View Poll Results: Should there be a Capital Gains Tax on Property
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No
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Yes
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Goff is just an idiot
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Epic fail for Labour
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13-03-2019, 10:04 PM
#531
Originally Posted by elZorro
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
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13-03-2019, 11:05 PM
#532
Originally Posted by elZorro
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.
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14-03-2019, 09:32 AM
#533
Originally Posted by fungus pudding
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
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14-03-2019, 09:50 AM
#534
Member
Originally Posted by elZorro
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
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14-03-2019, 10:12 AM
#535
Originally Posted by jmsnz
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
Originally Posted by jmsnz
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
Originally Posted by jmsnz
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
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14-03-2019, 11:09 AM
#536
Death duties are easily avoided by holding assets in a trust.
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14-03-2019, 02:48 PM
#537
Originally Posted by elZorro
…
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.
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14-03-2019, 02:57 PM
#538
Originally Posted by 777
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?
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14-03-2019, 03:43 PM
#539
Originally Posted by elZorro
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.
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14-03-2019, 04:38 PM
#540
Originally Posted by Bjauck
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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