Mitigating the effects of a potential new capital gains tax

[minimoke]

How is the impact of inflation accounted for. If I have a $100,000 rental house and inflation runs at 1% and my house is worth $101,000 in a years teim have I made a capital gain?

[winner69]

How is the impact of inflation accounted for. If I have a $100,000 rental house and inflation runs at 1% and my house is worth $101,000 in a years teim have I made a capital gain?

Farms and small business when sold will stuff up a few retirement plans if gains taxable

[Scrunch]

How is the impact of inflation accounted for. If I have a $100,000 rental house and inflation runs at 1% and my house is worth $101,000 in a years teim have I made a capital gain?

Economically no. You have the asset base to purchase the same goods and services as at the start of the year.

If you are looking to widen the tax net. Yes.

[enzed staffy]

The fairness argument is laughable wrt exemption
If 2 people have 1 million dollars NTA currently - one in Auckland has a family home for the average million dollar price, one has an average family home in Dunedin at 400k and 600k in the share market - the Dunedin person already pays more tax (on dividends) and now they want capital gains as well?
While the Auckland punter sits pretty on their exempt family home gaining capital and selling at a later date - no cost thank you.

[Jonboyz]

The fairness argument is laughable wrt exemption
If 2 people have 1 million dollars NTA currently - one in Auckland has a family home for the average million dollar price, one has an average family home in Dunedin at 400k and 600k in the share market - the Dunedin person already pays more tax (on dividends) and now they want capital gains as well?
While the Auckland punter sits pretty on their exempt family home gaining capital and selling at a later date - no cost thank you.

Starts making me wonder whether I should sell all my shares and upgrade my HOME to the maximum I can afford, and then keep on upgrading over the years until I need liquidity, and then start down-grading.

[Patient Panda]

Starts making me wonder whether I should sell all my shares and upgrade my HOME to the maximum I can afford, and then keep on upgrading over the years until I need liquidity, and then start down-grading.

If you want access to the increased value of the house you don’t even need to downgrade you can simply get a new registered valuation every few years and the bank will let you use a mortgage like an increasing bank account every time it get revalued upwards.

[percy]

Starts making me wonder whether I should sell all my shares and upgrade my HOME to the maximum I can afford, and then keep on upgrading over the years until I need liquidity, and then start down-grading.

Exactly right..
And if you are old enough when you need liquidity, you could take out a reserve mortgage with Heartland,while the value of your home keeps increasing..

[allfromacell]

Starts making me wonder whether I should sell all my shares and upgrade my HOME to the maximum I can afford, and then keep on upgrading over the years until I need liquidity, and then start down-grading.

Me too... As a younger person I personally prefer living in a nice suburb close to work and let my landlord subsidies my rent while I grow equity in other investments. However if this tax comes into effect it will make more sense to buy a house I can afford further out which I don't really want to do.

I don't really mind a capital gains tax but it needs to fairly applied to all assets, don't ring fence the family home! This is of course political suicide and would never fly with the electorate.

[enzed staffy]

Rather than exemptions - they would be better to set a threshold of NTA for capital gains applied to above to prevent the family home distortion- but then I guess that's much like a wealth tax

[Rep]

Starts making me wonder whether I should sell all my shares and upgrade my HOME to the maximum I can afford, and then keep on upgrading over the years until I need liquidity, and then start down-grading.

That is the distortive effect of exempting the family home so there's no CGT on these gains and potentially a massive tax advantage against say owning shares or starting a business that is productive and employs people... or in fact saving for retirement with your kiwisaver... if a PIE isn't exempt on the capital gains for shares.

Some suburbs are going to end up with vastly over capitalised mansions because the unintended consequence will be everyone buying bigger, more expensive housing until they look at reverse mortgages or liquidating their gains - Ryman, Summerset and Oceania will be laughing all the way to the bank....