a loss so far, but how would the IRD see it?

Bjauck

15-03-2019, 08:34 AM

It may be an inefficient asset, but is your asset and it should be solely up to you what you do with it. If its a family bach I would have thought it ought to be treated in the same way as all other family property. That is true. However on a national scale, if the banking system prefers the lending of funds for investment in real estate, on the collateral of the real estate itself, this helps inflate land values and the build up of investment in non-efficient real estate such as baches.

Add to that the tax system that taxes wages and investment income but not the capital gain then the untaxed build up of land values and non-efficient investments diverts investment away from productive income producing investments.

Bjauck

15-03-2019, 08:37 AM

Toulouse - Luzern

15-03-2019, 09:03 AM

For me the issue with CGT is that there are no definitive plans, no one is in charge, the governing coalition is incoherent with no visible competent manager.
I have always found an architectural argument such as "it would'nt look right" extremely difficult to counter with logical argument.
Justifying an expensive to implement complex new CGT tax on the argument of a move to a fair system ignores the option that existing tax GST and Income Tax rates can easily be changed if the Govt is desperate for revenue.
IMHO We do not need new taxes and the increase in Govt costs.

Bjauck

15-03-2019, 09:03 AM

Which will only be another shot at the "poor" people as they are elevated into the next tax bracket on the sale of what little capital they may have. Only for the amount that is in the top bracket in the year in which the asset is actually sold and any gain realised.

As any CGT is supposed to be neutral on the total tax take. Those “poor” people with little capital* may well be better off overall - taking into account tax reduction in other areas. So they could well pay less income tax if income tax rates are adjusted down. In addition they may benefit from other taxes being reduced.

* Maybe they have a multi-million dollar principal house that will still be exempt from a CGT under the TWG’s proposals.

minimoke

15-03-2019, 09:15 AM

I guess we thought that the capital gain alone would cover interest and costs, and that didn't happen with this bach to date. Average of about 2.5% gain p.a. over 13 years but the interest rate was a lot higher. Any CGT regime should try to be fair in all the diverse situations, if that is possible. We were of course lucky to have the bach at all, it wasn't too much of a drain ultimately on our finances, but there is no true leftover capital gain, it is a loss so far, but how would the IRD see it?As at today IRD isnt interested as you have held the property for too long to be covered by Brightline.

Will be interesting in the future though. If you hold the property as a family bach you cant claim expenses. But if it increase in value over time at the same rate of inflation then under the proposed regime you would be liable for tax on any gain. So in your scenario, going forward, you would be liable for CGT on the 2.5% inflation related gain. So about $12,540 in tax on a $38,000 gain on a $100,000 property. Or to put it another way. You will be loosing another $964 a year, on top of interest and expenses. Might be financially wiser to simply book-a-bach for the time you want to be away.

minimoke

15-03-2019, 09:18 AM

Only for the amount that is in the top bracket in the year in which the asset is actually sold and any gain realised.

As any CGT is supposed to be neutral on the total tax take. Those “poor” people with little capital* may well be better off overall - taking into account tax reduction in other areas. So they could well pay less income tax if income tax rates are adjusted down. In addition they may benefit from other taxes being reduced.

* Maybe they have a multi-million dollar principal house that will still be exempt from a CGT under the TWG’s proposals.
A gain will bump people into the next tax bracket, not necessarily the top bracket

Income
Tax rate
Effective tax rate

$0 – $14,000
10.5%
10.5%

$14,001 – $48,000
17.5%
10.5 - 15.5%

$48,001 – $70,000
30%
15.5 - 20.0%

Over $70,000
33%

Bjauck

15-03-2019, 09:23 AM

A gain will bump people into the next tax bracket, not necessarily the top bracket

Income
Tax rate
Effective tax rate

$0 – $14,000
10.5%
10.5%

$14,001 – $48,000
17.5%
10.5 - 15.5%

$48,001 – $70,000
30%
15.5 - 20.0%

Over $70,000
33%

Sure - their top bracket. Someone with few non-exempt assets will probably end up paying less tax under the TWG proposals.

Besides If the TWG’s are ever introduced and CGT receipts become meaningful then maybe those tax bands will be more generous and the top rate of income tax may be dropped to 28%...However our “poor” taxpayer may have already shifted all his equity into his over-capitalised multi-million Dollar exempt principal residence by then.

minimoke

15-03-2019, 09:31 AM

Sure - their top bracket. Someone with few non-exempt assets will probably end up paying less tax under the TWG proposals.Which results in what we know all along. The "rich" will be taxed to pay to the "poor". Its all about wealth redistribution.

Bjauck

15-03-2019, 09:54 AM

Which results in what we know all along. The "rich" will be taxed to pay to the "poor". Its all about wealth redistribution. I thought you were concerned about the poor taxpayer with little capital?

Under the TWG proposal, If you are rich with a valuable principal house and lots of income producing equity, I don’t imagine the overall effect will be much different (given the stated parameters)

If you have a big expensive house and a high income, you could see a tax reduction.

If you have currently no principal house, minimised taxable income and lots of investments which have relied on capital gain things may be different if capital profit is treated the same as income.

SBQ

15-03-2019, 02:15 PM

Sure - their top bracket. Someone with few non-exempt assets will probably end up paying less tax under the TWG proposals.

Besides If the TWG’s are ever introduced and CGT receipts become meaningful then maybe those tax bands will be more generous and the top rate of income tax may be dropped to 28%...However our “poor” taxpayer may have already shifted all his equity into his over-capitalised multi-million Dollar exempt principal residence by then.

Poor tax payers investing in their MM$ home? First you need to find where the buyers of these high end homes? Have we forgot there's a ban on foreign / non-residents buying real estate in NZ? Kiwis are not use to investing into their own home as the focus has always been through property accumulation and NOT property improvements. This is evident in how N. Americans view home ownership with multi-generational living vs NZ's change the house as often as "changing cars" point of view.

Is it me or the media is slow at releasing more news about this CGT? Beehive isn't talking much about CGT and isn't the reporting deadline in April?

Bjauck

15-03-2019, 02:35 PM

Poor tax payers investing in their MM$ home? First you need to find where the buyers of these high end homes? Have we forgot there's a ban on foreign / non-residents buying real estate in NZ? Kiwis are not use to investing into their own home as the focus has always been through property accumulation and NOT property improvements. This is evident in how N. Americans view home ownership with multi-generational living vs NZ's change the house as often as "changing cars" point of view.

Is it me or the media is slow at releasing more news about this CGT? Beehive isn't talking much about CGT and isn't the reporting deadline in April? I disagree - Many kiwis improve their main residence by adding rooms, renovating, landscaping etc.

As for multi-generational living in the same residence, that may be a cultural or affordability issue for many. I would have that would have applied in all the states of the USA including British Canada and French Quebec as well..

It is true - buying then selling the principal residence and borrowing to leverage your way up the property ladder is the de facto tax efficient way to accumulate the kiwi nest egg or fund for old age!

CGT in the form as released by the majority on the TWG is a political non-starter. A NZ CGT is like orthodontistry on Ken Dodd’s teeth*. Most people know work needs to be done to fix the teeth but nobody wants to be the one to have to do it and possibly stuffing up his act.

* or Cilla Black being gender equal! You have to be a certain age to appreciate those references (they were popular here back in the day. Did they make it to N.America?)

SBQ

15-03-2019, 11:25 PM

Actually as a population whole, no they don't look to improve their homes. After countless of trade shows in building, and with what mass group builders tell me, the focus on the typical NZ resident is not to improve the house by pouring $ into their own home. Let me elaborate.

In NZ residential building, they've never gone off to systematically build houses to scale and allowed for use of active ventilation (which requires a exceeding higher order of skill and requirement for 'air tight' construction) - not that such feature is important but it is a major cost in countries that do have these systems. It's been argued NZ's climate never warranted for such high performing homes. I mean insulation was not a code requirement until the late 90s. So what the architects continue to tell me is that if a person wants a better home, they don't pour $ in it to improve the home they live in but rather, they sell it and buy a NEWER home for the features they're after. There's a stigma that NZ houses are built poorly and that holding them too long creates problems = excessively higher maintenance costs.

Then there's the aspect of renovations that require lots of compliance from local councils, such as changing the plumbing around and electrical. It's a major headache. I'm not speak about putting up a conservatory or adding one of those 'Archgola' awnings. I'm talking the performance of the house in living comfort. New houses are far more comfortable than the state built, uninsulated homes despite how such old houses may have a certain appeal.

The worse part about NZ's old stock of homes is that no amount of $ you could pour into it would beat the performance of a newly built house at today's building code (well to within reason). A lot of $ can be spent on changing the windows, insulating the sub-floor, adding heat pumps, etc. but all these costs have paybacks well beyond the owner's anticipation of keeping the home. So the end result is houses on average change hands every 5 - 6 years.

elZorro

29-03-2019, 08:00 AM

On average that's probably correct, SBQ. There are exceptions of course. Plenty of younger developers who spent too much doing up a place, and others who have done fine, because they're right in the trade sector with suitable experience.

I found this survey result interesting.

https://www.newsroom.co.nz/2019/03/29/511314/old-landlords-vs-young-renters-on-cgt?preview=1

Scooter

29-03-2019, 08:28 AM

artemis

29-03-2019, 09:36 AM

My thoughts is that Labor don't need to get it past Winston, they will ride high in the polls after the terror attacks where they could govern alone. Wait for the bad news next month from them which will hopefully trip them up and allow the gloss to wear thin

They do need to get it past NZ First if it is to be legislated before the next election. After that election they need to be elected as the next government to implement. NZ First may agree to a watered down CGT. That would help elect a Labour-led government in 2020, and the watered down version would be a basis to extend a CGT. Because, mandate.

Scooter

29-03-2019, 10:15 AM

They do need to get it past NZ First if it is to be legislated before the next election. After that election they need to be elected as the next government to implement. NZ First may agree to a watered down CGT. That would help elect a Labour-led government in 2020, and the watered down version would be a basis to extend a CGT. Because, mandate.
Ahh, but if Labor poll 60%+ which is possible, they might 'forget' their COL partner and concentrate on Greens

BlackPeter

29-03-2019, 10:23 AM

Ahh, but if Labor poll 60%+ which is possible, they might 'forget' their COL partner and concentrate on Greens

It is irrelevant how they poll. If they want to get prior to the next election anything through parliament they will need NZ First support.

And pretty sure Winnie will remember his clientele - particularly with the next election approaching soon.

Joshuatree

29-03-2019, 01:26 PM

https://www.newsroom.co.nz/2019/03/2...-cgt?preview=1 (https://www.newsroom.co.nz/2019/03/29/511314/old-landlords-vs-young-renters-on-cgt?preview=1) 44% in favour 35% opposed, thats decent majority.

Bjauck

29-03-2019, 01:50 PM

https://www.newsroom.co.nz/2019/03/2...-cgt?preview=1 (https://www.newsroom.co.nz/2019/03/29/511314/old-landlords-vs-young-renters-on-cgt?preview=1) 44% in favour 35% opposed, thats decent majority. “Professionals and senior government officials were the most in support”

Would that be because they would profit from the extra compliance costs that will be inevitable? Or, that they would be better placed to find and benefit from the inevitable loopholes?

I would like to see the level of support from the high income subset with an exempt yet very expensive house but no other assets.

It was an ommision that the poll breakdown into owners of assets did not include the support level of those with an exempt principal home asset. Owner occupied housing is a significant class of asset ownership in NZ. They could be well be beneficiary of the proposed TWG scheme.

fungus pudding

29-03-2019, 03:24 PM

“Professionals and senior government officials were the most in support”

Would that be because they would profit from the extra compliance costs that will be inevitable? Or, that they would be better placed to find and benefit from the inevitable loopholes?

I would like to see the level of support from the high income subset with an exempt yet very expensive house but no other assets.

It was an ommision that the poll breakdown into owners of assets did not include the support level of those with an exempt principal home asset. Owner occupied housing is a significant class of asset ownership in NZ. They could be well be beneficiary of the proposed TWG scheme.

With no details of a CGT scheme available yet, it's hard to see how anyone can be for or against it.

artemis

29-03-2019, 03:53 PM

With no details of a CGT scheme available yet, it's hard to see how anyone can be for or against it.

There is the TWG report and its recommendations. The ToR were provided by the government so we the people could assume some or all of the recommendations will inform the policy to be announced in April. We could all keep quiet and accept what we are dished up. Good idea?

In practice there has been some seriously robust debate on the TWG report, and the government might take a bit of notice.

Aaron

08-04-2019, 08:01 AM

Tax Justice Aotearoa NZ. Read their ad in the herald this morning and agree with a lot of what they say but the name and colours make them sound like a cross between the Greenies and Maori parties. A lot of "out there" people in that crowd.
Campaign supporters include the Public Health Association, New Zealand Council of Christian Social Services, Council of Trade Unions, Public Service Association, Hui E! Community Aotearoa, Equality Network, Closing the Gap, Poverty Action Waikato, and UCAN (United Community Action Network).

fungus pudding

08-04-2019, 08:47 AM

There is the TWG report and its recommendations. The ToR were provided by the government so we the people could assume some or all of the recommendations will inform the policy to be announced in April. We could all keep quiet and accept what we are dished up. Good idea?

Of course not, but so much of what I have read is simply blind criticism containing all sorts of wild assumptions, as though it was all done and dusted. I can't see anything wrong with constructive discussion on CGT or any other subject. To repeat my original statement 'With no details of a CGT scheme available yet, it's hard to see how anyone can be for or against it.' That does not preclude constructive comment.

macduffy

08-04-2019, 12:29 PM

steveb

19-04-2019, 10:35 AM

777

19-04-2019, 12:11 PM

Gone!
Looks like jacinda does not have the stomach to roll the dice on an early election.Would have been interesting to see the results.I suspect winnie would have picked up a stack of votes from the nats

Don't see your reasoning here. Winston has lost votes since the election which probably never went to National, since they have also lost votes. So they will just come back from where they went which is likely Labour due to the fact they are the only party to have increased their votes in the polls.

Valuegrowth

21-04-2019, 03:08 PM

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12223514 (https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12223514)
Lizzie Marvelly: Forget capital gains tax, we need a new plan

https://www2.deloitte.com/nz/en/pages/tax/articles/capital-gains-tax-nz.html (https://www2.deloitte.com/nz/en/pages/tax/articles/capital-gains-tax-nz.html)

Is a capital gains tax right for New Zealand?

https://www.stuff.co.nz/business/109923112/capital-gains-tax-whats-fair-for-one-person-may-hurt-another (https://www.stuff.co.nz/business/109923112/capital-gains-tax-whats-fair-for-one-person-may-hurt-another)
Capital gains tax: What's fair for one person may hurt another

moka

30-06-2020, 10:54 PM

SBQ

04-07-2020, 05:57 PM

https://www.marketwatch.com/story/why-raising-taxes-on-the-rich-isnt-so-crazy-2019-12-09 (https://www.marketwatch.com/story/why-raising-taxes-on-the-rich-isnt-so-crazy-2019-12-09)
Wealth taxes wouldn’t destroy the economy — they’d make it better.
The economy would benefit directly from a more equal distribution of income because middle- and low-income families spend a greater portion of their incomes than the very rich do, so more money would recycle through the economy.
Inequality of wealth creates other problems. The top 1% are socking away a greater share of the nation’s wealth; so much so that regular Americans are starved for the capital they need to buy homes, invest in schooling and start new businesses.
Are taxes on the rich unfair? The poor are constantly being reminded that life isn’t supposed to be fair. Get over it.

The US already has already addressed taxing the wealthy. It's called the Estate or Death Duty tax which kicks in on amounts over $11 Million USD.

Article says the top 1% need to pay more? I agree they do. But in NZ, let's be real, how wealthy are the top 1% of NZ residents? I would say.. not so wealthy, definitely not when you compare income levels of the upper middle class in the US. There would be only a handful of NZ rich that are in the $500K/year income? Whereas in the US in that 1%, you're going to find a lot more earning that kind of money.

If CGT is implemented, then the NZ gov't & IRD need to consider removing existing taxes such as FIF (on those with overseas assets). The biggest impact CGT would have is the Kiwi Saver scheme ; it would mean NZ's tax code would look more and more like how the IRS and Australia and most other nations with CGT, address taxation.

Joshuatree

04-07-2020, 06:14 PM

Can you verify that "only a handful"

Panda-NZ-

04-07-2020, 07:03 PM

iceman

04-07-2020, 09:27 PM

The previous govt took away the kiwisaver tax credits and original 1k contribution. This would have had more of an impact on KS

The tax free status hasn't done much to encourage domestic savings and foreign ownership picks up the investment shortfalls.

Once again you spew misinformation or straight out lies. Are you paid by the Labour Party to do this ? You should disclose if you are.
The KS tax credits are still in place but at a lower level than they were.
The Government should in my view totally stop contributions to people´s KS accounts now that the Government´s books are in such a serious negative state.

moka

04-07-2020, 09:46 PM

Once again you spew misinformation or straight out lies. Are you paid by the Labour Party to do this ? You should disclose if you are.
The KS tax credits are still in place but at a lower level than they were.
The Government should in my view totally stop contributions to people´s KS accounts now that the Government´s books are in such a serious negative state.
It would be a more constructive discussion without the personal attacks, in bold above. You could just say I disagree, or that is not correct.
Panda-NZ- was correct in that the previous government took away the $1K contribution.

iceman

04-07-2020, 09:52 PM

It would be a more constructive discussion without the personal attacks, in bold above. You could just say I disagree, or that is not correct.
Panda-NZ- was correct in that the previous government took away the $1K contribution.

He/she has been called out several times in the last little while with straight out misinformation, making statements that are simply not based on fact. Yet it continues. It doesn´t matter whether I agree or disagree. His/her statement is simply not factual.

Edit: But I do take your point moka about my post being unnnecessarily harshly and personally worded, which is something I always try to avoid in comments on this site. Pointless editing it though as I can not edit your quote of it !

SBQ

04-07-2020, 10:02 PM

Can you verify that "only a handful"

I've found not data for NZ but not surprisingly, the US data here:

https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/

Annual Wages of Top Earners
The latest data from the EPI show that in 2018 annual wages for the top 1% reached $737,697, up just 0.2% compared to 2017.

I think it's fair to say when it comes to the top 1% of earners, NZ's 1% wouldn't be near this US figure.

The previous govt took away the kiwisaver tax credits and original 1k contribution. This would have had more of an impact on KS

The tax free status hasn't done much to encourage domestic savings and foreign ownership picks up the investment shortfalls.

Not sure about the tax free status of KS. Tax unfortunately isn't a well discussed topic among NZ financial advisors. I don't see how they can provide any meaningful advice to clients without breaking down the tax that listed corporations pay, and the tax on dividends that shareholders receive (if not partially input credited), and FIF tax if the shares are foreign based. If there's one thing certain, Kiwi Saver has been a landfall money maker for IRD. This is very different to the tax approach to share investments in the US & Canada where on most part, small investors have the ability to invest tax free (ie ROTH IRA):

https://www.youtube.com/watch?v=q63F1pBrUHA

Neither gov'ts in NZ have proposed what assets would have CGT - nor how it would impact other investments - Kiwi Saver? it's not that easy of an issue to clarify because NZ has come form an unusual stance of having no form of tax on capital gains.

Panda-NZ-

04-07-2020, 10:13 PM

moka

04-07-2020, 11:14 PM

The US already has already addressed taxing the wealthy. It's called the Estate or Death Duty tax which kicks in on amounts over $11 Million USD.

Article says the top 1% need to pay more? I agree they do. But in NZ, let's be real, how wealthy are the top 1% of NZ residents? I would say.. not so wealthy, definitely not when you compare income levels of the upper middle class in the US. There would be only a handful of NZ rich that are in the $500K/year income? Whereas in the US in that 1%, you're going to find a lot more earning that kind of money.

If CGT is implemented, then the NZ gov't & IRD need to consider removing existing taxes such as FIF (on those with overseas assets). The biggest impact CGT would have is the Kiwi Saver scheme ; it would mean NZ's tax code would look more and more like how the IRS and Australia and most other nations with CGT, address taxation.
If we are talking about capital gains tax or taxing the wealthy then we should be looking at wealth not income. Apart from a few well-paid CEOs the way you get wealthy in NZ is from capital gains, not income. And yes Estate or Death Duty tax should be re-introduced.
https://www.stuff.co.nz/business/money/112441631/how-rich-are-you-stats-nzs-wealth-calculator-will-tell-you
It shows the top 1 per cent of individuals owned around 20 per cent of the country's wealth at the end of June 2018, and the top 10 per cent owned 59 per cent of the country's wealth.

Panda-NZ-

04-07-2020, 11:22 PM

I don't really agree with either. The gift duty can be changed though so people can't switch between structures to avoid tax as easily. sadly its another legacy item from sir john and sir bill to resolve.

Move to stop all the tax avoidance so people pay what they should be paying here instead IMO.

SBQ

05-07-2020, 11:57 AM

There is a portion of Kiwisaver, maybe the majority, where tax isn't paid since its a capital gain.

Also keep in mind that it cannot be retrospective which means that you keep all of the existing gains to the current date which is quite fair.

Managed KiwiSaver funds pay taxes in the same manner as paying corporate taxes (this is what a financial advisor told me at a neighbourhood gathering). If this information is wrong then I stand corrected. The shareholders have a RWT to account for dividend payments which is treated differently than taxing of the gains. To bring in a CGT, there needs to be consideration of already existing taxes on gains in different asset classes. For eg. if a person is day trading shares (or frequently buy / sell like managed funds do ; with the INTENT of profit), then the gains are taxed at full income / corporate rates.

What's the most compelling issue i've found with financial advisors in NZ is a lack of consensus on advice. This is very different to what i've seen in Canadian afternoon TV hosting 'Finance Talk' programs to educate the public, and what these financial advisors say is pretty much widely accepted. Here's one perspective of a NZ advisor:

https://nestegginvestments.co.nz/index.php/2017/09/04/international-shares-not-always-taxed/

"This different tax treatment is sub-optimal, and unfair for NZ based funds. But until this situation changes, from a tax perspective only, it is preferable to hold international shares via foreign-based funds (or direct investments in overseas companies). "

Of course no financial advisor gets a commission telling clients to invest directly by themselves or choosing the lowest cost option of owning shares 'outside of a managed fund'.

So the issue whether CGT is taxed 'retrospective' or not is of no difference, the NZ investor is already paying taxes on their investments in so many different ways. Perhaps Jacinda Ardern didn't realise this and at the time she looked at making a decision to bring in CGT or not, she found out she couldn't arbitrarily single out CGT on the residential property market.

SBQ

05-07-2020, 12:28 PM

If we are talking about capital gains tax or taxing the wealthy then we should be looking at wealth not income. Apart from a few well-paid CEOs the way you get wealthy in NZ is from capital gains, not income. And yes Estate or Death Duty tax should be re-introduced.
https://www.stuff.co.nz/business/money/112441631/how-rich-are-you-stats-nzs-wealth-calculator-will-tell-you
It shows the top 1 per cent of individuals owned around 20 per cent of the country's wealth at the end of June 2018, and the top 10 per cent owned 59 per cent of the country's wealth.

While i'm not against taxation, why is it no one really addresses 'how much taxes' should a person pay in NZ? In my recent post here I made the comparison of the top 1% earners in NZ vs the 1% in America. What NZ politicians seem to miss out is how much more is expected out society to pay in taxation?

Perhaps question why NZ Gift Duty and NZ Estate Death taxes were removed in the past? I think the answer was more along the lines of NZ's failing brain drain and flight of capital overseas. You had NZ charities that struggled because of the Gift Duty that limited donors from achieving anything (I recall Jane Cameron ex-Katmadu wanting to make a generous gift in NZ but ended up moving to Australia). We live in a global world and there are no laws 'yet' that stops a person from declaring non-residency in NZ (so easily achieved by just flying to Australia). Where I grew up in Canada, a decision to declare non-residency is not so easy achieved because one can't simply say they just want to move to another country. A green card or residency visa is required in the US if a Canadian wants to live there. It's not so simply as a Kiwi hopping on a plane and flying to Australia when ever they want to.

So this brings back to my original point, if you want to compare the top 1% of the people in NZ, look who they are? Are they really make a lot of money or wealth? More importantly, are they the LAST egg left which Jacinda Ardern has been cautious about imposing CGT (or any new tax) to them? Believe me, Canada has had it's fair share of wealth leave the country throughout he 90s and 2000s (mostly due to brain drain and the wealthy sending their assets abroad).

@ Panda-NZ: I don't really agree with either. The gift duty can be changed though so people can't switch between structures to avoid tax as easily. sadly its another legacy item from sir john and sir bill to resolve.

Move to stop all the tax avoidance so people pay what they should be paying here instead IMO.

As I said before, what level of taxation is acceptable? NZ gov't has to be very cautious about this because again, we live in a globalised world. Residents will find out that they had enough and will leave. The US has all of the above (gift tax, death duty, etc..) but like their income tax brackets, the thresholds to be paying a lot of tax is way way up there. To be in the 1% top earner, one needs to be well over $500K a year income, in addition to also having capital gains tax. But for the vast majority, and i'm talking those that have enough after-tax disposable income to pay for medical insurance, they can structure their finances so they pay very very little taxes.

So I ask again, how much taxes should a NZ resident be paying? More specifically, how much should the top 1% should be paying in NZ? Because these groups of people are the most likely to move to more tax friendlier places like in the US (as what we've recently seen from the EU's hunt for taxes).

Bjauck

05-07-2020, 02:53 PM

…If CGT is implemented, then the NZ gov't & IRD need to consider removing existing taxes such as FIF (on those with overseas assets). The biggest impact CGT would have is the Kiwi Saver scheme ; it would mean NZ's tax code would look more and more like how the IRS and Australia and most other nations with CGT, address taxation.

I guess the FIF regime is supposedly an “income” tax. Even if in some years the use of the 5% “Fair dividend” rate is in effect a tax on imputed income, where there has only been a increase in unrealised capital gains without any dividend paid during the year. I guess this may result in the taxpayer selling down their overseas investment to pay the tax levied on unrealised returns on the investment. Would CGT be in addition to that when it comes to FIF investments?

NZ is on track to reaching the American levels of wealth and income of the top 1%. Disparities are growing. We currently have no death or estate duties, plus no stamp duties, comprehensive capital gains or capital taxes. Wealth is increasingly becoming concentrated in the top circle of families....

Panda-NZ-

05-07-2020, 04:19 PM

As I said before, what level of taxation is acceptable? NZ gov't has to be very cautious about this because again, we live in a globalised world. Residents will find out that they had enough and will leave. The US has all of the above (gift tax, death duty, etc..) but like their income tax brackets, the thresholds to be paying a lot of tax is way way up there. To be in the 1% top earner, one needs to be well over $500K a year income, in addition to also having capital gains tax. But for the vast majority, and i'm talking those that have enough after-tax disposable income to pay for medical insurance, they can structure their finances so they pay very very little taxes.

Every country will be looking to raise taxes soon. These views are pretty out of date, you may not have noticed the huge numbers of skilled people busting down our doors atm to come in. It will be even more in the future as climate change causes resource and water shortages. Taxes are way down the list.

We need a fair return from these people.. How much should they pay? more than 0% for a capital gain.

SBQ

05-07-2020, 08:39 PM

I guess the FIF regime is supposedly an “income” tax. Even if in some years the use of the 5% “Fair dividend” rate is in effect a tax on imputed income, where there has only been a increase in unrealised capital gains without any dividend paid during the year. I guess this may result in the taxpayer selling down their overseas investment to pay the tax levied on unrealised returns on the investment. Would CGT be in addition to that when it comes to FIF investments?

NZ is on track to reaching the American levels of wealth and income of the top 1%. Disparities are growing. We currently have no death or estate duties, plus no stamp duties, comprehensive capital gains or capital taxes. Wealth is increasingly becoming concentrated in the top circle of families....

Yep, this was the issue I brought up last year when Jacinda had this TWG discussion - what would be done to the existing NZ investments made in pension funds etc that already paid taxes? It was clear what the public wanted in NZ (the Labour voters) was a tax on residential properties. Too many of the rich had come from owning large portions of real estate in NZ but Jacinda, in her mind I suppose just couldn't do it. As the TWG suggested it could lead to political suicide or worse, a huge flight of NZ capital to abroad - if NZ's real estate market collapsed, it would have huge repercussions on NZ's bond rating and monetary / fiscal management on the global level.

I do agree in NZ, the disparity gap between the rich and poor is growing. A good proxy is look at all the private schools and how much they charge rich families that send their children there. It's an issue and commitment i'm not use to as I grew up in Canada. Private schools in primary & secondary are rare and only for the ultra elite and they still ended up attending the same universities around Canada. The compelling distinction I learned was Canada having the top 1 or 2 rank of 'attainment' levels in the world (ie. those carrying on to post secondary education) ; it's not the result of being rich or poor but rather, their public education must be doing something right.

@Panda-NZ-: Every country will be looking to raise taxes soon. These views are pretty out of date, you may not have noticed the huge numbers of skilled people busting down our doors atm to come in. It will be even more in the future as climate change causes resource and water shortages. Taxes are way down the list.

We need a fair return from these people.. How much should they pay? more than 0% for a capital gain.

That may be true - but I would put my $ on it that America would be the place to raise taxes the least for the simple reason, they have the buffer room. Places like NZ and Canada, if they impose more taxation, the result would be quite devastating. Remember the laws around gifting and moving assets around? Don't forget, the US has the advantage of bank secrecy laws (absence of CRS and impenetrable of NZ's FMA regulation laws).

Who are the people that are busting down the doors to get into NZ? From what I can see, they certainly are not the rich. It's already been proven that of the elite Chinese wanting to get of China, their top destination is the US or Australia:

https://youtu.be/qP-lnn-kwPA?t=154

Just like in the education wrap, those that don't get accepted into Cdn or American universities, they work their way down the list to the next country - NZ gets the left overs.

dibble

07-07-2020, 03:01 PM

While i'm not against taxation, why is it no one really addresses 'how much taxes' should a person pay in NZ? In my recent post here I made the comparison of the top 1% earners in NZ vs the 1% in America. What NZ politicians seem to miss out is how much more is expected out society to pay in taxation?

Perhaps question why NZ Gift Duty and NZ Estate Death taxes were removed in the past? I think the answer was more along the lines of NZ's failing brain drain and flight of capital overseas. You had NZ charities that struggled because of the Gift Duty that limited donors from achieving anything (I recall Jane Cameron ex-Katmadu wanting to make a generous gift in NZ but ended up moving to Australia). We live in a global world and there are no laws 'yet' that stops a person from declaring non-residency in NZ (so easily achieved by just flying to Australia). Where I grew up in Canada, a decision to declare non-residency is not so easy achieved because one can't simply say they just want to move to another country. A green card or residency visa is required in the US if a Canadian wants to live there. It's not so simply as a Kiwi hopping on a plane and flying to Australia when ever they want to.

So this brings back to my original point, if you want to compare the top 1% of the people in NZ, look who they are? Are they really make a lot of money or wealth? More importantly, are they the LAST egg left which Jacinda Ardern has been cautious about imposing CGT (or any new tax) to them? Believe me, Canada has had it's fair share of wealth leave the country throughout he 90s and 2000s (mostly due to brain drain and the wealthy sending their assets abroad).

As I said before, what level of taxation is acceptable? NZ gov't has to be very cautious about this because again, we live in a globalised world. Residents will find out that they had enough and will leave. The US has all of the above (gift tax, death duty, etc..) but like their income tax brackets, the thresholds to be paying a lot of tax is way way up there. To be in the 1% top earner, one needs to be well over $500K a year income, in addition to also having capital gains tax. But for the vast majority, and i'm talking those that have enough after-tax disposable income to pay for medical insurance, they can structure their finances so they pay very very little taxes.

So I ask again, how much taxes should a NZ resident be paying? More specifically, how much should the top 1% should be paying in NZ? Because these groups of people are the most likely to move to more tax friendlier places like in the US (as what we've recently seen from the EU's hunt for taxes).

The question should be "what sort of country do we want". If you value health, education, a clean environment, well trained police officers, minimally corrupt officials etc it must all be paid for. And if you think outsourcing things is cheaper note that the US Govt still spends a lot per capita on health (cant remember the figures but more than some OECD countries where health is free). So the answer is probably something like tax needs to somehow reflect spending and if residents decide they dont like paying "too much" tax despite enjoying the benefits and depart then good riddance.

Zaphod

07-07-2020, 05:55 PM

The question should be "what sort of country do we want". If you value health, education, a clean environment, well trained police officers, minimally corrupt officials etc it must all be paid for. And if you think outsourcing things is cheaper note that the US Govt still spends a lot per capita on health (cant remember the figures but more than some OECD countries where health is free). So the answer is probably something like tax needs to somehow reflect spending and if residents decide they dont like paying "too much" tax despite enjoying the benefits and depart then good riddance.

Which does nothing to address the issue of the proportion of tax that should be paid by individuals. What rate for each individual represents a "fair share" of the burden for these services? Let's put aside the separate and very subjective argument of which specific services and what level of services are essential.

dibble

07-07-2020, 09:54 PM

Which does nothing to address the issue of the proportion of tax that should be paid by individuals. What rate for each individual represents a "fair share" of the burden for these services?

Au contraire, context is everything otherwise no need to step outside the poll. CGT is expensive to administer, burdensome and relatively easy to fiddle. To expand the existing CGT it begs the question "why?" If it is merely revenue, increasing GST is far more efficient and its difficult to (legally) avoid. Plus it hits the wealthy harder if that is one's goal. Alternatively rolling out user pays might achieve the same goal (and negate the need for any new taxes). The Q how much an individual should pay absolutely, via what means and how much relative to another person, or corporation, is thus very much linked to what an individual gets/expects in return (micro and macro). It obviously gets very philosophical.

Panda-NZ-

07-07-2020, 10:07 PM

One simple line of code:

Sale_price - purchase_price * tax rate.

It's almost too simple which is why every country has it in place. for comparison the IRD's GST guide is 100 pages and nearly every business is required to know how to fill in the seperate form (sounds complex), know what to include in it as a taxable supply, what they can claim, make a number of adjustments, maintain their invoice records which have a company's GST number on it for multiple years somewhere.

This raises admin costs when you have to file two monthly rather than once for income. More of the economy is shifting towards capital and less income so it's also needed from that perspective if you are to maintain a tax base.

moka

07-07-2020, 11:13 PM

Which does nothing to address the issue of the proportion of tax that should be paid by individuals. What rate for each individual represents a "fair share" of the burden for these services? Let's put aside the separate and very subjective argument of which specific services and what level of services are essential.
The fair share to be paid by individuals is determined by how much they earn e.g. PAYE on wages and salary, or tax on interest or how much they spend i.e. GST. Tax is paid on what you receive in income and capital gains.

Tax is not calculated on what a “fair share” of the burden for these services.

It sounds like you are trying to rewrite the tax laws. The more you receive from the “common wealth” of a country, the more tax you pay. The “common wealth” is what every citizen in a country inherits from the efforts of our forebears over the years. If you accumulate income and wealth then you should pay tax on it. If you are in business you benefit indirectly from all government funded services that support your business, your employees, and your customers. It is not just what you as an individual use. You are an individual and you are also part of a community. The community provides services such as education, health, social welfare, justice etc which all provide the infrastructure for a healthy society, which enable you to run a profitable business.

dibble

10-07-2020, 03:38 PM

One simple line of code:

Sale_price - purchase_price * tax rate.
.

...just like AirNZ's spreadsheet is revenue-expenses * tax rate.
Devil is in the detail.

We have a half decent CGT that charges people at their top rate, not the usual 15-20% mooted. It's just tricky for IRD to prove intent... a tweak to move onus onto the tax payer to prove intent (or lack thereof) would go some way to addressing that without too much political hoo-ha.

Zaphod

11-07-2020, 09:43 AM

The fair share to be paid by individuals is determined by how much they earn e.g. PAYE on wages and salary, or tax on interest or how much they spend i.e. GST. Tax is paid on what you receive in income and capital gains.

Tax is not calculated on what a “fair share” of the burden for these services.

It sounds like you are trying to rewrite the tax laws. The more you receive from the “common wealth” of a country, the more tax you pay. The “common wealth” is what every citizen in a country inherits from the efforts of our forebears over the years. If you accumulate income and wealth then you should pay tax on it. If you are in business you benefit indirectly from all government funded services that support your business, your employees, and your customers. It is not just what you as an individual use. You are an individual and you are also part of a community. The community provides services such as education, health, social welfare, justice etc which all provide the infrastructure for a healthy society, which enable you to run a profitable business.

I agree with you. That's not the point I'm making though. What I am questioning is the all too often repeated orthodoxly that everyone must pay their fair share of tax. What is this fair share? How do we calculate it? It's completely subjective and those that repeat the line invariably can't come up with objective measures. It appears to be a line used to bludgeon those who believe others have accumulated too much wealth.

SBQ

11-07-2020, 10:11 AM

Au contraire, context is everything otherwise no need to step outside the poll. CGT is expensive to administer, burdensome and relatively easy to fiddle. To expand the existing CGT it begs the question "why?" If it is merely revenue, increasing GST is far more efficient and its difficult to (legally) avoid. Plus it hits the wealthy harder if that is one's goal. Alternatively rolling out user pays might achieve the same goal (and negate the need for any new taxes). The Q how much an individual should pay absolutely, via what means and how much relative to another person, or corporation, is thus very much linked to what an individual gets/expects in return (micro and macro). It obviously gets very philosophical.

How do you know CGT is expensive to administer? Put that question to every other OECD nation that has CGT?

As I mentioned before, you have to assess the FULL tax impact in NZ. Everything from how much corporate taxes are paid, how much tax on dividends and interest, how much income taxes are paid, and how much consumption taxes like GST is paid. I still find for many posters here, they don't know the difference between taxes on 'consumption', taxes on income, and taxes on gain in asset value such as shares and hard assets like real estate. They are NOT all the same.

The wealthier have 2 choices to level the disparity field. Pay more taxes or give their portion of wealth back to society. Many would agree, the former is not nearly efficient as giving to charity. Gov't bureaucracies always creates inefficiencies. After all where did the money come from? No one questioned how the wealthy obtain their wealth from? If it originally came from society, then it's more fair to for them to contribute it BACK to society. I'm not saying they should give ALL of it back, but it's very fair that since they obtain a larger portion of wealth, they have a duty of care to give a larger portion back to society.

Bjauck

11-07-2020, 10:55 AM

Bjauck

11-07-2020, 11:12 AM

I agree with you. That's not the point I'm making though. What I am questioning is the all too often repeated orthodoxly that everyone must pay their fair share of tax. What is this fair share? How do we calculate it? It's completely subjective and those that repeat the line invariably can't come up with objective measures. It appears to be a line used to bludgeon those who believe others have accumulated too much wealth.

I guess what is “fair” is determined by “the people.” If people consider that some segment of society is benefiting excessively from the “common wealth” then governments will be voted in to change that - or - if governments refuse to change the status quo revolution will occur. Obviously at the moment the status quo means that income and the cost of subsistence is taxed heavily and leveraged long term land-based investment has a less onerous tax burden. How long that lasts depends on how long “the people” will put up with it. For how long will “the people” accept the shift to a greater concentration of wealth at the top?

fungus pudding

11-07-2020, 11:20 AM

I agree with you. That's not the point I'm making though. What I am questioning is the all too often repeated orthodoxly that everyone must pay their fair share of tax. What is this fair share? How do we calculate it? It's completely subjective and those that repeat the line invariably can't come up with objective measures. It appears to be a line used to bludgeon those who believe others have accumulated too much wealth.

It's definitely subjective as you say and it seems to me that a lot of people deem it to be 'fair' when the burden falls on anyone but themselves. For all that I find it hard to argue with a flat rate - i.e. every dollar earned is taxed at exactly the same rate - double your income will double your tax. That's my idea of fair. It also has the added advantage of not being a major disincentive.

Baa_Baa

11-07-2020, 11:25 AM

fungus pudding

11-07-2020, 11:27 AM

Is a "dollar earned" a capital gain?

Is a capital gain a dollar earned?

artemis

11-07-2020, 12:33 PM

...just like AirNZ's spreadsheet is revenue-expenses * tax rate.
Devil is in the detail.

We have a half decent CGT that charges people at their top rate, not the usual 15-20% mooted. It's just tricky for IRD to prove intent... a tweak to move onus onto the tax payer to prove intent (or lack thereof) would go some way to addressing that without too much political hoo-ha.

Quite right, except that IRD does require the taxpayer to demonstrate intent, on request. And those currently paying income tax on capital gains would be laughing all the way to the bank if they only had to pay 15%.

fungus pudding

11-07-2020, 01:31 PM

Quite right, except that IRD does require the taxpayer to demonstrate intent, on request. And those currently paying income tax on capital gains would be laughing all the way to the bank if they only had to pay 15%.

The IRD would still differentiate a trader from an investor. The CGT would not apply to traders or developers/builders.They would still be subject to income tax - bet my bottom dollar.

Bjauck

11-07-2020, 05:03 PM

It's definitely subjective as you say and it seems to me that a lot of people deem it to be 'fair' when the burden falls on anyone but themselves. For all that I find it hard to argue with a flat rate - i.e. every dollar earned is taxed at exactly the same rate - double your income will double your tax. That's my idea of fair. It also has the added advantage of not being a major disincentive. Does your idea include a tax free subsistence income threshold, before income is taxed?

Why concentrate on income? Why not double your wealth (after a tax-free threshold) would mean double your tax? Or double your realised capital gains would mean doubling your tax.

artemis

11-07-2020, 05:04 PM

The IRD would still differentiate a trader from an investor. The CGT would not apply to traders or developers/builders.They would still be subject to income tax - bet my bottom dollar.

Probably correct, but it is quite a long time since I read Labour's CGT policy (actually policies as they kept tweaking it) or the TWG tome and don't recall the distinction being made. That is probably one of those pesky details to think about another day.

fungus pudding

11-07-2020, 07:09 PM

Probably correct, but it is quite a long time since I read Labour's CGT policy (actually policies as they kept tweaking it) or the TWG tome and don't recall the distinction being made. That is probably one of those pesky details to think about another day.

It would soon be introduced if every builder chose to pay CGT and just lived off capital. Not income.

moka

12-07-2020, 12:00 AM

I agree with you. That's not the point I'm making though. What I am questioning is the all too often repeated orthodoxly that everyone must pay their fair share of tax. What is this fair share? How do we calculate it? It's completely subjective and those that repeat the line invariably can't come up with objective measures. It appears to be a line used to bludgeon those who believe others have accumulated too much wealth.
Taxes often appear to be collected on what is easiest to collect i.e. at source from wages as PAYE, GST, RWT. Taxing income is easier than wealth/capital gains. If you are taxed on your own assessment of income/profit then it is not taxed at source and those who advise Inland Revenue of the income which is to be taxed have an unfair advantage as they can use creative accounting and all sorts of tricks to minimise and avoid tax. So there is the unfairness. How is it fair that someone pays tax on their labour/work and another person pays no tax on capital gains e.g. on rising house prices which they do nothing to earn? I don’t know what the solution is, but I can see the problem.

moka

12-07-2020, 12:06 AM

Here is Guy Standing’s view of how to transform the tax system.

https://greattransition.org/publication/precariat-transformative-class
(https://greattransition.org/publication/precariat-transformative-class)
The income from using commons resources should belong to every commoner equally. Accordingly, the tax system should shift from earned income and consumption to taxing commercial uses of the commons, thereby helping in their preservation. Levies on income gained from using our commons should become major sources of public revenue. This means such measures as a land value tax, a wealth transfer tax, ecological taxes such as a carbon tax, a water use levy, levies on income from intellectual property and on use of our personal data, a “frequent flyer levy,” and levies on all income generated by use of natural resources that should belong to us as commoners.

Bjauck

12-07-2020, 07:44 AM

...So there is the unfairness. How is it fair that someone pays tax on their labour/work and another person pays no tax on capital gains e.g. on rising house prices which they do nothing to earn? I don’t know what the solution is, but I can see the problem.

It is fair, because those with political power have political control and call the shots. Older (wealthier) people tend to participate politically more than younger (income earning) adults. Also the influential farming lobby with their land holdings and providing NZ's key exports for so long have perhaps ensured that NZ has a tax system that substantially avoids taxes on wealth, capital gains and estates. So the farming estates can pass through the generations intact.

In the meantime average salary and wage earners have taxes levied on both their incomes and consumption. The wealthier city dwellers of course finding common ground with the farmers as they are in a position to benefit from the light tax onus on capital profits and capital transfers.

So NZ has a system that encourages a type of pre-industrialised agrarian society. The emphasis is on land ownership as the means of developing wealth. This leaves a small institutional and pension fund sector and of course a small capitalisation of the stock market as the vast majority of NZ wealth is in investment in land. This means that NZ-based commercial and industrial companies are substantially owned by foreign off-shore interests, with little NZ-owned business operating overseas to compensate for it.

artemis

12-07-2020, 03:05 PM

.... How is it fair that someone pays tax on their labour/work and another person pays no tax on capital gains e.g. on rising house prices which they do nothing to earn? I don’t know what the solution is, but I can see the problem.

And yet no political party here, except TOP, thinks that CGT on the family home is ever going to happen. But the homeowner can make a capital gain just as much as a rental owner, a share investor, a farmer, a boat or bach owner, a classic car collection, a multi million dollar painting owner, or a business owner. Oh, some of those were excluded from Labour's CGT proposal and some were included - for reasons never satisfactorily explained. Except politics.

Most capital gains disintegrate when an asset is sold and a similar asset bought. Might have something to do with inflation.

And with some assets, eg shares in start ups, risk is priced in. Should an investor get some credit against a CGT for the risk in buying say ATM? You could say the buyer did nothing to earn the gain, apart from fronting up with some cash plus an appetite for risk.

dibble

12-07-2020, 04:26 PM

And yet no political party here, except TOP, thinks that CGT on the family home is ever going to happen.

And nor should it. A house is a place to live. Sooner we collectively get that into our heads the better. If it doubles due to Govt policy ((bldg regs, immigration, land restrictions etc) you still need to live somewhere, it doesnt mean you're suddenly wealthy. Unless you move to Gore perhaps. And if you have to move city for work and quarter of it disappears in CGT is it fair you can now only afford a smaller house in the next city because of factors you cant control?
Stamp and death duties are equally viable for discussion and might help with excessive wealth harbouring in the family home but generally hit all the same snags (trusts, exclusions, expensive ticket clippers etc).

Baa_Baa

12-07-2020, 04:59 PM

You’re already taxed on the family home capital gains, it’s called rates. Every time your home and property value increases, so does the tax... Er rates.

artemis

12-07-2020, 07:42 PM

You’re already taxed on the family home capital gains, it’s called rates. Every time your home and property value increases, so does the tax... Er rates.

That is also the case with other real estate - land, residential, commercial, farms, lifestyle blocks. Except that the main reason rates rise is that councils keep increasing rates above inflation. Otherwise, rate rises due to changes in value tend to be relative rather than absolute.

artemis

12-07-2020, 07:47 PM

And nor should it. A house is a place to live. Sooner we collectively get that into our heads the better. If it doubles due to Govt policy ((bldg regs, immigration, land restrictions etc) you still need to live somewhere, it doesnt mean you're suddenly wealthy. Unless you move to Gore perhaps. And if you have to move city for work and quarter of it disappears in CGT is it fair you can now only afford a smaller house in the next city because of factors you cant control? ....

Same applies to rentals - also people's homes. If the owner needs to sell then buy another, and can only afford a smaller rental after CGT, is that fair?

Bjauck

12-07-2020, 07:54 PM

You’re already taxed on the family home capital gains, it’s called rates. Every time your home and property value increases, so does the tax... Er rates. Rates are payments for council services - i.e. the beloved user pays. Landlords recover their rate expense through the rent that they charge their tenants. In Auckland there is a uniform general charge element to rates. That means part of the rate is the same whether the value is $500,000 or $5m. There can also be a targeted rate for amenities in the property’s neighbourhood.

We are talking about central government taxes. Not the payment for council services.

Bjauck

12-07-2020, 07:58 PM

And nor should it. A house is a place to live. Sooner we collectively get that into our heads the better. If it doubles due to Govt policy ((bldg regs, immigration, land restrictions etc) you still need to live somewhere, it doesnt mean you're suddenly wealthy. Unless you move to Gore perhaps. And if you have to move city for work and quarter of it disappears in CGT is it fair you can now only afford a smaller house in the next city because of factors you cant control?
Stamp and death duties are equally viable for discussion and might help with excessive wealth harbouring in the family home but generally hit all the same snags (trusts, exclusions, expensive ticket clippers etc).

Sure. People who own a business instead of a house, also need to somewhere to live. So why should an owner-occupied house be exempt from CGT and not those people’s businesses that may employ many other people too.

Baa_Baa

12-07-2020, 07:58 PM

That is also the case with other real estate - land, residential, commercial, farms, lifestyle blocks. Except that the main reason rates rise is that councils keep increasing rates above inflation. Otherwise, rate rises due to changes in value tend to be relative rather than absolute.

The only thing you’ll find when you dig deep into the process is that the rates tax is determined at local council level so there are differing approaches but the one thing common is a boffin with a spreadsheet that determines what your next tax rates rise will be and it’s directly correlated to QV. I contest every single rates rise and have every single one of them over turned by an on site valuation, always resulting in a lower valuation and a lower rates tax. Dig deep and you’ll find out how flawed the system really is. In any event it’s a tax on capital and increase in capital assessed, therefore it is a capital gains tax!

Bjauck

12-07-2020, 08:10 PM

Same applies to rentals - also people's homes. If the owner needs to sell then buy another, and can only afford a smaller rental after CGT, is that fair?
So do you think that the inflation element portion of term deposit interest should be tax free like the capital gains on real estate?

Likewise a certain level of income should be tax free just so that an individual can pay expenses to keep alive?

Baa_Baa

12-07-2020, 08:29 PM

Rates are payments for council services - i.e. the beloved user pays. Landlords recover their rate expense through the rent that they charge their tenants. In Auckland there is a uniform general charge element to rates. That means part of the rate is the same whether the value is $500,000 or $5m. There can also be a targeted rate for amenities in the property’s neighbourhood.

We are talking about central government taxes. Not the payment for council services.

BS they are taxes at a local government level, just like taxes for services at central government but obfuscated as rates, levies, contributions, there’s no difference for the tax payer. It’s all tax.

dibble

12-07-2020, 10:58 PM

Sure. People who own a business instead of a house, also need to somewhere to live. So why should an owner-occupied house be exempt from CGT and not those people’s businesses that may employ many other people too.

Im not suggesting a business ought be subject to CGT but for a start there are all sorts of tax breaks for a business (deductables, R&D credits when they are in vogue etc) that houses dont get during the lifetime and the whole point of a business is to make money so if CGT tax were implemented it seems a very different beast to a home which is, in the first instance, a place to live. One of the key elements of thingy's hierarchy of needs. Quite why you want to tax an owner occupied house for the sake of being a house, what it is you're trying to achieve, I cant see.

fungus pudding

12-07-2020, 11:03 PM

Bjauck

13-07-2020, 08:03 AM

Im not suggesting a business ought be subject to CGT but for a start there are all sorts of tax breaks for a business (deductables, R&D credits when they are in vogue etc) that houses dont get during the lifetime and the whole point of a business is to make money so if CGT tax were implemented it seems a very different beast to a home which is, in the first instance, a place to live. One of the key elements of thingy's hierarchy of needs. Quite why you want to tax an owner occupied house for the sake of being a house, what it is you're trying to achieve, I cant see. Al investments classes are for sustenance.

The point of owning a home is to provide a benefit (shelter) for which you would to pay rent out of taxed income if you did not own it.
The point of earning income is to enable you to pay for shelter.
The point of owning a business is to enable you to pay for shelter.
The point of owning shares is to enable you to pay for shelter.

For consistency, all or none should have their annual net benefit assessed for tax, and be included in any CGT.

SBQ

13-07-2020, 09:21 AM

For the last 2 pages i've read so far... the problems are easily solved. Just LOOK at how Australia, Canada, US, & UK treat taxes? Excesses of income should have more taxes levied. The wealthy holding excessive assets such as 3 or 20 houses need to pay more out of capital gain (not zero).

One of the most moronic excuses i've heard from an accountant was, he was in support of raising GST as to add more taxes. Of course he was a rich & wealthy accountant and had no regard on the working poor in how a consumption tax hits this group the hardest.

fungus pudding

13-07-2020, 09:45 AM

moka

13-07-2020, 10:05 PM

Al investments classes are for sustenance.

The point of owning a home is to provide a benefit (shelter) for which you would to pay rent out of taxed income if you did not own it.
The point of earning income is to enable you to pay for shelter.
The point of owning a business is to enable you to pay for shelter.
The point of owning shares is to enable you to pay for shelter.

For consistency, all or none should have their annual net benefit assessed for tax, and be included in any CGT.
I disagree that all investment classes are for sustenance. Sustenance is about basic needs or subsistence living and providing the necessities of life. Having a home is a basic need but owning a house is a luxury that many people cannot afford. For most people owning shares is to provide you with the luxuries of life, with wealth and savings. When people have enough money for a nice house they do not stop investing in shares or running their business so there are other reasons and motivations for investments.

Bjauck

14-07-2020, 07:10 AM

I disagree that all investment classes are for sustenance. Sustenance is about basic needs or subsistence living and providing the necessities of life. Having a home is a basic need but owning a house is a luxury that many people cannot afford. For most people owning shares is to provide you with the luxuries of life, with wealth and savings. When people have enough money for a nice house they do not stop investing in shares or running their business so there are other reasons and motivations for investments. There is more to sustenance than owner-occupied shelter. You still need food, clothing and medical care to sustain yourself and keep alive. For that you need a business, income, or income earning capital.

For the retired or for those that cannot work, share investments and fixed interest provide their income for sustenance. They are just as essential yet they would be treated differently for a CGT. There is no logic to that.

There are lots of palatial homes. The NZ tax and financial system with leveraged capital gains (and tax-free benefit of occupation) encourages over-capitalisation of the family home and property after all. They have moved far beyond providing the basic need for sustenance or shelter. I see no justification to treat them or any other owner-occupied housing differently from share investments/business investments for any CGT.

An increasing number of people cannot afford home ownership. Home ownership may also be inappropriate for some, whose businesses may mean they need to move around the country and World. They need their businesses to provide returns for all sustenance, shelter included. There is no economic or financial logic behind treating business or other investments differently from the equity in owner-occupied homeownership when it comes to any CGT. The reason is political.

Aaron

14-07-2020, 09:03 AM

Of course. All taxes do. Everything does.

Oh FP still haven't worked out that GST is a regressive tax. One day you might get it, but as they say no point banging my head against a brick wall.

Just coming on to post this article. I liked Stephen Tindall because after he became successful he has carried on investing and trying to make NZ a better place. Now he is signing a letter asking to be taxed to help out the country. here is a person deserving of the title sir.

https://www.stuff.co.nz/business/122122049/sir-stephen-tindall-among-83-millionaires-wanting-to-raise-taxes-for-the-wealthy

83 millionaires, globally I wonder what sort of percentage this is. I would guess relatively small.

blackcap

14-07-2020, 09:16 AM

Oh FP still haven't worked out that GST is a regressive tax. One day you might get it, but as they say no point banging my head against a brick wall.

Just coming on to post this article. I liked Stephen Tindall because after he became successful he has carried on investing and trying to make NZ a better place. Now he is signing a letter asking to be taxed to help out the country. here is a person deserving of the title sir.

https://www.stuff.co.nz/business/122122049/sir-stephen-tindall-among-83-millionaires-wanting-to-raise-taxes-for-the-wealthy

83 millionaires, globally I wonder what sort of percentage this is. I would guess relatively small.

What a virtue signalling idiot. If he wanted to contribute more to the tax take, there is nothing stopping him donating said amount. Just go ahead and do it Stephen, don't pontificate.

Panda-NZ-

14-07-2020, 09:17 AM

The same can be said for those self interested people who would like gst to rise because they dont pay it (property investors).

Sir stephen is being fair and reasonable I think given this unprecendented situaton and the need to raise tax revenue.

fungus pudding

14-07-2020, 09:29 AM

Oh FP still haven't worked out that GST is a regressive tax. One day you might get it, but as they say no point banging my head against a brick wall.

Just coming on to post this article. I liked Stephen Tindall because after he became successful he has carried on investing and trying to make NZ a better place. Now he is signing a letter asking to be taxed to help out the country. here is a person deserving of the title sir.

https://www.stuff.co.nz/business/122122049/sir-stephen-tindall-among-83-millionaires-wanting-to-raise-taxes-for-the-wealthy

83 millionaires, globally I wonder what sort of percentage this is. I would guess relatively small.

Of course it is. There are far more than that in the small city where I live.

Aaron

14-07-2020, 10:01 AM

What a virtue signalling idiot. If he wanted to contribute more to the tax take, there is nothing stopping him donating said amount. Just go ahead and do it Stephen, don't pontificate.

Speaking of idiotic statements. I wonder how much everyone on this site would donate to the govt coffers if it was optional.

Out of interest does anyone add an additional 5%-10% when paying their tax? (other than possibly blackcap)

fungus pudding

14-07-2020, 10:05 AM

Speaking of idiotic statements. I wonder how much everyone on this site would donate to the govt coffers if it was optional.

It is optional now. Give it a go.

Zaphod

14-07-2020, 01:37 PM

The same can be said for those self interested people who would like gst to rise because they dont pay it (property investors).

To clarify, property investors do pay GST. There are however a few situations where GST is zero rated on specific transactions for residential property. I get the point you're making though.

blackcap

14-07-2020, 02:07 PM

Speaking of idiotic statements. I wonder how much everyone on this site would donate to the govt coffers if it was optional.

Out of interest does anyone add an additional 5%-10% when paying their tax? (other than possibly blackcap)

It's not idiotic at all. If you feel that you want to contribute more because you can afford it, or because you earn too much, there is nothing stopping you at all.

Zaphod

14-07-2020, 02:21 PM

Speaking of idiotic statements. I wonder how much everyone on this site would donate to the govt coffers if it was optional.

Out of interest does anyone add an additional 5%-10% when paying their tax? (other than possibly blackcap)

We have given regular support to the local health board redevelopment project, donated infrastructure to the council parks division, etc. That's a much more efficient method than doing so via tax, but obviously Stephen prefers compulsion amongst his peers.

fungus pudding

14-07-2020, 04:28 PM

The same can be said for those self interested people who would like gst to rise because they dont pay it (property investors).

Where did you get that idea? Residential property is subject to GST, as is rent, and only in rare circumstances will a landlord be gst registered for their residential property activity Everyone pays GST on any personal purchase of goods and/or services. Those few who are registered for their residential activity will pay gst on the eventual sale price, and of course lose out on the rent - so hard to see an advantage. GST catches everybody.

moka

14-07-2020, 11:23 PM

An article about High Wealth Individuals and their associated entities which have increased 75% over five years, which is massively above inflation.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12252697&ref=art_readmore
(https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12252697&ref=art_readmore)
The number of super-rich earners on the New Zealand taxman's radar has skyrocketed in the past five years with 350 people now worth more than $50 million — some of whom are in a fight over more than $85 million in disputed tax.
The group - labelled High Wealth Individuals (HWI) by Inland Revenue - has soared 75 per cent since 2013, while the country's poorest residents continue to struggle.
Each HWI has, or controls, wealth in excess of $50 million. Their sources of income often include property development and investment.
Associated entities of the 350 super-rich individuals totalled 11,585.
Six years ago, in 2013, there were only 7009 HWIs and associated entities. In the 2014 tax year the disputed cost was $112.8m.
"You're seeing a real acceleration at the top end, whereas at the poorer end of New Zealand as best we can tell, the overall picture is either of growing debt or of stagnation."
To help resolve wealth inequality in New Zealand, Rashbrooke suggested implementing a wealth tax, which he acknowledged would ruffle feathers.

moka

14-07-2020, 11:31 PM

https://www.nzherald.co.nz/northern-advocate/news/article.cfm?c_id=1503450&objectid=12346101&ref=art_readmore
Vaughan Gunson asks who could possibly see the merit in wealthy New Zealanders paying a little more tax to help their compatriots out in a time of crisis?
That's the path to a more equitable and harmonious society.

Aaron

15-07-2020, 08:49 AM

We have given regular support to the local health board redevelopment project, donated infrastructure to the council parks division, etc. That's a much more efficient method than doing so via tax, but obviously Stephen prefers compulsion amongst his peers.
Point taken, I will vote for the party at the next election that proposes to scrap taxes and rely on individuals intelligence and generosity to donate to the most worthwhile things that affect them directly, indirectly and not at all.

Unfortunately though, I appreciate you are very generous and know how best to spend your money. I on the other hand hate paying tax and would be more inclined to keep what I earn rather than donating it, if I don't have to. Also I lack the intelligence or broad information required to know how best to donate my money to have the greatest impact/benefit to the country as a whole.

I also lack the time or inclination to put in the effort required to make your proposal feasible. Possibly I am alone in this regard but suspect there may be others like me and that you Zaphod are one of a very select few with the generosity and intelligence to make such a system work. Although from what I read on this thread there are a lot more people on here like you than I meet in everyday society.

Panda-NZ-

15-07-2020, 08:57 AM

Point taken, I will vote for the party at the next election that proposes to scrap taxes and rely on individuals intelligence and generosity to donate to the most worthwhile things that affect them directly, indirectly and not at all.

Unfortunately though, I appreciate you are very generous and know how best to spend your money. I on the other hand hate paying tax and would be more inclined to keep what I earn rather than donating it, if I don't have to. Also I lack the intelligence or broad information required to know how best to donate my money to have the greatest impact/benefit to the country as a whole.

I also lack the time or inclination to put in the effort required to make your proposal feasible. Possibly I am alone in this regard but suspect there may be others like me and that you Zaphod are one of a very select few with the generosity and intelligence to make such a system work. Although from what I read on this thread there are a lot more people on here like you than I meet in everyday society.

So there should be no opportunity given to those who lost their jobs for the health benefits of others?
I can't believe the mindset of some. Not to worry though you only need to convince 51% and what they would like to see becomes settled law :)

Aaron

15-07-2020, 09:13 AM

So there should be no opportunity given to those who lost their jobs for the health benefits of others?

I can't believe the mindset of some. Not to worry though you only need to convince 51% and what they would like to see becomes settled law :)

Perhaps sarcasm is not as easily picked up in the written form. But to spell it out I would suggest that taxation is not the destroyer of wealth and societies it is made out to be and I posted the article about Stephen Tindall because I thought it showed that there are some successful generous people out there who care for more than just themselves. This view was not shared by a couple of posters on this thread and blackcap suggested he is a "virtue signaling idiot" which I am not sure what it means but the idiot on the end would indicate it has a negative connotation.

Although I am pretty sure debt and/or printing money will be the preferred option for voters and their politicians over raising taxes on either side of the house.

Panda-NZ-

15-07-2020, 09:16 AM

oh right, thank goodness. Those views are not that worthy of a first world country.

Only two things in life are certain, death and taxes.
In some other forums placing a "/s" at the end shows sarcasm though not sure what the practice is on this one.

blackcap

15-07-2020, 09:23 AM

Perhaps sarcasm is not as easily picked up in the written form. But to spell it out I would suggest that taxation is not the destroyer of wealth and societies it is made out to be and I posted the article about Stephen Tindall because I thought it showed that there are some successful generous people out there who care for more than just themselves. This view was not shared by a couple of posters on this thread and blackcap suggested he is a "virtue signaling idiot" which I am not sure what it means but the idiot on the end would indicate it has a negative connotation.

Although I am pretty sure debt and/or printing money will be the preferred option for voters and their politicians over raising taxes on either side of the house.

The reason I called Tindall a virtue signalling idiot is that is exactly what he is with his call. He is trying to be virtuous without actually taking any action himself. It would reflect a lot better on him if he actually paid more to the tax coffers and shut up about it. He is trying to look virtuous to others without actually being virtuous. Just like the politicians with their intent to take a pay cut during the Wuflu lockups, but in the end how many actually took a pay cut? Again, more virtue signalling. It seems to be a disease that afflicts the left proportionally in larger numbers. (in my humble experience)

Aaron

15-07-2020, 09:28 AM

The reason I called Tindall a virtue signalling idiot is that is exactly what he is with his call. He is trying to be virtuous without actually taking any action himself. It would reflect a lot better on him if he actually paid more to the tax coffers and shut up about it. He is trying to look virtuous to others without actually being virtuous. Just like the politicians with their intent to take a pay cut during the Wuflu lockups, but in the end how many actually took a pay cut? Again, more virtue signalling. It seems to be a disease that afflicts the left proportionally in larger numbers. (in my humble experience)

I would be concerned if Stephen Tindall an unelected representative had any control over the tax system. Possibly he is trying to sway public opinion and therefore politicians in regard to raising taxes on the wealthy. To me it means more coming from some one wealthy rather than some one looking for a hand out. I suspect you would be critical of any person who raises the possibility of a tax increase.

Bjauck

15-07-2020, 09:29 AM

Perhaps sarcasm is not as easily picked up in the written form. ... It was masterful sarcasm. I read it with the voice of John Cleese!

Sarcasm or not? John Cleese..
https://www.youtube.com/watch?v=Ecc1XVhZkUA

blackcap

15-07-2020, 09:31 AM

I would be concerned if Stephen Tindall an unelected representative had any control over the tax system. Possibly he is trying to sway public opinion and therefore politicians in regard to raising taxes on the wealthy. To me it means more coming from some one wealthy rather than some one looking for a hand out.

Possibly he is and possibly he is trying to look like a decent man, caring for society that he is willing to be taxed more. (lets not forget the rubbish he imported from China into NZ with his red sheds and that damage that that caused) Maybe he is wanting the tax rates to go up, however he and the other millionaires are quite happy to pay their accountants and advisors to minimise their tax burden anyway. He looks good (calling for higher tax) but in practice pays no more. He should just shut up, and pay the money to the tax coffers. Or even better donate to his local community and bypass bureaucracy and other money wasting pen pushers.

blackcap

15-07-2020, 09:33 AM

Perhaps sarcasm is not as easily picked up in the written form. .

The sarcasm was picked up real easy. Was very well written. So that you did not need to put an /s or whatever after your post. It was literally dripping! :)

Panda-NZ-

15-07-2020, 10:12 AM

Possibly he is and possibly he is trying to look like a decent man, caring for society that he is willing to be taxed more. (lets not forget the rubbish he imported from China into NZ with his red sheds and that damage that that caused)

It's called the free market, something you support or not hard to tell?
Disappointed in the sort of stuff the opposition want with Tiwai.. only Lab it seems can be relied on to uphold market principles.

Zaphod

15-07-2020, 10:18 AM

Point taken, I will vote for the party at the next election that proposes to scrap taxes and rely on individuals intelligence and generosity to donate to the most worthwhile things that affect them directly, indirectly and not at all.

Unfortunately though, I appreciate you are very generous and know how best to spend your money. I on the other hand hate paying tax and would be more inclined to keep what I earn rather than donating it, if I don't have to. Also I lack the intelligence or broad information required to know how best to donate my money to have the greatest impact/benefit to the country as a whole.

I also lack the time or inclination to put in the effort required to make your proposal feasible. Possibly I am alone in this regard but suspect there may be others like me and that you Zaphod are one of a very select few with the generosity and intelligence to make such a system work. Although from what I read on this thread there are a lot more people on here like you than I meet in everyday society.

Your ad hominem attack would be much more effective if you actually used points that I had raised, rather than fabricating your own. For example, can you cite where I stated, or even implied, that taxes should be scraped?

Aaron

15-07-2020, 10:33 AM

Your ad hominem attack would be much more effective if you actually used points that I had raised, rather than fabricating your own. For example, can you cite where I stated that taxes should be scraped?
I am sorry you see my posts as attacks on you personally. Although I hate paying tax I do see it as a necessary evil. So my posts were meant to be promoting my view rather than attacking you.

Your right you don't state that taxes should be scrapped I have obviously inferred too much from your statement which I have copied and pasted below.

"We have given regular support to the local health board redevelopment project, donated infrastructure to the council parks division, etc. That's a much more efficient method than doing so via tax, but obviously Stephen prefers compulsion amongst his peers."

I obviously mistook "That's a much more efficient method than doing so via tax" as meaning private individuals donating for public services was a more efficient method of paying for public services rather than taxation. The inference I took was that scraping taxes and relying on individual generosity was a better way forward. Was I the only one to make this inference based on Zaphod's post on this site??

I swore off the political threads a couple of years ago, rather than upset people perhaps I should stick to that.

Aaron

15-07-2020, 11:10 AM

P.s and in no way should my arguments detract from your donations to your local community. It is a wonderful thing and you should be proud and I write this without any sarcasm at all.

Zaphod

15-07-2020, 11:56 AM

The context was that Stephen advocates for the wealthy to pay more tax to solve the various issues he sees in our society, but there are other ways to more effectively contribute to additional causes that he believes in.

I don’t begrudge paying tax, and I would hope that the majority of people do not, but the difficult part is always determining the level of taxation and what should be funded from it. Much of this is very subjective and invariably used for political gain during election years.

Stephen advocates for the wealthy to pay more tax to adequately fund various government services, but provides no details as to what he sees are the specific areas that are inadequately funded, nor why spending more money in these areas is the best method of rectifying the problem. Based on this alone we can’t decide whether his initiative is worthy of support.

We personally donated to specific initiatives such as a hospital refurbishment, trees & benches for a park because we saw a worthy cause that wasn’t being adequately fulfilled, in our opinion, based on existing spending from taxes. We are not in the top few percentage points of wealthy people in NZ either.

There also needs to be a much clearer definition of who is wealthy. Our PAYE system decrees that those who earn over $70K are wealthy, which places a proportion of those whom we believe are underpaid into the top (wealthy) bracket. With raging house prices, many people on modest incomes will be dragged into the top 5%, who would not be able to afford additional taxes without some significant compromises to their lifestyles.

IMO the situation and solution is complicated and deserves thorough analysis.

Don’t shy away from to continuing to post. It’s easy to misconstrue intent particularly on a long thread.

Panda-NZ-

15-07-2020, 12:06 PM

To pay off debt, support modern infrastructure and maintain super at 65 among other worthy and important goals.

Our PAYE system decrees that those who earn over $70K are wealthy, which places a proportion of those whom we believe are underpaid into the top (wealthy) bracket.

That's not this govt's legacy though. The previous admin were in for nine years and did nothing about this theshold. The top 5% mostly pay nothing for the most part. what you're talking about are wage earners who are (rapidly) dwindling in their importance to the economy.

It may be time to update and modernise your way of thinking about things :)

Zaphod

15-07-2020, 01:06 PM

To pay off debt, support modern infrastructure and maintain super at 65 among other worthy and important goals.

Debt will be a significant issue post COVID-19.

What modern infrastructure isn't being supported currently? Why isn't it being supported? What are the adequate levels of support?

Should we maintain super at 65? Many other countries have raised the age required to qualify for superannuation in line with increasing lifespans due to overall higher levels of health in the community. Cullen himself penned a paper proposing that national super should only top up income derived from an annuity purchased using Kiwisaver funds, so perhaps that's the solution to maintain super?

Claiming these are worthy and important goals is highly subjective.

That's not this govt's legacy though. The previous admin were in for nine years and did nothing about this theshold. The top 5% mostly pay nothing for the most part. what you're talking about are wage earners who are (rapidly) dwindling in their importance to the economy.

It may be time to update and modernise your way of thinking about things :)

Raising wages while not increasing the income thresholds is most certainly is a legacy of this government, as well as many predecessors.

Panda-NZ-

15-07-2020, 01:13 PM

Debt will be a significant issue post COVID-19.

Not really, lowest in the world and owned by the RBNZ at 1%.

What modern infrastructure isn't being supported currently? Why isn't it being supported? What are the adequate levels of support?

The infrastructure commission will have some recommendations although the govt is delivering alot of announcements recently. I like the approach of making it more region-based than it was in the past. My personal hope is a country wide freight network through Kiwirail. This will reduce the enormous damage trucks do to roads (so less spent on resurfacing and maintenance) and stop the importation of feul and new models of trucks.

Should we maintain super at 65? Many other countries have raised the age required to qualify for superannuation in line with increasing lifespans due to overall higher levels of health in the community. Cullen himself penned a paper proposing that national super should only top up income derived from an annuity purchased using Kiwisaver funds, so perhaps that's the solution to maintain super?

It can be if we re-fund the NZ super fund and lift Kiwisaver, two epic mistakes by the last government. Though they don't believe in red tape and that it will impose a burden to some businesses so it wasn't done sadly.

fungus pudding

15-07-2020, 01:20 PM

To pay off debt, support modern infrastructure and maintain super at 65 among other worthy and important goals.

That's not this govt's legacy though. The previous admin were in for nine years and did nothing about this theshold. The top 5% mostly pay nothing for the most part. what you're talking about are wage earners who are (rapidly) dwindling in their importance to the economy.

You sure have some strange ideas. Here is the real picture from NBR

"As a result, the rich shoulder a disproportionate burden of tax. The top 3% of all households (above $250,000 a year) pay a quarter of all income tax. The top 10% (above $175,000) pay 50%. The bottom 60% (less than $80,000) pay $6 billion in tax but receive $7 billion in handouts such as Working for Families. They are net tax recipients. In total, they suck in a billion dollars.

Meanwhile, the top 10% of households pay more than $11 billion in tax. They suck in nothing."

Panda-NZ-

15-07-2020, 01:21 PM

Capital gains is not counted as income in NZ.

Zaphod

15-07-2020, 01:27 PM

Not really, lowest in the world and owned by the RBNZ at 1%.

Interest rates are unlikely to stay at 1% until the debt is paid off though. Having relatively low debt compared to other countries, albeit only at this stage, does not offer comfort to tax payers who must still repay it. Debit is still a problem according to treasury forecasts.

The infrastructure commision will have some recommendations although the govt is delivering alot of announcements recently.

Do the government announcements correlate with what the infrastructure commission recommendations? Can these be funded adequately through existing taxation? Or are you proposing we just throw more money at it?

It can be if we re-fund NZ super and lift kiwisaver, two epic mistakes by the last government. Though they don't believe in red tape and that it will impose a burden to some businesses so it wasn't done.

Yes I think that if we had not funded the CHCH rebuild, we could have started recontributing to the NZ Super fund, or perhaps there was another way?

Panda-NZ-

15-07-2020, 01:35 PM

Interest rates are unlikely to stay at 1% until the debt is paid off though. Having relatively low debt compared to other countries, albeit only at this stage, does not offer comfort to tax payers who must still repay it. Debit is still a problem according to treasury forecasts.

What do you mean since the interest is fixed for 10-30 years when the govt issues a bond.
after-inflation the interest is 0% ..

Do the government announcements correlate with what the infrastructure commission recommendations? Can these be funded adequately through existing taxation? Or are you proposing we just throw more money at it?

All of the above. the response should be adapted to the conditions we are in... which it has been for the most part.
Look around the world and we are in great shape. :)

fungus pudding

15-07-2020, 01:43 PM

Capital gains is not counted as income in NZ.

It certainly is when it is income, although not when it is not income. The IRD will tell you the difference because I can't be bothered - or any accountant will explain it to you. And capital gains is a plural term. Therefore 'Capital gains are ...' is correct. 'Capital gains is ...' is not. Any educated person could explain that to you, but note that does not include school teachers.

Bjauck

15-07-2020, 06:15 PM

It certainly is when it is income, although not when it is not income. The IRD will tell you the difference because I can't be bothered...
...and sometimes even unrealised capital gains can be taxed as income too.

moka

15-07-2020, 07:48 PM

You sure have some strange ideas. Here is the real picture from NBR

"As a result, the rich shoulder a disproportionate burden of tax. The top 3% of all households (above $250,000 a year) pay a quarter of all income tax. The top 10% (above $175,000) pay 50%. The bottom 60% (less than $80,000) pay $6 billion in tax but receive $7 billion in handouts such as Working for Families. They are net tax recipients. In total, they suck in a billion dollars.

Meanwhile, the top 10% of households pay more than $11 billion in tax. They suck in nothing."
So really most businesses are getting a government subsidy because they are not paying their employees enough to cover their expenses such as raising their children without extra financial help from the government. If it was really a free market we would have a population that is less healthy and less educated and with other social problems. Raising children is reproducing human capital which business expects to have without contributing to the financial cost, someone else bears the cost.

artemis

16-07-2020, 06:21 AM

So really most businesses are getting a government subsidy because they are not paying their employees enough to cover their expenses such as raising their children without extra financial help from the government. If it was really a free market we would have a population that is less healthy and less educated and with other social problems. Raising children is reproducing human capital which business expects to have without contributing to the financial cost, someone else bears the cost.

What say employers are paying employees what they are actually worth. Plenty of employees are low skilled and that skill level might be because of their own choices. We are starting to see a serious wave of layoffs and the low skilled are going to be first out. And double that if employers are forced to pay more than the return they get.

Raising children is only one way to ensure future employees. Immigration, upskilling, automation ...

Zaphod

16-07-2020, 08:15 AM

What do you mean since the interest is fixed for 10-30 years when the govt issues a bond.
after-inflation the interest is 0% ..

Inflation and price rises effect bonds, particularly when this impacts the wider economy. What source did you use for the 1% inflation figure? Are you also claiming that the effective interest rate will be zero for the term of the bond, or is this just a momentary blip in interest rates?

All of the above. the response should be adapted to the conditions we are in... which it has been for the most part.
Look around the world and we are in great shape. :)

Thanks to prudent fiscal management of two successive governments. The real test will be how we emerge economically from this event, especially with major turmoil with exporters (also due to geopolitical factors) and the tourism & foreign education sectors effectively shut down.

Bjauck

19-07-2020, 08:47 AM

What say employers are paying employees what they are actually worth. Plenty of employees are low skilled and that skill level might be because of their own choices. "Might be" being a very relevant point. The children of those with stable high paid employment, capital gains from assets, and inherited wealth opening up more options in getting a hand up in realising their potential and acquiring those skills of course.

kiora

23-07-2020, 07:10 PM

When are we to learn what we are in for?
"(i) tell people who lost their jobs that it was their bad luck to be working in the wrong sectors, and that they should borrow to get through the emergency until they could find employment in some other sector, or with their original employers if the jobs were still there when the emergency passed.

(ii) increase taxes by large amounts immediately on those who remain in employment (and those in receipt of capital income) in order to provide transfer payments to those unemployed or those whose businesses had suffered;

(iii) borrow from those most able to lend, to reduce the costs of option (ii), to be repaid by future taxes;

(iv) create money to provide the transfers."
https://www.interest.co.nz/opinion/106196/andrew-coleman-looks-options-facing-government-funding-covid-related-public-debt

moka

01-08-2020, 12:11 AM

What say employers are paying employees what they are actually worth. Plenty of employees are low skilled and that skill level might be because of their own choices.
It should apply to the well paid too. CEOs paid well but not always competent. Certain sectors such as finance and insurance are well paid because of the sector, not necessarily the skill level. The wage gap between the low and high paid not does reflect actual skills.

moka

01-08-2020, 12:13 AM

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12352640
Forget a capital gains tax – what New Zealand needs is a tax on inherited wealth.
New Zealand first taxed inter-generational capital transfers in 1866. However, the rate of estate duty was reduced to zero in 1993 and gift duty was scrapped in 2011.
The tax working group, established by the Labour-led government after the 2017 election, specifically excluded an inheritance tax. While there were good theoretical reasons for such a tax, group member Geof Nightingale said, it "breaks down at the politics".
Inheritance taxes are intensely disliked, so if you haven't got one it's very hard to put one in.

Baby boomers, the wealthiest generation that has ever lived, will increasingly start dying during the 2020s.
Tax policymakers cannot ignore the opportunity – arguably the moral imperative – of taxing and redistributing those transfers.

First, the application of tax needs to shift from the deceased to the living. In other words, we need to focus on the recipient of the wealth transfer. Ireland's capital acquisitions tax (CAT) applies a flat rate of 33% to accumulated gifts and inheritances over the relevant threshold.
Unlike a CGT, which can be perceived as penalising business owners, a CAT targets unearned windfalls from an accident of birth. This should make a CAT more politically acceptable than a CGT.

Second, the younger generations most critical of baby boomers' "unfair" acquisition of wealth (Gen X and millennials) must accept that taxing this unprecedented transfer of wealth will promote both inter- and intra-generational fairness.
If we don't tax and redistribute these transfers, wealth inequalities will be exacerbated and entrenched among future generations.

And finally, arguments in favour of a more equitable system have to overcome the rhetoric of "death taxes". As far back as the 1960s, Canada's Royal Commission on Taxation did this by popularising the idea that "a buck is a buck", no matter how it is earned.
In other words, if you have the money you can pay tax, whether that money comes from labour, investment or inheritance.

fungus pudding

01-08-2020, 08:40 AM

It should apply to the well paid too. CEOs paid well but not always competent. Certain sectors such as finance and insurance are well paid because of the sector, not necessarily the skill level. The wage gap between the low and high paid not does reflect actual skills.

Of course not. As one example, there are plenty of low skill workers who are overpaid because of minimum wage laws.

Bjauck

01-08-2020, 10:08 AM

Of course not. As one example, there are plenty of low skill workers who are overpaid because of minimum wage laws.
I agree. Just a slightly more skilled worker could end up saving a lot in costs or boosting revenue by more than their current extra employment cost . Similarly a slightly better CEO could make a material impact in profitability, especially in large organisations.

However a boost to the minimum wage rates and social welfare benefits help create a high consumption market for various products and services - which could boost business revenue by at least the amount of the extra payments . In addition a more “egalitarian” society with equal opportunities to achieve potentials could help create a more socially peaceful society less prone to social unrest and revolution. That is good for wealth creation and retention?

As long as a majority of politically engaged people think they will or could benefit from untaxed inherited wealth and capital gains, then leaving these gains untaxed but taxing gains from what is currently classed as “assessable income” will continue to be deemed a “fair” way to raise tax.

mfd

01-08-2020, 10:16 AM

fungus pudding

01-08-2020, 10:57 AM

I'd love to see an inheritance tax in NZ - there's no time I'd rather pay my tax than after I'm dead. A society where each generation stands on its own two feet a little more should be an improvement - it obviously won't do anything about the better schooling and connections of the well-off but it gives those less lucky in birth a bit of a fighting chance. Ideally I'd pitch it higher than 33% as this money is truly unearned and receiving it is correlated with the other benefits I've mentioned, but I guess that's a good starting point.

Sorry to disappoint, but I can assure you, you will not inherit one cent after you are dead.

mfd

01-08-2020, 11:34 AM

Sorry to disappoint, but I can assure you, you will not inherit one cent after you are dead.

I guess there's different ways of thinking about it. To my mind, if I inherit money I've not earned it in any way, so to complain about paying tax on it would seem strange. As the person leaving an inheritance, I'd much prefer that tax is taken from my estate after I'm dead rather than chasing me for it when I'm alive.

westerly

01-08-2020, 11:42 AM

Of course not. As one example, there are plenty of low skill workers who are overpaid because of minimum wage laws.

Low skilled workers get what is offered. Unlike those in the professions they cannot set their own wages.
Lawyers, surgeons, company directors and others in public office etc seem to set their recompense for
their efforts on whatever they think the market will bear without too much protest.
The essential workers during the lockdown were mostly in the lower paid positions.

westerly

fungus pudding

01-08-2020, 11:46 AM

westerly

01-08-2020, 01:22 PM

Yes. I think everyone over the age of three already knew that.

I would say 12 which appears to be about your age

westerly

fungus pudding

01-08-2020, 01:25 PM

I would say 12 which appears to be about your age

westerly

I wouldn't argue. So let's agree that everyone over the age of 12 already knew that.

tim23

02-08-2020, 06:14 PM

Of course not. As one example, there are plenty of low skill workers who are overpaid because of minimum wage laws.

How charming - those wealthy souls earning $18.90 per hour!

fungus pudding

02-08-2020, 06:29 PM

How charming - those wealthy souls earning $18.90 per hour!

No problem if they are worth that. Some aren't.

blackcap

02-08-2020, 06:36 PM

Low skilled workers get what is offered. Unlike those in the professions they cannot set their own wages.
Lawyers, surgeons, company directors and others in public office etc seem to set their recompense for
their efforts on whatever they think the market will bear without too much protest.
The essential workers during the lockdown were mostly in the lower paid positions.

westerly

Exactly, what the market will bear with too much protest. That also applies to low skilled workers. Wonder why that is? Lawyers, surgeons can only set their recompense at what society/market thinks they are worth. Same applies to other occupations thus the same rules apply to all.
FP is correct in that there are those that are overpaid due to the artificial barrier to free markets and price discovery that the minimum wage provides.

dibble

02-08-2020, 08:33 PM

... Lawyers, surgeons can only set their recompense at what society/market thinks they are worth. Same applies to other occupations thus the same rules apply to all.
FP is correct in that there are those that are overpaid due to the artificial barrier to free markets and price discovery that the minimum wage provides.

Ha, classic. You believe that tosh? That might apply in a mythical "perfect" market. Market/society has no idea what lawyers/dentists etc are worth, as lawyers/dentists etc well know and strive to maintain. Much like houses. Their fees go up CPI+ 5% each year, they sit back and as long as some weird breakout doesnt rock the boat they all prosper. Occasionally some rascal will increase fees 20% and a new low will be set. They know we are too stupid to query it. We moan a bit then book an appointment. The professions with the strongest lobby groups ensure nothing too crazy happens to them.
Overpayment/underpayment? Its largely guesswork. Non market forces are many.

moka

02-08-2020, 09:40 PM

https://www.abc.net.au/news/2016-11-25/inheritance-tax-combining-the-two-certainties-of-life/8058578
Inheritance taxes efficient, but unpopular
Inheritance taxes are incredibly efficient on economic grounds.
After all, you can't really change your behaviour to avoid them. We're all going to die one day.
This is surely one of the biggest frustrations for economists — for some reason, the 'best' taxes also seem to be some of the most unpopular ones.

People grudgingly accept income tax and stamp duty, which are 'bad' taxes.
They discourage people from doing positive things, like working more or moving to a more suitable home.
There is one big flaw in inheritance taxes, aside from being deeply unpopular, however.
Experience shows that many people manage their affairs to minimise the inheritance tax they have to pay.
For instance, they might set up a family trust during their lifetime to avoid some of the tax bill.
These problems are not insurmountable, after all there's plenty of historical experience in Australia and current lessons from overseas about how governments can minimise this avoidance.

However, the combination of avoidance and various exemptions (such as high thresholds) used to minimise popular backlash against death duties mean they raise relatively little revenue.
Belgium raises the largest proportion of its taxes from the dead but, even there, the OECD found estate taxes make up just 1.6 per cent of total tax revenue.

So are death duties worthwhile if they raise so little?
The answer is yes if they prove to be an effective tool to redistribute some of the accumulated assets of the wealthy to those born without a silver spoon anywhere near their mouths.
Certainly, renowned economist and author of a best-selling analysis of wealth and income inequality, Professor Thomas Piketty, thinks estate taxes have a significant role to play.
"If you have labour income of $50,000 or $100,000 you are going to pay a lot of tax, but if you receive $1 million or $2 million in property from your family the tax rate will be zero per cent — there is no inheritance tax — which is very small as a tax rate."

Bjauck

04-08-2020, 12:08 PM

https://www.abc.net.au/news/2016-11-25/inheritance-tax-combining-the-two-certainties-of-life/8058578
Inheritance taxes efficient, but unpopular
Inheritance taxes are incredibly efficient on economic grounds...

How would inheritance taxes apply in NZ? Family trusts are very popular in NZ. The wealthy in NZ have to a great extent settled their wealth into discretionary family trusts. In NZ to include inherited wealth in the tax net, you would need to introduce death duties together with some sort of a capital transfer tax.

Another way to tax inheritances in NZ could be to treat trust assets in a trust, in which the settlor retained a beneficial interest in the assets in the trust as a discretionary beneficiary, as forming part of the settlor's estate upon their death. The trust assets would then be taxed at the marginal estate duty rate applicable to the deceased estate.

artemis

04-08-2020, 01:10 PM

Thomas Piketty and his data are not the best to rely on when formulating policy or even opinions.

In any case although there might not be death duties etc here atm, those who inherit assets are required to pay tax on any income from them. So swapping labour for capital as an income source. Just like working at the office for $50k, but without the working.

dibble

04-08-2020, 03:06 PM

How would inheritance taxes apply in NZ? Family trusts are very popular in NZ. The wealthy in NZ have to a great extent settled their wealth into discretionary family trusts. In NZ to include inherited wealth in the tax net, you would need to introduce death duties together with some sort of a capital transfer tax.

Another way to tax inheritances in NZ could be to treat trust assets in a trust, in which the settlor retained a beneficial interest in the assets in the trust as a discretionary beneficiary, as forming part of the settlor's estate upon their death. The trust assets would then be taxed at the marginal estate duty rate applicable to the deceased estate.

Wouldnt be that difficult, thats the way it used to be (gift and estate duties in tandem) until not so long ago. then just need to discourage trusts as a tax dodge e.g. with tax rates, put estate duty on people, then wealth duty and/or higher income tax on trusts. Once the disincentive goes they generally stop being much use. Not sure if there is s genuine reason for trusts anyway, if it is to ring fence assets against creditors then presumably you've done something wrong. If one has a valid reason then the extra tax becomes the price one would have to pay for that insurance. Or some such thing.

SBQ

04-08-2020, 04:05 PM

fish

04-08-2020, 04:46 PM

Death duties can be very unfair and may not be good for Nz.
For instance they may force the sale of a family farm that a son has spent all his life contributing to but his father has wanted to hold on to.
Nz is a country made up of small business paying taxes and contributing-they maybe forced to sell it in order to pay death duties.
The rich will find ways to avoid.
The old will be encouraged to gift their assets to family before death-hence no luxury in resthomes
It is a form of double taxation for most cases that will be hit and why should this be so?

Bjauck

04-08-2020, 05:01 PM

…
The rich will find ways to avoid.
The old will be encouraged to gift their assets to family before death-hence no luxury in resthomes
It is a form of double taxation for most cases that will be hit and why should this be so? True, it will be the moderately well-off who will end shouldering the burden. The seriously rich will have the well-paid advisers to find the loopholes.

There are lots of instances of double , treble and more taxation. The government clips the ticket when income is earned, then when it is spent. Then when it earns income from investments made from tax paid income etc.

Except in certain specific cases such as inter-spousal inheritances and your example of the son not receiving a market place salary for working on his father’s farm, from an inheritor’s point of view, receiving a legacy is an untaxed windfall gain.

Zaphod

04-08-2020, 05:52 PM

Correct me if i'm wrong but aren't NZ Trusts taxed at 33%? Any income they derive would be taxed at that rate? Also being a trust, and like a company, they lose the benefit of tax free capital gain vs an individual owning a principal resident home?

Most places have some form of CGT and likewise, estate or death tax. Why should NZ be excluded? FYI, the US has death / estate tax which the threshold is set at a whopping $10.5M and higher. Nothing wrong with that but I think NZ needs to be careful on the level of taxation as more and more will continue to leave - find ways ways to move wealth abroad.

Yes you're correct. Trusts are still subject to tax and they're not really a viable entity to use as a tax dodge as others have suggested. IRD gets their share one way or another.

What they have traditionally provided, is a method to shield family assets. This has slowly been chipped away by the courts, along with many other advantages.

dibble

04-08-2020, 08:34 PM

Yes you're correct. Trusts are still subject to tax and they're not really a viable entity to use as a tax dodge as others have suggested. IRD gets their share one way or another.

What they have traditionally provided, is a method to shield family assets. This has slowly been chipped away by the courts, along with many other advantages.

The point was regarding estate duty, the old tax dodge was to set up a trust which lives longer than the parents thereby avoiding estate duty when they meet their demise. Another was (before it was closed down) a way of removing assets from means testing regarding aged care subsidies. Tax dodge/careful planning, call it what you like.
And to the question about the farm being built up and handed down, no different from building up a panel beater shop or just building up a nest-egg for your kids' education or whatever, not sure farmers should get a specific tax break. Some bigger question than just farmers to be addressed.

Aaron

18-08-2020, 03:15 PM

The reason I called Tindall a virtue signalling idiot is that is exactly what he is with his call. He is trying to be virtuous without actually taking any action himself. It would reflect a lot better on him if he actually paid more to the tax coffers and shut up about it. He is trying to look virtuous to others without actually being virtuous. Just like the politicians with their intent to take a pay cut during the Wuflu lockups, but in the end how many actually took a pay cut? Again, more virtue signalling. It seems to be a disease that afflicts the left proportionally in larger numbers. (in my humble experience)

I noticed this and thought of you Blackcap.
Obviously Stephen Tindall doesn't know how to properly virtue signal as it looks like he is actually giving away quite a lot (about $10million a year). What a virtue signaling w*nk*r.
Maybe you should contact him to point out what an idiot he is making of himself by asking for the wealthy to contribute more to society.

https://tindall.org.nz/who-we-are/

moka

02-09-2020, 10:20 PM

Bjauck

02-09-2020, 11:20 PM

https://www.theguardian.com/world/2020/aug/31/new-zealands-astounding-wealth-gap-challenges-our-fair-go-identity

New Zealand's astounding wealth gap challenges our 'fair go' identity
New data shows the richest 1% are worth 68 times more than a typical New Zealander.
The extent of wealth inequality in supposedly egalitarian New Zealand has been laid bare by figures showing the wealthiest individuals have over NZ$140bn (US$93bn) stashed away in trusts – and overall have nearly 70 times more assets than the typical Kiwi.
The wealth inequality data, developed in conjunction with Statistics New Zealand researchers, also show that the 1% have an average (mean) of $3.6m held in trusts, $1.6m in shares and $470,000 in cash. Their debts are on average just $80,000.
Overall, the wealthiest 10% have 59% of all the country’s assets, and the middle classes around 39%. That leaves the poorest half of the country with just 2%.
Wealth understandably tends to increase with age with the 55-65 age group being the most wealthy. With NZ houses becoming so expensive, the disparity in wealth from young to older has no doubt increased over the years. I also think it would be meaningful to gauge wealth inequality within age groups. That perhaps would be more significant marker of the growth in inequality in NZ.

Also, It would be interesting to know what percentage of wealth the top 0.1% has. I suspect that the top 1% figures will be slewed by the mega wealthy 0.1%

artemis

03-09-2020, 05:37 AM

Critics of Oxfam's global wealth reports, and there are many critics, have pointed out that the bottom global wealth group includes US students close to graduating from the ivy league colleges.

BlackPeter

03-09-2020, 08:33 AM

Critics of Oxfam's global wealth reports, and there are many critics, have pointed out that the bottom global wealth group includes US students close to graduating from the ivy league colleges.

Even if this may be technically correct for some of them, the number would not be material as proportion of the other 4b people who belong to the "have nothing's" ...

Inequality is one of our largest problems and it is rising ...

artemis

03-09-2020, 08:55 AM

Even if this may be technically correct for some of them, the number would not be material as proportion of the other 4b people who belong to the "have nothing's" ...

Inequality is one of our largest problems and it is rising ...

Point is that debt is common enough but not taken into account. And the trouble with inequality is that is usually means inequality of outcome, a position barely relevant in New Zealand where opportunities are everywhere for most households. Does require opportunities to be chosen though.

Aaron

03-09-2020, 08:57 AM

Even if this may be technically correct for some of them, the number would not be material as proportion of the other 4b people who belong to the "have nothing's" ...

Inequality is one of our largest problems and it is rising ...

Nothing being proposed from any party to reverse the rising inequality.

2011 I started this thread by suggesting I would vote for whoever proposes a capital gains tax. Obviously too hard to bring it in and stay in power. Much like Nationals superannuation surcharge, they bring in something sensible but the average bludging NZer has his/her hand out and is happy to sell their vote to the most generous party.

This election I will promise to vote for whichever party promises to scrap targeted inflation. Politically easy to do as people don't seem to care about such things. I will say, not if it is the Advance NZ Party they seem a bit fruity.

James Shaw has shown his true colours by insisting our tax dollars go to a private school. It said "green" so I guess his ideology overrode common sense as well as his own parties policy against privatising education. I would want to know his relationship to the people involved as well. Any hint of corruption and he should go. So far it only looks like stupidity any school that is planting crystals to improve fifth dimensional consciousness is one taxpayers should not be funding ever.

In my not so humble opinion.

P.s. Blackcap have you talked to Stephen Tindall yet?

artemis

03-09-2020, 09:10 AM

Nothing being proposed from any party to reverse the rising inequality. .....

What about the social investment approach, partly implemented by the previous government. It is / was structured to improve opportunities and thus outcomes by careful targeting of support rather than scattergun funding.

Check out the Young Parent Payment, implemented and actually expanded under the last government, and I hear anecdotally (from a couple of MSD staffers) now less resourced and ticking over at best currently. And check out the policy to remove school decile funding and target support for pupils identified by schools as meeting risk profiles.

Bjauck

03-09-2020, 09:51 AM

Nothing being proposed from any party to reverse the rising inequality.
.. NZ used to be regarded by migrants as a great place for raising kids.. However now we are ranked 34/41 for chid wellbeing in the OECD. Perhaps not a concern for some wealthy STers, who maybe have the wealth for a Bach/Crib beside the sea and access to private healthcare and education. Growing wealth inequality, Poverty, education quality and health outcomes all help NZ achieve this disappointing situation today.

https://www.stuff.co.nz/national/93583589/unicef-report-wellbeing-of-kiwi-kids-languishes-behind-other-developed-countries

Aaron

03-09-2020, 09:52 AM

What about the social investment approach, partly implemented by the previous government. It is / was structured to improve opportunities and thus outcomes by careful targeting of support rather than scattergun funding.

Check out the Young Parent Payment, implemented and actually expanded under the last government, and I hear anecdotally (from a couple of MSD staffers) now less resourced and ticking over at best currently. And check out the policy to remove school decile funding and target support for pupils identified by schools as meeting risk profiles.

They sound more like policies addressing the symptoms rather than addressing the main issue to me. Rising wealth inequality is not a bad thing per se, hard working people making good choices should be rewarded but having central banks push up house prices 7% a year (compounding) over the last 20 years feels good but doesn't seem sustainable to me now we are finally at 0% interest rates. Demand from excessive immigration will also be contributing but 20 years ago the 90day bank bill rate was 6% now it is .3%. Targeted inflation has driven up asset prices while exporting jobs to asia has meant a drop in the price of manufactured goods has disguised the effect. Trickle down economics is bulls**it. Surprised so called left leaning parties aren't addressing this. The more dopey this gets (e.g. Adrian Orr discussing negative interest rates) the more likely some other dopey option looks good, like communism.

Bjauck

03-09-2020, 11:11 AM

Rising wealth inequality is not a bad thing per se...
I disagree. Absolute poverty (affecting shelter and health) is relevant along with comparative poverty. Rising inequality and inequality in general can affect those at the most disadvantaged end. For example with rising inequality those at the disadvantaged end would feel more excluded and could become less involved with the political and social environment, the more unequal society becomes. Also the latest technology, medical breakthroughs etc. would more likely be further out of reach for those at the most disadvantaged part leading to further divergence in opportunities and feeling of hopelessness and exclusion.

artemis

03-09-2020, 11:27 AM

They sound more like policies addressing the symptoms rather than addressing the main issue to me....

No. Take a closer look.

fungus pudding

03-09-2020, 11:30 AM

I disagree. Absolute poverty (affecting shelter and health) is relevant along with comparative poverty. Rising inequality and inequality in general can affect those at the most disadvantaged end. For example with rising inequality those at the disadvantaged end would feel more excluded and could become less involved with the political and social environment, the more unequal society becomes. Also the latest technology, medical breakthroughs etc. would more likely be further out of reach for those at the most disadvantaged part leading to further divergence in opportunities and feeling of hopelessness and exclusion.

Inequality is not a problem. The problem in society, which is often blamed on inequality, is poverty at the lower end of the scale. Does anyone who has adequate housing, and all the material goods he wants or needs, plenty of food, clothing etc, really care that some people have a lot more?

blackcap

03-09-2020, 11:47 AM

Does anyone who has adequate housing, and all the material goods he wants or needs, plenty of food, clothing etc, really care that some people have a lot more?

Definitely. I have a friend who earns 100k per annum, has adequate housing, minimal material goods due to poor financial management, eats well, is fully clothed. However he is always moaning about rich pricks and how hard done by he is. Plenty of envy out there, and you will find it in the middle classes as well.

fungus pudding

03-09-2020, 11:54 AM

Definitely. I have a friend who earns 100k per annum, has adequate housing, minimal material goods due to poor financial management, eats well, is fully clothed. However he is always moaning about rich pricks and how hard done by he is. Plenty of envy out there, and you will find it in the middle classes as well.

Yeah, but that is not a problem. Or not one to worry about. All the equality in the world will not cure envy. I feel it everyday when I see these young fellas poncing around town with some young filly hanging off their arm.

blackcap

03-09-2020, 11:58 AM

Yeah, but that is not a problem. Or not one to worry about. All the equality in the world will not cure envy. I feel it everyday when I see these young fellas poncing around town with some young filly hanging off their arm.

I see where you are coming from. I feel that envy too. But it is these middle class filled with envy that advocate for the politics of redistribution. (My mate and his wife vote Green!)

Panda-NZ-

03-09-2020, 12:02 PM

Aaron

03-09-2020, 12:13 PM

No. Take a closer look.

Helping the impoverished, still doesn't help them if asset prices are rising at 7% while wages are rising at 3%.

Aaron

03-09-2020, 12:19 PM

I disagree. Absolute poverty (affecting shelter and health) is relevant along with comparative poverty. Rising inequality and inequality in general can affect those at the most disadvantaged end. For example with rising inequality those at the disadvantaged end would feel more excluded and could become less involved with the political and social environment, the more unequal society becomes. Also the latest technology, medical breakthroughs etc. would more likely be further out of reach for those at the most disadvantaged part leading to further divergence in opportunities and feeling of hopelessness and exclusion.

Probably poorly worded. I don't think everyone should have the same outcome. Young people should have the same opportunities (education etc) but the outcome rests with the individual. Last time I looked the NZ communist party wasn't polling well. I don't think many support the idea of everyone being exactly the same. I do agree that the continued rise in asset and income inequality is not good for society eventually, the USA might be a lot closer than us.

I don't think any party is seriously addressing the issue.

artemis

03-09-2020, 12:19 PM

More the politics of make everyone pay tax which is often a right wing outlook. When professionals pay 30% income & gst and real estate moguls etc pay 0% there are many and varied issues to consider.

There are rather a lot of New Zealanders who not only pay no tax, they are net tax takers.

Under what circumstances do 'real estate moguls' whatever they are, pay no tax. Asking for IRD.

artemis

03-09-2020, 12:22 PM

....I don't think any party is seriously addressing the issue.

I think the social investment approach does seriously address the issue.

blackcap

03-09-2020, 12:29 PM

Helping the impoverished, still doesn't help them if asset prices are rising at 7% while wages are rising at 3%.

That is more a function of interest rates than anything else though. If interest rates rise you will find asset prices falling and wages still rising as per normal.

Aaron

03-09-2020, 12:41 PM

That is more a function of interest rates than anything else though. If interest rates rise you will find asset prices falling and wages still rising as per normal.

Agreed when do you think we might see the next interest rate rise? We have had 20-30years of continually lower rates and easier money. Rates are now historically low but now they talk of negative rates which makes absolutely no sense to me.

BlackPeter

03-09-2020, 12:43 PM

Inequality is not a problem. The problem in society, which is often blamed on inequality, is poverty at the lower end of the scale. Does anyone who has adequate housing, and all the material goods he wants or needs, plenty of food, clothing etc, really care that some people have a lot more?

It is if you have on one end of the spectrum people who make not 10, not hundred but often thousand times (or more) of the income of the average person. Nobody works that hard - i.e. this wealth is basically stolen from less lucky people.

These super rich people start to control society and are able to buy public opinion and political favours. They are in many countries able to buy justice - even in NZ it can make a huge difference for the outcome of a trial whether you are able to fork out a couple of 100k for a good lawyer - or not. Ask the people who still wait for a settlement of their EQC claim.

Look no further than the US, Russia or e.g. Brazil to see how these things effect societies. Inequality kills democracies and turns them into oligarchies controlled by strongmen.

It is inequality which makes the rich people richer and the poor people poorer - it is a vicious cycle. Just look at how the recent crisis effects the rich in the US. The rich people (the reserve bank cares about) got richer (many doubled their share portfolios) and the poor people without political power lost their jobs.

blackcap

03-09-2020, 12:44 PM

Agreed when do you think we might see the next interest rate rise? We have had 20-30years of continually lower rates and easier money. Rates are now historically low but now they talk of negative rates which makes absolutely no sense to me.

I don't know. I do know that if you look at the yield curve there is an expectation that interest rates will be extremely low for the next 10 years. Not a good situation for anyone to be in.

Panda-NZ-

03-09-2020, 12:51 PM

People should earn what they deserve (but as a minimum enough to allow them some acceptable life). Nobody can tell me that some people work hundred or thousand times harder than the average person - i.e. whatever they get is stolen from the less lucky people in society.

Some of the poor and middle class have sacraficed their incomes and livelihood for years mainly for the health benefits of some here who are probably older than the NZ median age but still have the attitude that they don't want to pay a cent more.

It's not a universal view though and good on the likes of Tindall, Buffet, Gates and others.

Aaron

03-09-2020, 12:57 PM

I don't know. I do know that if you look at the yield curve there is an expectation that interest rates will be extremely low for the next 10 years. Not a good situation for anyone to be in.

And why are interest rates being kept low by the central banks?

fungus pudding

03-09-2020, 01:01 PM

More the politics of make everyone pay tax which is often a right wing outlook.
When professionals pay 30% income and gst and real estate moguls etc pay 0% there are many and varied issues to consider.

Real businesses have to pay a flat 15% on their sales while others pay nothing.

Real estate moguls, whatever they are, pay exactly the same tax as everyone else on their income. Businesses pay 15% on their profit margin. Not their sales.

Panda-NZ-

03-09-2020, 01:06 PM

Who pays the sales tax known as GST to the IRD.

Not the consumer. and not the person who flips properties to someone else tax free every couple of months or so.

blackcap

03-09-2020, 01:18 PM

Who pays the sales tax known as GST to the IRD.

Not the consumer. and not the person who flips properties to someone else tax free every couple of months or so.

You really do not know what you are talking about do you. If you "flip properties" you pay tax on any gains made.

Panda-NZ-

03-09-2020, 01:22 PM

If you do then you're doing it wrong.

If a CGT came in then presumably it would replace the tax (or be a lower rate) on those gains so why be against it.
..because they pay nothing now that's why.

blackcap

03-09-2020, 01:30 PM

If you do then you're doing it wrong.

If a CGT came in then presumably it would replace the tax (or be a lower rate) on those gains so why be against it.
..because they pay nothing now that's why.

Pray tell me how I am doing it wrong? How should I be doing it? If I sell a property within 5 years of purchase I pay tax on it. If I am in the business of buying and selling properties I pay tax on the profit irrespective of how long I hold them.

Bjauck

03-09-2020, 02:15 PM

fungus pudding

03-09-2020, 02:23 PM

You really do not know what you are talking about do you. If you "flip properties" you pay tax on any gains made.

If selling properties 'every couple of months or so', then that is a taxable activity. If you're an investor in real estate you pay tax on rental profit.
GST is not known as sales tax. It is a tax paid by any GST registered person. The sales total, while used in the calculation is not the figure GST is paid on. From sales or income a registered person deducts costs and purchases etc, and pays on that figure. i.e. the profit.
I get the distinct impression you are one of those snivelling small-minded sad-sacks who spends your life worrying that under every rock is someone doing better than you. Well if so, it's because they are more deserving than you, boosted largely by a positive attitude.

blackcap

03-09-2020, 02:31 PM

If selling properties 'every couple of months or so', then that is a taxable activity. If you're an investor in real estate you pay tax on rental profit.
GST is not known as sales tax. It is a tax paid by any GST registered person. The sales total, while used in the calculation is not the figure GST is paid on. From sales or income a registered person deducts costs and purchases etc, and pays on that figure. i.e. the profit.
I get the distinct impression you are one of those snivelling small-minded sad-sacks who spends your life worrying that under every rock is someone doing better than you. Well if so, it's because they are more deserving than you, boosted largely by a positive attitude.

Are you replying to me because if you are that makes no sense whatsoever.

artemis

03-09-2020, 02:38 PM

If selling properties 'every couple of months or so', then that is a taxable activity. If you're an investor in real estate you pay tax on rental profit. ......

If you are an investor in residential real estate then you can pay income tax at marginal rate on capital gain. Bright line test. Note residential rentals only. Then there is the intention test as well.

There is an increasing number of gotchas in relation to rentals. Some have sold up or not added to portfolios, others owners might well be waiting for the 5 year mark to sell, or until the carried forward rental losses have been used up.

Could be a rental shortage now or coming up. There is already a shortage for even slightly risky tenants, as witness the skyrocketing social housing waiting list. And net migration is also rising fast.

fungus pudding

03-09-2020, 04:13 PM

If you are an investor in residential real estate then you can pay income tax at marginal rate on capital gain. Bright line test. Note residential rentals only.

Since when did C and I become exempt?

artemis

03-09-2020, 04:27 PM

Since when did C and I become exempt?

Bright line test only applies to res, rentals mainly.

fungus pudding

03-09-2020, 04:50 PM

Bright line test only applies to res, rentals mainly.

My apologies. You are quite right. Brain froze up for a moment or two. Memory banks fading also.

Aaron

04-09-2020, 02:51 PM

Just an opinion piece, but relevant to the discussion. Not sure what you call it when a journalist is providing an opinion piece.

https://www.stuff.co.nz/national/politics/opinion/300099650/housing-inequality-is-going-to-get-a-lot-worse-and-the-government-doesnt-want-to-talk-about-why

Bjauck

04-09-2020, 03:18 PM

BlackPeter

05-09-2020, 10:30 AM

Yep the Asset bubbles make the baby boomer rich richer.

There is no sense behind taxing every last cent of income (including all gains from money lent to businesses) yet leaving most of the gains from Leveraged investment housing and all the gains Owner-occupation untaxed. Residential Real estate bubbles are encouraged.

The real estate bubble (if it turns out to be a bubble - at current it is just a continuous uptrend with the odd minor ripple) has little to do with CGT or the lack thereof.

The main culprits are
- low interest rates - i.e. people can afford to pay more for a scarce resource (a worldwide problem)
- money created by QE searching a new home (see what I did there :) ) - again a worldwide problem,
- very expensive building methods (stick by stick instead of using industrial production methods - this is a NZ specific problem) and
- the aversion of most Kiwis to live in apartment buildings
(admittedly, there are hardly any good quality apartments in NZ. Chicken - egg?) - obviously a home made problem as well

Don't blame the lack of CGT for our high property prices ... most countries do have a CGT and housing is expensive there as well everywhere where people can find a job and want to live ...

Sure - I hear property prices in the UK are dropping, but this is because people don't want to live there anymore.

Bjauck

05-09-2020, 01:11 PM

The real estate bubble (if it turns out to be a bubble - at current it is just a continuous uptrend with the odd minor ripple) has little to do with CGT or the lack thereof.

The main culprits are
- low interest rates - i.e. people can afford to pay more for a scarce resource (a worldwide problem)
- money created by QE searching a new home (see what I did there :) ) - again a worldwide problem,
- very expensive building methods (stick by stick instead of using industrial production methods - this is a NZ specific problem) and
- the aversion of most Kiwis to live in apartment buildings
(admittedly, there are hardly any good quality apartments in NZ. Chicken - egg?) - obviously a home made problem as well

Don't blame the lack of CGT for our high property prices ... most countries do have a CGT and housing is expensive there as well everywhere where people can find a job and want to live ...

Sure - I hear property prices in the UK are dropping, but this is because people don't want to live there anymore. I agree with all those points. NZ has among the most expensive housing for our income levels. I would add two additional main points.

The lack of a CGT and stamp duties in NZ, unlike most other countries, has the effect of making real estate even more compelling an investment. The relative ease to borrow to fund the acquisition of a house or real estate (as opposed to greater difficulty borrowing for share investment and businesses) makes housing more appealing as an investment, as leveraged capital gains are more easily achievable by more people. Also no stamp duties are payable making more frequent buying and selling of the family home a more Viable and compelling option to boost untaxed gains in equity.

Housing also gets a fillip from the fact that alternatives to households’ investing in real estate are less compelling in NZ. We have a comparatively small share market (part of the reason being explained above) and a small managed fund sector. Also kiwisaver is newish and has weak incentives to attract funds away from the real estate investment for all of the foregoing reasons.

fungus pudding

05-09-2020, 01:36 PM

I agree with all those points. NZ has among the most expensive housing for our income levels. I would add two additional main points.

The lack of a CGT in NZ, unlike most other countries, has the effect of making real estate even more compelling an investment. The relative ease to borrow to fund the acquisition of a house or real estate (as opposed to greater difficulty borrowing for share investment and businesses) makes housing more appealing as an investment, as leveraged capital gains are more easily achievable by more people.

Housing also gets a fillip from the fact that alternatives to households’ investing in real estate are less compelling in NZ. We have a comparatively small share market (part of the reason being explained above) and a small managed fund sector. Also kiwisaver is newish and has weak incentives to attract funds away from the real estate investment for all of the foregoing reasons.

If the lack of a CGT tax does make R.E. a more compelling investment (and there's no proof that it does), then by all means leave well alone. The purchase of a home makes for a stable society, so should be encouraged - not discouraged. Of course many proponents of a CGT would like their own home to be exempt. The thinking for many of them seems to be 'it's a fair tax as long as it doesn't apply to me'.

Bjauck

05-09-2020, 02:05 PM

If the lack of a CGT tax does make R.E. a more compelling investment (and there's no proof that it does), then by all means leave well alone. The purchase of a home makes for a stable society, so should be encourages - not discouraged. Of course many proponents of a CGT would like their own home to be exempt' The thinking for many of them seems to be 'it's a fair tax as long as it doesn't apply to me'. Presumably then investor housing should be further discouraged then to make room for owner-occupiers?

There are countries with lower home ownership rates with stable law-abiding societies. So there are several factors at play and stability rests on factors other than owner-occupied home ownership.

As for real estate being a compelling investment in NZ, I guess the household wealth wrapped up in home ownership and RE investment should be compared with those assets households own in shares, businesses and managed funds. How does that compare with other countries.

fungus pudding

05-09-2020, 02:14 PM

Presumably then investor housing should be further discouraged then to make room for owner-occupiers?

You've obviously never been a residential landlord. Believe me, there's plenty to discourage res. renting as an investment without the IRD 'helping'.

Bjauck

05-09-2020, 08:12 PM

You've obviously never been a residential landlord. Believe me, there's plenty to discourage res. renting as an investment without the IRD 'helping'.
Presumably there has been plenty to encourage investment residential real estate as Auckland and NZ home ownership levels have been dropping for years.

iceman

06-09-2020, 07:47 AM

The real estate bubble (if it turns out to be a bubble - at current it is just a continuous uptrend with the odd minor ripple) has little to do with CGT or the lack thereof.

The main culprits are
- low interest rates - i.e. people can afford to pay more for a scarce resource (a worldwide problem)
- money created by QE searching a new home (see what I did there :) ) - again a worldwide problem,
- very expensive building methods (stick by stick instead of using industrial production methods - this is a NZ specific problem) and
- the aversion of most Kiwis to live in apartment buildings
(admittedly, there are hardly any good quality apartments in NZ. Chicken - egg?) - obviously a home made problem as well

Don't blame the lack of CGT for our high property prices ... most countries do have a CGT and housing is expensive there as well everywhere where people can find a job and want to live ...

Sure - I hear property prices in the UK are dropping, but this is because people don't want to live there anymore.

A good post BP that I totally agree with. My wife and I were talking about this yesterday when we drove through one of the lowest socio economic area here in Nelson yesterday, where she works and we have a rental property. Houses are old and many have not been maintained well but all sitting on large properties. The whole lot should be bulldozed and nice apartments built. The population in the area could easily be quadrupled and all withing easy walking distance to the town center. This could be repeated right around the country.

I do not agree with FP that home ownership is necessary for a stable society. Germany is a good example of a society where over 50% of the population rents and societies do not get more stable than Germany.
But a good interesting discussion on CGT.

fungus pudding

06-09-2020, 08:11 AM

A good post BP that I totally agree with. My wife and I were talking about this yesterday when we drove through one of the lowest socio economic area here in Nelson yesterday, where she works and we have a rental property. Houses are old and many have not been maintained well but all sitting on large properties. The whole lot should be bulldozed and nice apartments built. The population in the area could easily be quadrupled and all withing easy walking distance to the town center. This could be repeated right around the country.

I do not agree with FP that home ownership is necessary for a stable society. Germany is a good example of a society where over 50% of the population rents and societies do not get more stable than Germany.
But a good interesting discussion on CGT.

Ahhh ... but Germans are not New Zealanders!

iceman

06-09-2020, 08:13 AM

Ahhh ... but Germans are not New Zealanders!

Some are. Just ask BP :-)

Bjauck

06-09-2020, 08:22 AM

Ahhh ... but Germans are not New Zealanders! Also, the NZ and perhaps especially the Auckland of twenty years ago is not the NZ of today.

artemis

06-09-2020, 08:24 AM

A good post BP that I totally agree with. My wife and I were talking about this yesterday when we drove through one of the lowest socio economic area here in Nelson yesterday, where she works and we have a rental property. Houses are old and many have not been maintained well but all sitting on large properties. The whole lot should be bulldozed and nice apartments built. The population in the area could easily be quadrupled and all withing easy walking distance to the town center. This could be repeated right around the country......

Hi iceman. Yes redevelopment could happen but why doesn't it? Nelson district apparently has a lot more demand than supply going by recent media reports. Developers could start with buying up 2 or 3 properties to demolish and build. That costs, but it is the day job for developers and potentially lucrative.

What is stopping it?

iceman

06-09-2020, 08:30 AM

Hi iceman. Yes redevelopment could happen but why doesn't it? Nelson district apparently has a lot more demand than supply going by recent media reports. Developers could start with buying up 2 or 3 properties to demolish and build. That costs, but it is the day job for developers and potentially lucrative.

What is stopping it?

Good question and applies to all of NZ. I think it is mainly due to attitudes. Kiwis seem to think of only expensive city center or waterfront properties when apartments are mentioned. In my old home country nearly all young families live in nice apartments and do not even dream of houses for first homes. This Kiwi attitude is partly to blame for our high property prices

fungus pudding

06-09-2020, 08:32 AM

Also, the NZ and perhaps especially the Auckland of twenty years ago is not the NZ of today.

And even more worrying, the NZ of today, especially Auckland, is not the NZ of twenty years from now.

Bjauck

06-09-2020, 08:37 AM

And even more worrying, the NZ of today, especially Auckland, is not the NZ of twenty years from now. What are you worried about? What trends do you think need to be addressed?

fungus pudding

06-09-2020, 08:54 AM

Good question and applies to all of NZ. I think it is mainly due to attitudes. Kiwis seem to think of only expensive city center or waterfront properties when apartments are mentioned. In my old home country nearly all young families live in nice apartments and do not even dream of houses for first homes. This Kiwi attitude is partly to blame for our high property prices

I find it ridiculous when schemes like Kiwibuild aim to provide first home buyers with brand new housing. Just build a range of saleable houses, quality homes to tempt established home owners - whatever the market demands. Leave first home buyers to snap up the older housing stock that will result. They can improve and renovate them over time. That would improve housing stock at both ends of the market. There is huge demand from existing owners wanting to trade up; every extra build adds to the housing stock - so let's forget the rubbish about building 'affordable' homes. There could be plenty of them, if only we could get the existing owners to shift out and into something nice and new. And they would if such housing existed. The answer is in town planning.

artemis

06-09-2020, 01:01 PM

I find it ridiculous when schemes like Kiwibuild aim to provide first home buyers with brand new housing. Just build a range of saleable houses, quality homes to tempt established home owners - whatever the market demands. Leave first home buyers to snap up the older housing stock that will result. They can improve and renovate them over time. That would improve housing stock at both ends of the market. There is huge demand from existing owners wanting to trade up; every extra build adds to the housing stock - so let's forget the rubbish about building 'affordable' homes. There could be plenty of them, if only we could get the existing owners to shift out and into something nice and new. And they would if such housing existed. The answer is in town planning.

About 60% of res bank lending is to existing home owners, and not for investment, three times as much as first home buyers. (Reserve Bank.) Doesn't say if the are trading up, down or just changing. Still nearly $4bill a month so a whole lot of buying going on.

Probably a decent number will be moving into retirement villages. And those on this site have a handle on those numbers, with a couple of operators indicating increases in enquiries and sales.

Even leaving retirement village units aside, developers are going to be more interested in upmarket builds rather than the likes of Kiwibuild which are limited on several fronts.

fungus pudding

06-09-2020, 01:18 PM

About 60% of res bank lending is to existing home owners, and not for investment, three times as much as first home buyers. (Reserve Bank.) Doesn't say if the are trading up, down or just changing. Still nearly $4bill a month so a whole lot of buying going on.

Probably a decent number will be moving into retirement villages. And those on this site have a handle on those numbers, with a couple of operators indicating increases in enquiries and sales.

Even leaving retirement village units aside, developers are going to be more interested in upmarket builds rather than the likes of Kiwibuild which are limited on several fronts.

True, but planning and zoning laws slow their activities, thereby slowing the older villas, bungalows etc from coming on to the market, and those generally are ideal for younger, first home buyers with families.

Aaron

21-09-2020, 09:21 AM

And why are interest rates being kept low by the central banks?

Maybe this is why

https://www.zerohedge.com/markets/global-debt-exploding-shocking-rate

Inflation is absolutely essential to get rid of debt.

If you thought they could not reverse what they are doing would it be reasonable to think it is unsustainable? or like a ponzi scheme if it requires more and more people taking on more and more debt to sustain the people who were in first.

If it is unsustainable what will be the eventual consequences? Where do I invest?

I still think getting rid of targeted inflation and having actual price stability as a goal is a good idea even if it brings the Ponzi scheme to an end.

The world central bankers appear to have taken a page from the John Law school of economics.

dibble

04-10-2020, 01:33 PM

Good question and applies to all of NZ. I think it is mainly due to attitudes. Kiwis seem to think of only expensive city center or waterfront properties when apartments are mentioned. In my old home country nearly all young families live in nice apartments and do not even dream of houses for first homes. This Kiwi attitude is partly to blame for our high property prices

Dont be too harsh. "Attitude" is also people's lives. Not everyone asked for a population explosion, its a little unfair to begrudge society for wanting a bit of space for the dog and a few tomatoes on a leafy street if that is how they grew up. In my experience, apartments here are unlivable long term. Pokey, scant noise insulation, expensive and that view will be built out. Developer greed? Poor planning? Probably both. Old East European apartments are way more salubrious and genuinely nice places to stay. I suspect attitudes to commute-free apartments would change if the value/space/livability equation changed.