Capital Gains Tax

[777]

I don't think they'll use the marginal tax rates with the CGT, and they'll have to be very careful around businesses and share portfolios, as you say.

Marginal rates is what they want and what the TWG came up with. Remember the TWG was told what the result was to be.

[minimoke]

Marginal rates is what they want and what the TWG came up with. Remember the TWG was told what the result was to be.

Which will only be another shot at the "poor" people as they are elevated into the next tax bracket on the sale of what little capital they may have.

[Bjauck]

Which will only be another shot at the "poor" people as they are elevated into the next tax bracket on the sale of what little capital they may have.

Only for the amount that is in the top bracket in the year in which the asset is actually sold and any gain realised.

As any CGT is supposed to be neutral on the total tax take. Those “poor” people with little capital* may well be better off overall - taking into account tax reduction in other areas. So they could well pay less income tax if income tax rates are adjusted down. In addition they may benefit from other taxes being reduced.

* Maybe they have a multi-million dollar principal house that will still be exempt from a CGT under the TWG’s proposals.

[minimoke]

Only for the amount that is in the top bracket in the year in which the asset is actually sold and any gain realised.

As any CGT is supposed to be neutral on the total tax take. Those “poor” people with little capital* may well be better off overall - taking into account tax reduction in other areas. So they could well pay less income tax if income tax rates are adjusted down. In addition they may benefit from other taxes being reduced.

* Maybe they have a multi-million dollar principal house that will still be exempt from a CGT under the TWG’s proposals.

A gain will bump people into the next tax bracket, not necessarily the top bracket

Income	Tax rate	Effective tax rate
$0 – $14,000	10.5%	10.5%
$14,001 – $48,000	17.5%	10.5 - 15.5%
$48,001 – $70,000	30%	15.5 - 20.0%
Over $70,000	33%

[Bjauck]

A gain will bump people into the next tax bracket, not necessarily the top bracket

Income	Tax rate	Effective tax rate
$0 – $14,000	10.5%	10.5%
$14,001 – $48,000	17.5%	10.5 - 15.5%
$48,001 – $70,000	30%	15.5 - 20.0%
Over $70,000	33%

Sure - their top bracket. Someone with few non-exempt assets will probably end up paying less tax under the TWG proposals.

Besides If the TWG’s are ever introduced and CGT receipts become meaningful then maybe those tax bands will be more generous and the top rate of income tax may be dropped to 28%...However our “poor” taxpayer may have already shifted all his equity into his over-capitalised multi-million Dollar exempt principal residence by then.

[minimoke]

Sure - their top bracket. Someone with few non-exempt assets will probably end up paying less tax under the TWG proposals.

Which results in what we know all along. The "rich" will be taxed to pay to the "poor". Its all about wealth redistribution.

[Bjauck]

Which results in what we know all along. The "rich" will be taxed to pay to the "poor". Its all about wealth redistribution.

I thought you were concerned about the poor taxpayer with little capital?

Under the TWG proposal, If you are rich with a valuable principal house and lots of income producing equity, I don’t imagine the overall effect will be much different (given the stated parameters)

If you have a big expensive house and a high income, you could see a tax reduction.

If you have currently no principal house, minimised taxable income and lots of investments which have relied on capital gain things may be different if capital profit is treated the same as income.

[SBQ]

Sure - their top bracket. Someone with few non-exempt assets will probably end up paying less tax under the TWG proposals.

Besides If the TWG’s are ever introduced and CGT receipts become meaningful then maybe those tax bands will be more generous and the top rate of income tax may be dropped to 28%...However our “poor” taxpayer may have already shifted all his equity into his over-capitalised multi-million Dollar exempt principal residence by then.

Poor tax payers investing in their MM$ home? First you need to find where the buyers of these high end homes? Have we forgot there's a ban on foreign / non-residents buying real estate in NZ? Kiwis are not use to investing into their own home as the focus has always been through property accumulation and NOT property improvements. This is evident in how N. Americans view home ownership with multi-generational living vs NZ's change the house as often as "changing cars" point of view.

Is it me or the media is slow at releasing more news about this CGT? Beehive isn't talking much about CGT and isn't the reporting deadline in April?

[Bjauck]

Poor tax payers investing in their MM$ home? First you need to find where the buyers of these high end homes? Have we forgot there's a ban on foreign / non-residents buying real estate in NZ? Kiwis are not use to investing into their own home as the focus has always been through property accumulation and NOT property improvements. This is evident in how N. Americans view home ownership with multi-generational living vs NZ's change the house as often as "changing cars" point of view.

Is it me or the media is slow at releasing more news about this CGT? Beehive isn't talking much about CGT and isn't the reporting deadline in April?

I disagree - Many kiwis improve their main residence by adding rooms, renovating, landscaping etc.

As for multi-generational living in the same residence, that may be a cultural or affordability issue for many. I would have that would have applied in all the states of the USA including British Canada and French Quebec as well..

It is true - buying then selling the principal residence and borrowing to leverage your way up the property ladder is the de facto tax efficient way to accumulate the kiwi nest egg or fund for old age!

CGT in the form as released by the majority on the TWG is a political non-starter. A NZ CGT is like orthodontistry on Ken Dodd’s teeth*. Most people know work needs to be done to fix the teeth but nobody wants to be the one to have to do it and possibly stuffing up his act.

* or Cilla Black being gender equal! You have to be a certain age to appreciate those references (they were popular here back in the day. Did they make it to N.America?)