Mitigating the effects of a potential new capital gains tax

[couta1]

I was.going to start a new thread to ask but may as well put it here.

Under the current regime, what criteria do they use to seperate between trading and investing for the purpose of tax?

Always been a gray area of some confusion in my mind.

(I do not do a lot of transactions and the vast majority are buys)

You can find threads on that topic on the off market section but here is the definition from the Tax Bible." Profits from selling shares are taxable if the Clear and Dominant purpose at the time of purchase was to resell to make a profit. Look at each individual parcel of shares that taxpayer sells to make correct ruling. If shares are aquired to make capital gains from their growth in value as well as to earn income from dividends then there is no clear purpose of resale so profit is not taxable and losses are not deductable." A CGT will change all that of course.

[Bjauck]

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.

The fact that an enormous inestment class - owner occupied real estate - is likely to be excluded from a CGT could mean that many more people will favour further capitalisation of their homes either by bidding up the price of land further or by further investment in improvements. That could be at the expense of investment in equities (which would be subject to a CGT)

In addition those who do not have their own homes but do have investments in businesses and shares could be further encouraged by the tax system to divest from income producing assets into owner-occupied residential property.

If owner-occupied housing is exempt from a CGT, There should be scheme to allow those who do not own their own homes to have a higher exemption threshhold before CGT applies.

[Beagle]

Good onya for clearing that level. Next step $1.20

Chatted with my old mate Couta a littler earlier this afternoon and it turns out I was buying his shares at $1.19. He's officially been Beaglized
The claw marks are really going to hurt when this hits $1.25 shortly...
Might hold these OCA puppies till I die and transfer them to my family trust then any capital gains tax is my kids problem

[Jonboyz]

While wine (and other collectables) can be profitable and there are plenty of stories of investors doing very well, the markets are highly illiquid, price transparency is poor, price spreads and transaction costs are high, there is negative cash flow from storage fees and insurance and there are risks of damage from various causes. If you do invest in wine, you will need to be able to show provenance (i.e. that the wines have been legitimately sourced and properly stored from the moment they left the chateaux) or your sales price will be heavily discounted.

The most significant risk is that what starts as an investment in a new asset class for your portfolio ends up being a very expensive investment in future drinking.

Well, if that's the case, I might just stay with 'investing' in low cost wines then.

[minimoke]

Chatted with my old mate Couta a littler earlier this afternoon and it turns out I was buying his shares at $1.19. He's officially been Beaglized
The claw marks are really going to hurt when this hits $1.25 shortly...
Might hold these OCA puppies till I die and transfer them to my family trust then any capital gains tax is my kids problem

And part of my mitigation strategy would be to trade off market to to remove a potential transaction radar (as well as broker fees)

[Beagle]

And part of my mitigation strategy would be to trade off market to to remove a potential transaction radar (as well as broker fees)

Good idea and simple enough to make an in specie transfer or one to an external party for that matter.

[minimoke]

If owner-occupied housing is exempt from a CGT, There should be scheme to allow those who do not own their own homes to have a higher exemption threshhold before CGT applies.

Just something to keep an eye on - and thats definition.

Two phrases are coming to light: "family home" and "Owner occupied house". Assuming both are free from CGT I may vacate my "family home" and move into an "owner occupied house" do-oer upper thought that might depend on cost involved in the doing up

[steveb]

How about moving your portfolio offshore? Caymen Islands for example

[kiwico]

Just something to keep an eye on - and thats definition.

Two phrases are coming to light: "family home" and "Owner occupied house". Assuming both are free from CGT I may vacate my "family home" and move into an "owner occupied house" do-oer upper thought that might depend on cost involved in the doing up

Or is this trying to differentiate between a home owned by the occupier and a home owned by a trust?

[Patient Panda]

Just something to keep an eye on - and thats definition.

Two phrases are coming to light: "family home" and "Owner occupied house". Assuming both are free from CGT I may vacate my "family home" and move into an "owner occupied house" do-oer upper thought that might depend on cost involved in the doing up

Yes if they have any economically trained or minded people in the TWG regardless of political orientation they will know and hopefully convey ringfensing the family home is disturbingly economically inefficient and will create a lot of perverse behaviours and incentives.


for a while I worked in a mortgage brokerage and very often I saw numerous perverse behaviours to sidestep rules regarding kiwisaver and the first home buyers grant and a requirement for ‘owner occupation’. I can only imagine it being the same or much worse with family home ring fensing.