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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. #346
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    This is pretty much my summary of why I'm happy for a CGT. Regardless of $1 or $5Million I see no reason for why income & capital gains shouldn't be taxed to make it more fair for all. Yes it's going to be tough for the middle class but fairs fairs...

    Screen Shot 2019-02-22 at 7.26.54 AM.png

  2. #347
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    Quote Originally Posted by FIsaver View Post
    This is pretty much my summary of why I'm happy for a CGT. Regardless of $1 or $5Million I see no reason for why income & capital gains shouldn't be taxed to make it more fair for all. Yes it's going to be tough for the middle class but fairs fairs...

    Screen Shot 2019-02-22 at 7.26.54 AM.png
    Interesting chart FIsaver. I saw this comment from David Slack on CGT in the SST yesterday.

    https://www.stuff.co.nz/national/pol...he-tax-we-need

  3. #348
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    Oldie but a goodie why tax, especially a progressive tax system is unfair:

    https://www.youtube.com/watch?v=S6HEH23W_bM

  4. #349
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    Here we go again (and i'm being sarcastic) . The NZ voice speaking out that what other large nations are doing is not so good, and NZ can go and try and do it better. So their CGT (or tax system) isn't so "fair" and NZ is out to try and reinvent the wheel (among many other things). After all, "We have a population of 4.5M people, we're SURELY to do better than the 350M people in N. America or the 23M in Australia" or perhaps all of Europe?

    Quote Originally Posted by Bjauck View Post
    Do you think we should introduce the Australian tax system to replace the NZ tax system?

    There are ways in which the NZ tax system already taxes as income some capital gains and indeed wealth.

    So to introduce just the Australian capital gains tax regime would be blunt and without significant review of existing tax provisions, it would involve double taxation.

    Compared to Oz, implanting the OzCGT scheme into NZ would also make trading up the housing home ownership ladder with owner-occupied home ownership significantly more tax efficient to other investments taking into account the absence of stamp duties on NZ house transfers and lack of concessionary tax rates on the income from KiwiSaver pension balances in NZ.
    Perhaps question why so many are able to invest in NZ real estate and ABLE to pay not a single dime of tax on the gain of the asset upon time of sale??? When I first came to NZ, I thought it was VERY "blunt" that such an asset class was left untouched of any taxation. The excuse I was told then was NZ is a small country and deserves some perks.

    Trading up the house home ownership? You mean it's a bad idea for people to value and treat their primary residence as a prized asset (for where they will make improvements), than an asset of financial gain? It's goes to show when Kiwis want a better home, they don't improve the house they live in, instead they sell the house and buy a NEWER house that has the improvements. It's a behaviour no different to changing cars.

    Stamp duty is essentially no different to a GST on the sale of the house. But why do most houses in NZ don't have GST on them? Other countries have some form of 'sales tax' when it's changed hands. In Canada many provinces have a tax on the 2nd hand cars that get sold (PST). Are you saying that NZ already has enough taxes? I say NZ has been too generous to the top 10%.

    Again, am I led to believe that the average Australia, Canadian, or American is smarter, more understanding about taxation and finance, then the typical Kiwi? My experience from speaking to various NZ financial advisors is, they fail to give me a straight answer regarding taxation & finance. When I grew up, CFA exams require all financial advisors to be fully updated with taxation laws. In fact, in almost every case all the finance advisors (N. America) have to give advice from the point of taxation. But in NZ, i'm compelled to believe they can not give advice from a tax point of view and say "you must also seek a tax accountant specialist". How complicated is that? As complicated as building a multistory house because all I see in NZ new sub-division builds is the same single story houses (can blame the NZ RMA for that).

  5. #350
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    Quote Originally Posted by FIsaver View Post
    This is pretty much my summary of why I'm happy for a CGT. Regardless of $1 or $5Million I see no reason for why income & capital gains shouldn't be taxed to make it more fair for all. Yes it's going to be tough for the middle class but fairs fairs...

    Screen Shot 2019-02-22 at 7.26.54 AM.png

    That chart applies to the USA. The primary residence is a much much greater component of NZ household wealth with shares and retirement savings comprising a much smaller component of household wealth in all wealth bands. A CGT in NZ would bring in much less tax as the primary residence exclusion would remove a much greater percent of capital assets.

    Add to that the facts that the lack of property transfer stamp duties and the NZ share market is so comparatively small for the size of the economy, then a CGT on investment housing would probably just mean that more middle class wealth will end being diverted into the primary residence (especially for those that do not need to earn taxable income from their wealth).

    So it would not be fair for those who invest their capital in productive assets instead of a primary residence. In NZ do we really need the primary residence to be given another tax break?

  6. #351
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    SBQ - I have no issue with a CGT. I do have issue with a CGT exempting the primary residence. Especially since the primary residence comprises so much of household wealth in NZ. In the NZ context with NZ having no stamp duties and an unsophisticated equities market - I think that it may mean than even more wealthy people would divert more of their wealth into their primary residences. So the approach in overseas jurisdictions may not be appropriate in NZ.

  7. #352
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    Quote Originally Posted by blackcap View Post
    Oldie but a goodie why tax, especially a progressive tax system is unfair:

    https://www.youtube.com/watch?v=S6HEH23W_bM

    Good video. Unfortunately most of the voters in NZ are lead to believe the top 10% still don't pair their fair share.

  8. #353
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    Bjauck - as the chart FISaver linked, it's natural the primary residence will be the biggest asset for at least say 80% ? of the population. The vast majority of people would not be affected by CGT. But since they hold the voting power, it seems what will happen is a Robin Hood effect. Labout Gov't going after those who work harder, earn more $, invested more, and so now it's time for the CGT to take it away (err.. take those CGT on houses away).

    I'm not putting my bet that with CGT more people will invest into their primary residence. The vast wealthy top 10% already have a ritzy house. What would be more compelling is the exodus flow of capital leaving NZ. A weakening of the NZD. A lower standard of living. and most likely, little or no change of tax revenue over the long term (as the wealthy have ways to move their assets abroad). We may see housing prices correcting lower as the wealthy exit the real estate market (a good thing for those that can't afford houses).

  9. #354
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    SBQ - The chart used was an analysis of wealth in the USA. It has a more limited relevancy to the composition of wealth in NZ. The NZ investment environment differs from that in the USA.

    I agree that that with the introduction of CGT (with primary residence exemption) there could be a risk a run of overseas owners selling their NZ residential housing investments with a possible destabilising effect.

    As far as wealthier resident owners are concerned - I disagree with you insofar as I think there may be greater movement to further invest in the primary residence as a tax haven as the opportunities in NZ are more limited as far as equities are concerned or have fewer tax breaks (compared with other jusrisdiction) as far as pension schemes are concerned.

    Home ownership (including those with mortgages) rates are dropping in NZ. In Auckland about 50% of households are owner-occupied; about 65% nationally.
    Last edited by Bjauck; 25-02-2019 at 11:29 AM.

  10. #355
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    Quote Originally Posted by blackcap View Post
    Oldie but a goodie why tax, especially a progressive tax system is unfair:

    https://www.youtube.com/watch?v=S6HEH23W_bM
    A one man neo con university ? Yeah right

    westerly

  11. #356
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    Quote Originally Posted by westerly View Post
    A one man neo con university ? Yeah right

    westerly
    I'm not sure I follow. Just watch the video and tell me what is wrong with it. What does neo con even mean?

  12. #357
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    Quote Originally Posted by SBQ View Post
    Here we go again (and i'm being sarcastic) . The NZ voice speaking out that what other large nations are doing is not so good, and NZ can go and try and do it better. So their CGT (or tax system) isn't so "fair" and NZ is out to try and reinvent the wheel (among many other things). After all, "We have a population of 4.5M people, we're SURELY to do better than the 350M people in N. America or the 23M in Australia" or perhaps all of Europe?



    Perhaps question why so many are able to invest in NZ real estate and ABLE to pay not a single dime of tax on the gain of the asset upon time of sale??? When I first came to NZ, I thought it was VERY "blunt" that such an asset class was left untouched of any taxation. The excuse I was told then was NZ is a small country and deserves some perks.

    Trading up the house home ownership? You mean it's a bad idea for people to value and treat their primary residence as a prized asset (for where they will make improvements), than an asset of financial gain? It's goes to show when Kiwis want a better home, they don't improve the house they live in, instead they sell the house and buy a NEWER house that has the improvements. It's a behaviour no different to changing cars.

    Stamp duty is essentially no different to a GST on the sale of the house. But why do most houses in NZ don't have GST on them? Other countries have some form of 'sales tax' when it's changed hands. In Canada many provinces have a tax on the 2nd hand cars that get sold (PST). Are you saying that NZ already has enough taxes? I say NZ has been too generous to the top 10%.

    Again, am I led to believe that the average Australia, Canadian, or American is smarter, more understanding about taxation and finance, then the typical Kiwi? My experience from speaking to various NZ financial advisors is, they fail to give me a straight answer regarding taxation & finance. When I grew up, CFA exams require all financial advisors to be fully updated with taxation laws. In fact, in almost every case all the finance advisors (N. America) have to give advice from the point of taxation. But in NZ, i'm compelled to believe they can not give advice from a tax point of view and say "you must also seek a tax accountant specialist". How complicated is that? As complicated as building a multistory house because all I see in NZ new sub-division builds is the same single story houses (can blame the NZ RMA for that).
    NZ used to be (and probably still is) one of the countries with the lowest compliance costs to do business. And while I hear the lefties shouting "tax them to the hilt" - it is good for all of us if the compliance costs for business are low. This helps particularly small companies and they are the life blood of our economy. Lower compliance cost - more SME's, more jobs.

    So - even if our government would manage to change the taxes in a way which does not increse the overall tax take (pull the other one ) - it drastically would increase compliance costs for business. They do have to pay people to value regularly their assets - and the accounting to calculate the tax burden gets much more expensive. Given that business (and the consumer) are paying this burden - we all will lose without gaining a cent - unless for tax accountants, of course - they would gain a lot!

    Is it worth it? I seriously doubt it. Will Labour try to push it through? They probalby will despite understanding that it will damage the country. It might increase poverty and unemployment, which is good for them (more beneficiaries, more Labour voters).

    Can't trust Labour to do the right thing (which would be ditching this proposal) - better make sure we get the next time the right people back into government.
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  13. #358
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    BP while I think it will not go thru as it stands and maybe not at all if Labour voted out (as we all know governments are voted out not in generally), currently does the tax only come about once the asset is sold, so no on-going valuations required, and even that is then open to abuse, paper work says one thing actual money exchanged could be another in some circumstances. Though thinking about it not beneficial to new buyer when they want to sell!

  14. #359
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    Quote Originally Posted by Jay View Post
    BP while I think it will not go thru as it stands and maybe not at all if Labour voted out (as we all know governments are voted out not in generally), currently does the tax only come about once the asset is sold, so no on-going valuations required, and even that is then open to abuse, paper work says one thing actual money exchanged could be another in some circumstances. Though thinking about it not beneficial to new buyer when they want to sell!
    Even if no regular evaluation would be required - everybody would need to pay for their initial valuation - or what do you think they take as starting value of this new tax?

    And there are so many other sides to this proposal which are blatantly unfair ...

    Somebody who owns a 4499 sqm luxus beach villa in Auckland (on less than 4500 sqm would not need to pay CGT for their family home.
    Somebody who owns a 4501 sqm "supermini"-lifestyle block close to Invercargill however would need to pay full CGT on any capital gains on their family home.

    What happens if your parents die? Would you need to get a valuation of their business or property and pay CGT?

    Suppose you work at a different place than your family home (happens not just to PM's). You buy a small second home to live there and sell that after 10 years to move into a more suitable one. Suddenly you can't anymore afford to buy in the same market you sold into, because you just had to pay one third of the "capital gains" to the tax man. You need to downgrade.

    Assume you buy at the moment a wee house in Auckland for $1m. Lets assume we have modest inflation (less than 4% pa) through this time and inflation adjusted property values don't change over the next 2 decades. You sell the house after 20 years for $2m (which has the same purchasing power than now $1m). You pay $333k to the taxman for the benefit of having no (in real terms) capital gain at all.

    No way how you look at it - this tax proposal is made from non performers for non performers. It is unfair, it is expensive and it will constrain any growth. Typical Labour - can't do.
    Last edited by BlackPeter; 25-02-2019 at 05:01 PM.
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  15. #360
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    Quote Originally Posted by BlackPeter View Post
    Even if no regular evaluation would be required - everybody would need to pay for their initial valuation - or what do you think they take as starting value of this new tax?

    And there are so many other sides to this proposal which are blatantly unfair ...

    Somebody who owns a 4499 sqm luxus beach villa in Auckland (on less than 4500 sqm would not need to pay CGT for their family home.
    Somebody who owns a 4501 sqm "supermini"-lifestyle block close to Invercargill however would need to pay full CGT on any capital gains on their family home.

    What happens if your parents die? Would you need to get a valuation of their business or property and pay CGT?

    Suppose you work at a different place than your family home (happens not just to PM's). You buy a small second home to live there and sell that after 10 years to move into a more suitable one. Suddenly you can't anymore afford to buy in the same market you sold into, because you just had to pay one third of the "capital gains" to the tax man. You need to downgrade.

    Assume you buy at the moment a wee house in Auckland for $1m. Lets assume we have modest inflation (less than 4% pa) through this time and inflation adjusted property values don't change over the next 2 decades. You sell the house after 20 years for $2m (which has the same purchasing power than now $1m). You pay $333k to the taxman for the benefit of having no (in real terms) capital gain at all.

    No way how you look at it - this tax proposal is made from non performers for non performers. It is unfair, it is expensive and it will constrain any growth. Typical Labour - can't do.
    I don't think valuation is an issue. When I studied tax in Canada the tax act accepted many ways to determine the Fair Market Value (FMV). Houses are particularly easy as the owner can simply accept the local city rates valuation. Those that think their homes were undervalued could simply get revaluations privately (ie by a real estate agent etc.) - but what it meant at the time of owning the property depended on those wanting to sell vs those that wanted buy. Those wanting to sell wanted a higher valuation ; those wanted to own for long periods of time wanted a LOW valuation so they would pay lower property taxes. Eitherway, valuation was never an issue when it came to CGT calculations - neither side (tax dept. vs tax payer) came from the view of unfair FMV.

    In Canada (and i'm assuming IRD would follow a similar model), when a person dies "Deemed Disposition" applies. That is at the time of death, ALL assets are valued and considered sold. Like NZ, Canada has no estate or death tax. Again FMV aren't a problem upon death. If the death causes problems in estate asset sales, well then that's the fault of the deceased person for not moving the assets into a 'trust' while their were alive. But then any time you move assets to a trust (that is also considered a sale).

    "Primary Residence" means just that. Moving elsewhere because of the job and owning that new 2nd house for 10 years can not be deemed as a primary residence. Why should it? Realize most people barely have funds to buy their 1st home, let alone buying a 2nd home. I know some people buying their 5th rental home and it's very clear, they've held a real estate portfolio that is fully exempt of paying tax on the gain of their house (starting well over 10 years ago). How is this fair when if they invested in any OTHER asset class, they would be expected to pay tax on the gain? Anotherwords, why should real estate exempt any form of taxation other than paying rates? You can argue that the price of houses goes up in line of inflation but I beg to differ, especially in Auckland.

    As for how CGT would constrain growth and deter investment, yes I agree with that. Fortunately i'm able to keep my options open on the impact of CGT in the next 5 or 10 years and when I can see the effects (ie. my children having little chance of employment / lower standard of living / etc) we would be quick to move abroad.

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