If National wins ...

[fungus pudding]

Wrong FP. They propose to exempt the "family home". whatever that means. I think CGT or any other tax should be applied universally and without exemptions, like our very successful GST.

Yes. I should have mentioned that. I can see good and bad in a CGT. It definitely should have a repatriation clause, or it stops things happening, and it should include the family home, be it a packing case on a swamp or a gold plated mansion. Otherwise it's nonsense. Many countries tax only that amount in excess of the inflation rate, and there's an argument to support that. It's an extremely tricky tax and will still have that difficulty of deciding where the line is drawn between what is to be taxed as income and what is taxed as capital gain.

[iceman]

Yes. I should have mentioned that. I can see good and bad in a CGT. It definitely should have a repatriation clause, or it stops things happening, and it should include the family home, be it a packing case on a swamp or a gold plated mansion. Otherwise it's nonsense. Many countries tax only that amount in excess of the inflation rate, and there's an argument to support that. It's an extremely tricky tax and will still have that difficulty of deciding where the line is drawn between what is to be taxed as income and what is taxed as capital gain.

Some countries also only apply the tax "at exit" so do not tax you as long as you reinvest the money within a certain time frame. I like that idea.

[fungus pudding]

Some countries also only apply the tax "at exit" so do not tax you as long as you reinvest the money within a certain time frame. I like that idea.

That's what I mean by a repatriation clause. I agree that it is a good idea; or more specifically a bad idea to not allow it.

[iceman]

Article in today's Herald about CGT !

http://www.nzherald.co.nz/opinion/ne...ectid=11197320

[winner69]

Great move by Mr Rabbit this week

All the things John might have talked about not that important if we stroke John's ego and invite him to G20 .....and tell the world John is his new mentor

Classy stuff .......and John is happy as

[elZorro]

That's what I mean by a repatriation clause. I agree that it is a good idea; or more specifically a bad idea to not allow it.

That sounds like the CGT you have when you're not having a CGT. Sam Morgan sells a new TradeMe in the future, pays no tax yet again, because he simply finds another investment to move into. Who wouldn't?

I can see where you guys are coming from. Add in the family home, and a CGT will never get over the line. Or make it easy to bypass the whole thing at the end, and there will be no effect anyway.

The family home can be left out of the CGT, as long as it is below a certain value depending on the region of NZ. It would be rare for a family home to do very well, after people have paid their tax-paid income across in interest and capital repayments, updated an older house because they are living in it, putting their own labour in.

But a rental is a different kettle of fish. The interest comes off the income, other costs are defrayed against tax due, and rentals are notorious for having less spent on upkeep. If that was not the case, the insulation figures for NZ would be a lot better. Commercial buildings are similar, with the landlord only needing to keep the place watertight, a good water and power supply, and the tenant usually has to cover all internal upgrades on top of the longer-term lease. This situation is written into the standard lease agreements.

So please don't insult the left's intelligence by stating that a CGT has to include the family home. It can stay out, that would be only fair. And a repatriation clause undermines the whole thing. If you make a good clean profit on a business sale or additional property sale, you need to pay some tax on it, to be fair to everyone else. End of story.

It has been a great few days for NZ. We won the Sevens in Wellington, and Metiria Turei became the first female politician to speak on Te Tii Marae, a full 16 years after Helen Clark was denied the privilege. It shows that progress is being made, it's slow, but we are moving towards a more equal society, where everyone gets a fair go.

http://www.stuff.co.nz/national/poli...t-Te-Tii-Marae

[fungus pudding]

That sounds like the CGT you have when you're not having a CGT. Sam Morgan sells a new TradeMe in the future, pays no tax yet again, because he simply finds another investment to move into. Who wouldn't?

Any profit from business, land and buildings should be taxed only on exit. It's unrealistic to call it taxable profit if it goes straight into another venture likely to further taxable income, as opposed to payable on exit when it becomes free to spend on personal matters. So what if Sam Morgan's next business venture absorbs all his money from previous sale? Sounds like he's doing his bit.
I've just sold a small vacant commercial building - try as I might I could not find tenants because it is the last remaining commercial building in what has become a student residential area (in Dunedin). I was able to sell the site for student flat development at a price a bit below its theoretical commercial value. I am about to buy another property to replace my lost income. To do that will cost me just on $100,000 more. Question: Have I made a profit?

P.S. I understand Sam Morgan did not repatriate a large % of the sale of trademe, but paid out a lot to shareholders which may or may not have been reinvested. I have no argument with that being taxed - if CGT is introduced. Overall I hope it isn't. It does have a nasty downside.

[elZorro]

Any profit from business, land and buildings should be taxed only on exit. It's unrealistic to call it taxable profit if it goes straight into another venture likely to further taxable income, as opposed to payable on exit when it becomes free to spend on personal matters. So what if Sam Morgan's next business venture absorbs all his money from previous sale? Sounds like he's doing his bit.
I've just sold a small vacant commercial building - try as I might I could not find tenants because it is the last remaining commercial building in what has become a student residential area (in Dunedin). I was able to sell the site for student flat development at a price a bit below its theoretical commercial value. I am about to buy another property to replace my lost income. To do that will cost me just on $100,000 more. Question: Have I made a profit?

P.S. I understand Sam Morgan did not repatriate a large % of the sale of trademe, but paid out a lot to shareholders which may or may not have been reinvested. I have no argument with that being taxed - if CGT is introduced. Overall I hope it isn't. It does have a nasty downside.

I guess the property situation will be a complex beast: on one side there is a trading situation which may have been in loss for a period, giving a tax rebate of about 30%, offsetting other income tax due. On the capital side, there would have been a capital gain over time, so presumably what has now paid itself off with income and inflation, is still not quite able to meet the cost of a particular replacement building.

What is not clear is how profitable the first commercial building was over the period of ownership, therefore what the criteria are for the new building. In any case, a $100,000 shortfall for a commercial building might cost just 7% interest, or $7,000 a year. There would be no immediate need to pay out the capital shortfall, and in any case most of the capital needed for the building is already there.

Assuming that the renovation on the first commercial property is all carried out by the next owner, and that you have decided it is not as good an investment idea as a replacement commercial property lease, and the latter is preferable to simply holding the cash proceeds in a bank account, then I think the situation is clear. The sale of the building is really the sale of a business, you might buy another business to replace its income, but at this point in time the first business will have made a capital gain.

Ensuring investors keep rolling their funds into new projects is not a big issue. Farms and businesses are being sold all the time, that money has to go somewhere. The investor still gets to keep most of the gains with a CGT.

[fungus pudding]

I guess the property situation will be a complex beast: on one side there is a trading situation which may have been in loss for a period, giving a tax rebate of about 30%, offsetting other income tax due. On the capital side, there would have been a capital gain over time, so presumably what has now paid itself off with income and inflation, is still not quite able to meet the cost of a particular replacement building.

What is not clear is how profitable the first commercial building was over the period of ownership, therefore what the criteria are for the new building. In any case, a $100,000 shortfall for a commercial building might cost just 7% interest, or $7,000 a year. There would be no immediate need to pay out the capital shortfall, and in any case most of the capital needed for the building is already there.

Assuming that the renovation on the first commercial property is all carried out by the next owner, and that you have decided it is not as good an investment idea as a replacement commercial property lease, and the latter is preferable to simply holding the cash proceeds in a bank account, then I think the situation is clear. The sale of the building is really the sale of a business, you might buy another business to replace its income, but at this point in time the first business will have made a capital gain.

Ensuring investors keep rolling their funds into new projects is not a big issue. Farms and businesses are being sold all the time, that money has to go somewhere. The investor still gets to keep most of the gains with a CGT.

What on earth does all that mean? My building, which I had owned for 18 years, has had no deductible expenses. Tenants paid everything - no interest because I haven't used mortgages for decades. The building will be demolished by new owner. So you appear to think that had I been able to keep that building with a tenant I should not be liable for tax, but if I acquire another building by reusing the capital I should pay tax. That is not logical. In the first case, I have made a profit but not realised it (by not selling it). In the second case, I have made the same profit, but having to pay tax because I have moved it from one pocket to another.
Here is another one. Young fellow I know has moved from Christchurch to Dunedin because his firm relocated after losing their building in the earthquake. He owned an old house in flats in Ch-ch but found he was having to make frequent trips there to put out the inevitable fires that come with residential tenants. So he sold at a considerable 'profit'. He has purchased a similar property in Dunedin to maintain his long term goal of long term ownership to supplement his income and for eventual retirement. Believe me, with sales commission and legal fees for both transactions, valuations and other due diligence costs, he is well and truly out of pocket. Under current tax law the IRD would not tax him on the sale. Under your scheme, you would prefer he was taxed even though he is no better off (has not profited) . Hard to see what that achieves.

[elZorro]

What on earth does all that mean? My building, which I had owned for 18 years, has had no deductible expenses. Tenants paid everything - no interest because I haven't used mortgages for decades. The building will be demolished by new owner. So you appear to think that had I been able to keep that building with a tenant I should not be liable for tax, but if I acquire another building by reusing the capital I should pay tax. That is not logical. In the first case, I have made a profit but not realised it (by not selling it). In the second case, I have made the same profit, but having to pay tax because I have moved it from one pocket to another.
Here is another one. Young fellow I know has moved from Christchurch to Dunedin because his firm relocated after losing their building in the earthquake. He owned an old house in flats in Ch-ch but found he was having to make frequent trips there to put out the inevitable fires that come with residential tenants. So he sold at a considerable 'profit'. He has purchased a similar property in Dunedin to maintain his long term goal of long term ownership to supplement his income and for eventual retirement. Believe me, with sales commission and legal fees for both transactions, valuations and other due diligence costs, he is well and truly out of pocket. Under current tax law the IRD would not tax him on the sale. Under your scheme, you would prefer he was taxed even though he is no better off (has not profited) . Hard to see what that achieves.

FP, you have confirmed my view of some landlords. You owned a building for 18 years and had to do no upkeep on your side of the lease agreement? Obviously it was not tidied up enough to interest a new tenant. And now it is to be demolished, so you were land-banking with that asset. Your situation and the one the younger investor sees, are different. In one, the capital gain must have been quite small if it didn't cover the selling and buying costs. So he would have little CGT to bother about.

Your ownership of the first building was mainly concerned with the appreciation of the land value over time, otherwise you'd have tried to ensure the building was too useful as a business premises to be pulled down.

Now that the property has been sold, there is a real market valuation on it, the cash is there, and that is the only time in 18 years that a CGT could realistically be levelled. All those employee suckers out there, who pay tax on all of their income, and most of their spending, quite rightfully think that capital investment profits are overdue for a tax, to match other countries.