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  1. #1
    ShareTrader Legend Beagle's Avatar
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    Default Mitigating the effects of a potential new capital gains tax

    http://www.sharechat.co.nz/article/7...ital-gainshtml

    It looks like the goal posts could be moved in the foreseeable future.
    Very good to see they are NOT recommending changing the imputation scheme as that would have been a huge blow to the market.
    So...this begs the question of how to mitigate the effects of any new capital gains tax on shares ?
    What springs to mind immediately is Percy's favorite of finding good quality companies that will pay ever increasing dividends and hold them indefinitely.
    Well worth noting that the interim Tax working group report does not recommend taxing unrealized profits.
    So buy high quality companies with a sound dividend yield that will grow earnings and dividends very nicely over time and never sell. OCA springs readily to mind.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  2. #2
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    Default

    Quote Originally Posted by Beagle View Post
    http://www.sharechat.co.nz/article/7...ital-gainshtml

    It looks like the goal posts could be moved in the foreseeable future.
    Very good to see they are NOT recommending changing the imputation scheme as that would have been a huge blow to the market.
    So...this begs the question of how to mitigate the effects of any new capital gains tax on shares ?
    What springs to mind immediately is Percy's favorite of finding good quality companies that will pay ever increasing dividends and hold them indefinitely.
    Well worth noting that the interim Tax working group report does not recommend taxing unrealized profits.
    So buy high quality companies with a sound dividend yield that will grow earnings and dividends very nicely over time and never sell. OCA springs readily to mind.
    Or sell every gain you have before it comes into effect.

  3. #3
    ShareTrader Legend Beagle's Avatar
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    Default

    Quote Originally Posted by couta1 View Post
    Or sell every gain you have before it comes into effect.
    I'm getting out of HLG now before you destroy the price and Couterise me
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  4. #4
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    Default

    Yes Beagle the strategy You outlined favoured by Percy and many others is the same one espoused by Warren Buffet . Will certainly encourage a longer term view for many.

    overall I would not be upset about a CGT so long as it applies to everything equally similar to how gst operates. However I would be extremely annoyed if they do actually ring fence the family home. You could not get any worse policy than that.

  5. #5
    Herbacious
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    Default

    Past CGT proposals have included a "valuation day" whereby gains are recorded only from that day onwards. So if that's the case there's no need to worry about gains you have right now.

  6. #6
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Patient Panda View Post
    Yes Beagle the strategy You outlined favoured by Percy and many others is the same one espoused by Warren Buffet . Will certainly encourage a longer term view for many.

    overall I would not be upset about a CGT so long as it applies to everything equally similar to how gst operates. However I would be extremely annoyed if they do actually ring fence the family home. You could not get any worse policy than that.
    Yep, just finished backing up the truck and cleaned out the remaining shares of offer at $1.19 in OCA. Compelling fundamental's and long term growth story.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  7. #7
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    Default

    CGT would be set at a lower rate than most of the current marginal tax rates so wouldn't make any difference to traders, just means everyone else starts paying an extra tax somewhere along the line.

  8. #8
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    it would probably be bad news for the NZX, one of the popular advantages to mum and dad investor types is the lack of capital gains tax. Throw that in the mix and I think personally we'd see a sizeable asset re-allocation back into less complex asset type.

  9. #9
    Speedy Az winner69's Avatar
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    Even the Percys of the world will be worse off ...even though he holds for increasing dividends he does sell things quite often (when things slow down) and it appears he would have to pay tax on any share price gains.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  10. #10
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    At the end of the day, it will be a political decision.

    Mainly because of two things:

    One - it will be hard for the electorate to accept a CGT without an exemption for the principal place of residence (i.e. family home) even though this is part of a number of factors affecting housing affordability (including amongst others - cheap interest rates driving up asset prices, relative shortage of units particularly in Auckland).

    Two - currently PIEs don't pay taxes on capital gains on locally listed shares and large Australian ones, start taxing these capital gains then there will be a lot of ordinary New Zealanders who are going to see their after tax returns on their kiwisavers take a hit or dissuade them from making further contributions. If they do leave the exemption for PIEs then the CGT on equities is going to be avoided by investing in PIEs rather than directly (although you could see special PIEs that only say invest in a particular share instead) and the managed funds are going to be pumping their fists.

    Changing the rules on the tax status of Kiwisaver returns is going to be met with suspicion and derision.

    Watch this one get parked.

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