Why should interest differ from any other form of income? Surely if interest was not taxed, then dividends and rental income shouldn't be either. (Although I'd be all for it ;) )
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Fixed interest, as a class of income, does tend to be the investment income that is earned by a broader cross-section of people.
However I do agree with you that all investment income and capital gains should be treated the same. If the family home is exempt from a CGT (and income tax as currently) then why shouldn’t there be tax free thresholds for business and investment income and capital gains - especially for those who do not want to own their own home.
For those who do not own (or cannot own) a family home, then they should have an exemption for their investments (up to a certain threshold?) For those that have a low value family home, then they should be given a CGT and Income tax allowance for other investments. Family home exemption (without a value limit) from a CGT could lead to a mansion effect in NZ.
Perhaps one way to replace the family home exemption from a CGT would be to give all adult taxpayers an annual CGT exemption allowance equivalent to say 5% of the average house price at the start of the year. This could accumulate if unused in a particular year. The exemption could then off-set taxable realised capital gains whether they be from the family home, investment real estate or other investments.
Winston has now told farmers that they should be exempted as CGT is only to stop short term speculation. This is getting better by the day !!
Might be time to sell the shares and buy the second family home.
Will a licence to occupy be subject to a CGT? If not, and hard to see if it will, expect the retirement village sector to explode as homeowners sell up sooner rather than later.
I wouldn't expect it to as it isn't "capital" its just a right to live somewhere. You might be right - with a flight to retirement villages. The thing there is to, if you buy into them you know you are going to sell at a loss. So that loss would be a tax benefit to your estate. So lock in capital gain prior to V Day and reap a tax benefit later.
You're missing the MAJOR distinction between taxing of necessities vs taxing of large size wealth. After all, pretty much EVERY OECD nation treats CGT differently to income tax rates. Why? Show me a country that applies CGT exemption limits each year? How would that be particularly useful to the person that owns no assets? Therefore, I don't see your argument that the principal resident should not be exempt as it would be the single source of asset a person can hold, and more importantly, not having to worry about selling for a capital LOSS (consider those that move from place to place every 5 or 10 years?) and then pay another round of CGT when the market rebounds.
I also do not buy into the argument about those choosing NOT to buy a house and instead, invest their savings elsewhere (ie managed funds). The fact is simple, those that can't afford to buy a house simply do NOT have the $ to save ; what % of those on minimum wage actually contribute to Kiwi Saver? Very few because that 3% they lose off their total annual income would be better spent in putting food on the table. The approach of CGT by other wealthy nations is aimed none other than the wealthy ; the NZ top 5% of the population that has parked their $ in real estate, banking it without having to worry about paying tax on the gain.
I've mentioned before in the case of real estate, all properties have a "rates valuation" by the local city council. If you feel the assessment is not accurate (because of some fancy irrigation or building accessory installed), you can always get an independent valuation and the city will reflect that on your rates bill.
By the way, i've been working on my Mini Moke today re-adjusting the carburetor (needle jet air/fuel mixture). Next job is to readjust the valve tappet clearances. :)
One good thing about a CGT against the real estate market is it will reduce the demand of houses. I mean does NZ really need 10,000 houses to be built 'right away' ? Also the idea of retirement villages does not sound appealing to me. But many choose to do reverse mortgages on their home.
There in lies the problem. There is a huge difference between a "rating" valuation and capital valuation. Eg when I renovated Council stuffed up. My rates valuation went up a smidge but not near the $300k of actual value. Needless to say I've kept quiet on that one. Then there's my Insurance Valuation. Somewhere in there will be a market value which is when the witch doctors come in and stir the ashes to value land and the improvements.
Pretty weird that in a "fair" scheme they exclude family home - that's where so much capital is tied up and used for other money making purposes.
Isnt it great having a car you can actually work on. Sadly I open my bonnet now and haven't a clue where to start.