CGT reduces real estate/commercial property turnover, increases prices and never yields more than a fraction of the tax harvest its misty eyed optimistic proponents hope for. If you really have a deficit in your Budget, raising the GST is the second most reliable way of solving it.
The most reliable way is cutting unnecessary government expenditure.
Major
So my haven"t any Australian LIBERAL governments abolished their CGT since a LABOUR government introduced them in 1986???
I have never said CGT is bad. I have said badly designed CGT is bad e.g. Australian system. I have said it will not lower house prices as Parker claimed.
Why would anyone write off something pertaining to another business or profession instead of from where the expense was incurred?
Businesses such as vineyards and farms pay tax on their profits; not their turnover, and expenses do not form part of their profits. Goods taken for personal use must be proportioned out, and don't think for one second the IRD don't keep a strict eye on personal expenses. Go and talk to a few accountants and learn something rather than just parroting the garbage commonly espoused by the hoi-polloi.
FP, your idea of a good CGT is including the family home (not a goer, fundamentally incorrect as there is no rebate for interest costs or personal labour), nor any other income usually), and with repatriation (in other words, IRD will hardly ever see anything, as assets get sold and rolled into new investments). A Claytons CGT.
You know full well what Westerly was talking about: the ability to post losses in a farming or rental property business, where it is a reasonable concept and quite normal, to defray tax due in a professional business or other investment owned by the same entity.
I think we all know the difference between turnover and profits, and that income tax is levied on profits. It would be hard for an accountant to spot a difference of 5% or 10% in a major overhead(s), and in any case, accountants always use a clause that they have prepared their client's books based on information given to them.
FP, your idea of a good CGT is including the family home (not a goer, fundamentally incorrect as there is no rebate for interest costs or personal labour), nor any other income usually), and with repatriation (in other words, IRD will hardly ever see anything, as assets get sold and rolled into new investments). A Claytons CGT.
You know full well what Westerly was talking about: the ability to post losses in a farming or rental property business, where it is a reasonable concept and quite normal, to defray tax due in a professional business or other investment owned by the same entity.
I think we all know the difference between turnover and profits, and that income tax is levied on profits. It would be hard for an accountant to spot a difference of 5% or 10% in a major overhead(s), and in any case, accountants always use a clause that they have prepared their client's books based on information given to them.
There is no rebate for interest costs or personal labour on investment properties either. Of course IRD would see money if repatriation was allowed. Yes, some would be delayed, but with CGT there can be a reluctance to sell and/or trade up, so think about that. The reason Labour have rejected CGT in the past is because it stops things happening, and that's not good for any economy. Allowing repatriation eliminates that downside. Applying CGT to primary residence stops the absurd practice of building huge high spec'd house that aren't required - and that's happened to a huge degree in USA and Australia. It's stupid, but it happens, just like people put big money in the ridiculously low yielding Bonus Bonds scheme rather than earning interest - cos it's taxable. Plain nuts, but it happens. .
I have no idea what your second paragraph means. Costs can and should be applied where they are generated. There's no advantage in charging an expense to the wrong activity.
Of course some people will fiddle some costs, just as employees run up pvt. mileage in firms vehicles, take bits and pieces home, make pvt. toll calls from work phones and cell phones. It's not for an accountant to police things, as long as he/she doesn't knowingly misreport. The IRD are pretty active at assessing these things. Yes there will be the odd exception, but generally it's not a big deal. I can't think of anyone I know who is in business or self employed because of any tax advantage.
Last edited by fungus pudding; 04-10-2014 at 05:47 PM.
Even the family farm allows the write off of many day to day expenses not available to wage earners. Vehicles, telephones, etc. and and therefore reduce tax.
westerly
And what's wrong with a farmer writing off something like his telephone expensive to save a little tax. Firstly he needs that telephone to run the farm. Secondly, they don't always get the privilege of working nice set hours, if the sun decides to shine they have to make hay leading to some long long days. Then his $hith#ad employee doesn't turn up because he decided to have a night at the boozer instead and he needs to use his telephone to organize the solution. IMHO being able to claim a couple of grand of extra expense to not pay tax on is meagre compensation for the extra stuff they have to deal with over a salary and wage earner.
I appreciate it's not just a telephone and as you say vehicles etc. But I still say, well that's part of their compensation for doing what they do.
Don't believe they work hard? Go to a good old Canterbury dairy farm at 6am on a frosty winters morning when you can't even feel your fingers and your already been up for two hours, standing in a wet dark dairy shed getting shat on by cows and then your prize is to work all afternoon and do it all again the next day but in a bitterly cold southerly this time if you're lucky. I soon think you'd agree writing tax off the telephone is all good.
I unfortunately don't own a real farm (yet) or even work on one, but I don't hold a grudge against the guys who do own one. Sure they are in a great position because they have a huge amount of capital. Good on them.
Anyway if you're a salary and wage earner it's really not hard to start sneaky little hobby business that also allows you to claim expenses.
Hey EZ that good news that the Nats don't have a clear majority now isn't it
Now we will see if that kid Seymour is for his electorate or just John's plaything eh
Without Seymour RMA and employment things might be a difficult to bully through.
Somebody wrote the other day that the people of Epsom wouldn't want to see a RMA that encouraged higher density housing in their posh suburbs. Seymour fight for them now ...of course not. John might be nice to him and once he done a year as a good boy get a better job.
Deep down I hope Seymour plays really hardball but then again he might want some really right wing radical stuff.
There is no rebate for interest costs or personal labour on investment properties either. Of course IRD would see money if repatriation was allowed. Yes, some would be delayed, but with CGT there can be a reluctance to sell and/or trade up, so think about that. The reason Labour have rejected CGT in the past is because it stops things happening, and that's not good for any economy. Allowing repatriation eliminates that downside. Applying CGT to primary residence stops the absurd practice of building huge high spec'd house that aren't required - and that's happened to a huge degree in USA and Australia. It's stupid, but it happens, just like people put big money in the ridiculously low yielding Bonus Bonds scheme rather than earning interest - cos it's taxable. Plain nuts, but it happens. .
I have no idea what your second paragraph means. Costs can and should be applied where they are generated. There's no advantage in charging an expense to the wrong activity.
Of course some people will fiddle some costs, just as employees run up pvt. mileage in firms vehicles, take bits and pieces home, make pvt. toll calls from work phones and cell phones. It's not for an accountant to police things, as long as he/she doesn't knowingly misreport. The IRD are pretty active at assessing these things. Yes there will be the odd exception, but generally it's not a big deal. I can't think of anyone I know who is in business or self employed because of any tax advantage.
The interest paid on an investment property or farm is tax deductible. Not a full rebate, but it comes off their income for tax calculation purposes, that's right isn't it? So compared to a private homeowner, investors pay about 2/3 of the percentage interest costs if they borrow. They can save tax losses and bring them forward.
"CGT stops things happening", this is along the lines of MVT's powerful argument. I'll believe you when I see the data. I think the opposite will happen.
Domestic houses could easily have a regional price clamp on them, below which value they are not subject to CGT (not Labour policy at the moment). But many OTT houses lose money for their first owners, anyway.
Many people are self employed as contractors because of the tax advantage. They have to comply with the contractor rules though. Business people tend to figure out the tax advantages soon enough. I've always said it beats being employed, once you get through the first years of hard graft, but of course we can't all be business owners.
And what's wrong with a farmer writing off something like his telephone expensive to save a little tax. Firstly he needs that telephone to run the farm. Secondly, they don't always get the privilege of working nice set hours, if the sun decides to shine they have to make hay leading to some long long days. Then his $hith#ad employee doesn't turn up because he decided to have a night at the boozer instead and he needs to use his telephone to organize the solution. IMHO being able to claim a couple of grand of extra expense to not pay tax on is meagre compensation for the extra stuff they have to deal with over a salary and wage earner.
I appreciate it's not just a telephone and as you say vehicles etc. But I still say, well that's part of their compensation for doing what they do.
Don't believe they work hard? Go to a good old Canterbury dairy farm at 6am on a frosty winters morning when you can't even feel your fingers and your already been up for two hours, standing in a wet dark dairy shed getting shat on by cows and then your prize is to work all afternoon and do it all again the next day but in a bitterly cold southerly this time if you're lucky. I soon think you'd agree writing tax off the telephone is all good.
I unfortunately don't own a real farm (yet) or even work on one, but I don't hold a grudge against the guys who do own one. Sure they are in a great position because they have a huge amount of capital. Good on them.
Anyway if you're a salary and wage earner it's really not hard to start sneaky little hobby business that also allows you to claim expenses.
NBT, I've worked in a dairy shed too, but not in the cold south. I can go along with you on the smaller costs, but there are lots of major equipment purchases that are surely beyond the pale. Suzuki farm bike shops that also happen to sell Harleys, etc.
While talking about CGT, it's a fascinating coincidence that while Helen Clark's govt was in office, and everything in NZ started to look a lot better for most, dairy farm average price /Ha went from about $14,000 to $35,000. It has basically flatlined there nationwide (20k-40k) since National got in, although the monthly data for Waikato dairy farms ranges from $13,000 to $60,000/ha over the next few years to late 2013.It reached nearly $50,000/Ha with the high dairy payout last year, now dipping back.
All this means is that a dairy farmer who was fortunate enough to buy before the turn of the century, has seen an asset gain that pays off half of his farm, or on average (80Ha back then) is potentially about $2mill better off, tax free. Income generated from the asset is on top of that. Some income will be used to maintain or improve the farm, but again this reduces any income tax due. Buying another farm, as many have done, uses interest to defray income, looking for the next capital gain. Now the average dairy farm in NZ is 170Ha.
Most business owners will plough income back into the business, nothing wrong with that. But I don't see rural landowners as being as benevolent to our economy as they think they are. And they seem to have a massive say in how things are done around here.
I hope John follows the lead of Osborne ....we need rhetoric like this to wake up the those who think things are going to be onky dory fovthem. Might even leadvto marches on Parliament and a bit of civil unrest
The chancellor called on business leaders to raise their heads “above the parapet” and fight back against charities and others who he said were making arguments against the free market and standing in the way of economic prosperity.
And
“It is, I know, a difficult decision sometimes to put your head above the parapet, but that is the only way we are going to win this argument for an enterprising, business, low-tax economy that delivers prosperity for the people and generations to come.
“There is a big argument in our country … about our future, about whether we are a country that is for business, for enterprise, for the free market.”
I see what you mean, W69. Will the real National Party (John Key) step forward? Will they dare to present their economic results so far?
It seems obvious looking back, that the three Labour terms grew the pie for most people. More were employed, productivity was good, more SMEs were created, old debts paid off, even the farmers did remarkably well. National won't be breaking their running record of budget deficits this year either. Housing is increasingly unaffordable for first home-owners, unemployment stubbornly high, over 40,000 manufacturing jobs lost, our main dairy export earnings on a dive.
The obvious step for National will be to continue wage and beneficiary squeezes, surely that will fix a lot of issues with a lacklustre private sector that is showing its usual lack of positive direction - apart from their interest in lower taxes, maybe.
NBT, I've worked in a dairy shed too, but not in the cold south. I can go along with you on the smaller costs, but there are lots of major equipment purchases that are surely beyond the pale. Suzuki farm bike shops that also happen to sell Harleys, etc.
While talking about CGT, it's a fascinating coincidence that while Helen Clark's govt was in office, and everything in NZ started to look a lot better for most, dairy farm average price /Ha went from about $14,000 to $35,000. It has basically flatlined there nationwide (20k-40k) since National got in, although the monthly data for Waikato dairy farms ranges from $13,000 to $60,000/ha over the next few years to late 2013.It reached nearly $50,000/Ha with the high dairy payout last year, now dipping back.
All this means is that a dairy farmer who was fortunate enough to buy before the turn of the century, has seen an asset gain that pays off half of his farm, or on average (80Ha back then) is potentially about $2mill better off, tax free. Income generated from the asset is on top of that. Some income will be used to maintain or improve the farm, but again this reduces any income tax due. Buying another farm, as many have done, uses interest to defray income, looking for the next capital gain. Now the average dairy farm in NZ is 170Ha.
Most business owners will plough income back into the business, nothing wrong with that. But I don't see rural landowners as being as benevolent to our economy as they think they are. And they seem to have a massive say in how things are done around here.
1) I know that business with Harley's and 'new water pump' = boat motor stuff goes on el Z but those sorts of things are rightly illegal and that's a different matter, these people are choosing to be criminals.
2) If the farmer makes a profit each year and receives that as an income then he pays tax just like everybody else. I understand they might make tax free gains when the price of the farm goes up. Good on them. They have the capital tied up and they've worked hard and paid tax on their income like everybody else. Except for the phone expense which we agree is compensation for the 4am alarm and staff hassles.
3) They get one vote like every other kiwi. Sure farmers can lobby. Just like a union with all its numbers can lobby. So I don't think they have an overpowering say.
4) when is a farm a farm? Is a house on 2000m2 with some chickens a farm? Is a house on 10 hectares but no animals or crops etc a farm? Is 10 hectares a lifestyle block or a small farm? What about 20? What about 30? What's the cut off? While I'm sure this is answered somewhere in Labours 39 page doc, either way it's going to be messy. Say it's 50 acres. So the guy with 49 is laughing but his mate who bought the 51 acre block is now taxed at 15% so his property actually decreases in value because it's taxable. DC wrote it and he can't even work it out.
What I do find interesting is this. What does every party agree on? That raising wages through a smart clean economy would be a good thing for all. So why don't the parties all get together and work on doing exactly that? Part of the answer I think is because while it sounds great, what are they actually going to do? If there was all this magical clean smart money to be made, people would be out there doing it already. It's a myth. A sound bite invented by the C-T's of the left to attract votes. We'll pump money into tech like software development! What so we can compete with Indian programmers earning $5 an hour? If anyone knows what these great clean green future business ideas are please let me know so I can start it!
Originally Posted by Major von Tempsky
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