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View Poll Results: Should there be a Capital Gains Tax on Property

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  • No

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  1. #526
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    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.

  2. #527
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    Quote Originally Posted by SBQ View Post
    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.

    Quote Originally Posted by SBQ View Post
    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.

  3. #528
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    Quote Originally Posted by elZorro View Post
    ....
    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.
    Last edited by Bjauck; 12-03-2019 at 06:37 PM.

  4. #529
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    Quote Originally Posted by minimoke View Post
    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).

  5. #530
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    Quote Originally Posted by Bjauck View Post
    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.

  6. #531
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    Quote Originally Posted by elZorro View Post
    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

  7. #532
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    Quote Originally Posted by elZorro View Post
    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.

  8. #533
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    Quote Originally Posted by fungus pudding View Post
    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

  9. #534
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    Quote Originally Posted by elZorro View Post
    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

  10. #535
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    Quote Originally Posted by jmsnz View Post
    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
    You would be liable for CGT as its not the family home
    Quote Originally Posted by jmsnz View Post
    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
    you would be liable for income tax on any rental profit and CGT
    Quote Originally Posted by jmsnz View Post
    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
    you 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

  11. #536
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    Death duties are easily avoided by holding assets in a trust.

  12. #537
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    Quote Originally Posted by elZorro View Post


    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.

  13. #538
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    Quote Originally Posted by 777 View Post
    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?

  14. #539
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    Quote Originally Posted by elZorro View Post
    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....
    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.

  15. #540
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    Quote Originally Posted by Bjauck View Post
    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.

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