If National wins ...

[fungus pudding]

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.

Interest comes off their turnover to calculate taxable profit. It is not a rebate in any way. A rebate is where a supplier makes a refund or a return is given. Forget popular jargon - that is correct. A homeowner buys for his benefit, not to provide his income or increase his taxable income; if part of the home is an income producing flat or similar then they will incur expenses which they can deduct fronm their income to assess profit; although homeowners may take in a border and not declare it, (unless the rules have changed recently).
As far as CGT stopping things happening - I have quite some experience in Australian commercial and industrial property. I assure you it is far more difficult to conclude a deal over there solely because of CGT. There are often sensible reasons for industrial owners (more-so owner operators) to swap or shift premises. CGT stops a lot of desirable mnoves. Go and try it around Queensland.

[elZorro]

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!

Great post NBT. I have to agree with a lot of it. Farmers do lobby well however. Federated Farmers for one. During this election it seemed that every farm paddock near a road sprouted a National sign. When the local Labour lads tried that, even on the odd bit of land owned by Labour voters, the leasehold farm operators made them put the signs on the fenceline, where it was less effective.

Point 2, it is normally the bank who has their paper capital tied up. Farmers don't have to pay off a lot of the farm themselves over the longer term, just the interest. Capital gains and waiting for a high point in the cycle will do the rest: at some point if they can hold on, the capital gain will more than equal their original investment that they borrowed. They will have doubled their money, or more.

I'm not sure when a lifestyle block becomes a farm either.

Last point: yes of course, there is money in clean-tech. look at the money Lanzatech has been getting into the coffers. No profits yet though. We will need govt support to get many of these risky capital-intensive ideas off the ground, but ongoing work into biodiesel would seem a smart idea. Carbon neutral, and the price of mobile energy resources will keep going up. Solar gear is a lot cheaper than it was.

I take your point about whether we should look at IT. Xero is trying hard, still no profits yet, but they are big employers. The looming IRD project should stay here. India might pay their programmers $5/hr, but bills out at NZ$25 quite often. I tried that, I received poor results from one outfit. I could have done better here for the same money.

[elZorro]

Interest comes off their turnover to calculate taxable profit. It is not a rebate in any way. A rebate is where a supplier makes a refund or a return is given. Forget popular jargon - that is correct. A homeowner buys for his benefit, not to provide his income or increase his taxable income; if part of the home is an income producing flat or similar then they will incur expenses which they can deduct fronm their income to assess profit; although homeowners may take in a border and not declare it, (unless the rules have changed recently).
As far as CGT stopping things happening - I have quite some experience in Australian commercial and industrial property. I assure you it is far more difficult to conclude a deal over there solely because of CGT. There are often sensible reasons for industrial owners (more-so owner operators) to swap or shift premises. CGT stops a lot of desirable mnoves. Go and try it around Queensland.

FP, OK, I was wrong, the interest isn't a rebate, it's an expense. Call it what you like, but when you can invest in an operation where history tells you that you are almost certain to get a good (but not spectacular) long term capital gain, that it won't be taxed, but all your expenses and interest costs will be deducted from your income from the asset for the duration, for tax purposes, then it's a bit of a no-brainer when you have the startup capital.

Note that most manufacturing businesses, startups, new technology etc, don't have guaranteed profit records, or surety of capital safety. They can provide stunning returns, also untaxed over the long term, but carry greater risks. These operations also tend to employ more people, with wide-ranging skill bases.

A CGT is designed to change the perception of those with new capital. Would they buy into a farm or commercial building knowing that the stable but average capital gain will be taxed at about 15%, or would they instead look at an investment with a higher possible capital gain? You have noted that in Queensland, commercial property owners that were invested, stay put. It has in effect clamped some of that sector, just as it was designed to do.

New capital is probably going elsewhere, and overall, Australia has more prosperous businesses, better productivity, higher wages.

[artemis]

1) .... 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!

I agree that if there are good ideas for clean and smart businesses people would be doing it.There does seem to be other people's money available for at least some startups - Callaghan fund, VC funds, crowdfunding. Perhaps all these advocates for clean, green and smart businesses are quietly working on their business plans with costs based on the 'living wage', assessing the risks they plan to take, saving their pennies to get started.

What do you reckon?

[artemis]

............ Xero is trying hard, still no profits yet, but they are big employers...... .

Not a good example. Xero has a plan. It is tracking well. It does not include profit. Yet. They don't seem to have any difficulty raising capital.

[fungus pudding]

FP, OK, I was wrong, the interest isn't a rebate, it's an expense. Call it what you like, but when you can invest in an operation where history tells you that you are almost certain to get a good (but not spectacular) long term capital gain, that it won't be taxed, but all your expenses and interest costs will be deducted from your income from the asset for the duration, for tax purposes, then it's a bit of a no-brainer when you have the startup capital.

Note that most manufacturing businesses, startups, new technology etc, don't have guaranteed profit records, or surety of capital safety. They can provide stunning returns, also untaxed over the long term, but carry greater risks. These operations also tend to employ more people, with wide-ranging skill bases.

A CGT is designed to change the perception of those with new capital. Would they buy into a farm or commercial building knowing that the stable but average capital gain will be taxed at about 15%, or would they instead look at an investment with a higher possible capital gain? You have noted that in Queensland, commercial property owners that were invested, stay put. It has in effect clamped some of that sector, just as it was designed to do.

New capital is probably going elsewhere, and overall, Australia has more prosperous businesses, better productivity, higher wages.

You have a closed mind to the downsides of CGT - there are some, which is not to say it's all bad. A land tax exempting personal property (homes and holiday homes) paid annually is better, but still has hooks. Actually NZ's system at the moment is pretty good although IRD did get a bit slack on traders for a decade or so. They're ferocious at present. Anyway it's all irrelevant as at long last Labour seem prepared to listen to objections to their policies, whereas they wouldn't even discuss CGT before. In fact it was only after Cunliffe wouldn't answer questions about it that Parker stated there would be a panel to finalise details. That was ludicrous going into their second election with CGT as a policy. That was indicative of some of their policies and the reason for their downfall. So I'll bet my bottom dollar if they really want to analyse the pros and cons of their policies as they claim , that CGT will not be heard of again. It's not all bad, but it's not all good either and they've been looking at one side in the hope it would placate the envious.
I should add that much of that envy has been driven by Labour and silly claims about the rich not paying tax, and pure b/s about growing inequality. Both provably wrong.

[westerly]

I should add that much of that envy has been driven by Labour and silly claims about the rich not paying tax, and pure b/s about growing inequality. Both provably wrong.

Thats where your arguement turns into propoganda. Have a look at the financial statements for Soho Properties

westerly

[fungus pudding]

Thats where your arguement turns into propoganda. Have a look at the financial statements for Soho Properties

westerly

What's your point?

[minimoke]

[QUOTE=elZorro;509867]

Many people are self employed as contractors because of the tax advantage. [/quote| Excellent so all I need to do to make $0.30 is to spend $1.00.

They have to comply with the contractor rules though. Business people tend to figure out the tax advantages soon enough.

And here was me thinking you only paid tax when you made a profit. So there is an advantage to spending to cut your tax. Who'd have thought.

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.

Well, I'll need to remind all those tradesmen and Mr Green people I know how good their life is. That is until they have an accident and fond their tax fiddles have reduced their taxable income meaning they get bugger all compo. Have you ever converted the hours you work in a week to an hourly rate - there are loads of "business people" who would be better off working at Maccas.

[couta1]

Yes MM that's why I switched to agreed value compensation with ACC, if I have an accident and can't work I don't have to produce any accounts or the like and can even work part time and still get the full amount agreed upon paid to me. Disc-Have never been on ACC in 24 years of self employment but like the reduced levy payments using the agreed amount option.