Talking tax

Capital. Gains. Tax. Three little words that strike fear into the hearts of many New Zealanders.

Opposition to a capital gains tax (CGT) is so deep-seated that it has crossed ideological barriers to gain a reputation as a highly effective vote killer.

New Zealand is somewhat unusual in its position as many similar countries - including our closest neighbour Australia – have long had capital gains taxes in place.

But resistance to it is such that it has been trialled and dumped as a tax policy many times.

Likewise a long series of tax reviews and working groups have considered a CGT before deciding not to recommend the introduction of one.

None the less, when the current Labour-led Government took power they quickly set up their Tax Working Group (TWG) to investigate how the tax system might be reformed to make it more equitable.

Since then, it’s been an open secret that the introduction of a CGT is on the agenda.

While the TWG’s remit is to advise on wide ranging tax reforms, public attention has been firmly fixed on whether or not it will recommend a capital gains tax on residential property.

It makes it clear that the TWG believes capital income – gains from the sale of capital assets like property – is taxed inconsistently and that this situation needed to be rectified.

But rather than making a concrete recommendation on a CGT, as many hoped it would, the TWG emphasises that more work needs to be done before any conclusions can be reached.

So what does the report have to say and what are the implications for investors? In this month’s issue of NZ Property Investor magazine we find out.

To read more about the Tax Working Group’s interim report, click here to get the digital issue of NZ Property Investor magazine.

Subscribe to NZ Property Investor magazine here to get great stories like this delivered to your mailbox every month.

Comments from our readers

On 6 November 2018 at 1:57 pm michaeljakob said:

CGT is a deceitful 'tax' unless it is tied to inflation. Taxing gross profit on a property sale is lucrative for governments but as inflation causes ALL costs to increase one could conceivably sell a property for a capital gain when what the proceeds actually buys is less than what they bought at the time a property was originally purchased.
Governments do not index a property cost base against inflation. If they did it would be fair and the only thing investors would need to watch is the validity of CPI figures so that they are not fabricated like they are here in Australia. Unashamedly FAKE so that average Australians are held to a falling standard of living and cost of living wage increases are never compensated for.

Good luck to kiwis. You appear to have a much more honest and fairer system of government in your country. Hopefully the CGT issue fizzles, but if brought in it needs to be transparent and fair. In Australia it is just a blatant money grab resulting in real losses for investors unless they can pick that extraordinary location to invest in. Think Auckland.

On 8 November 2018 at 10:34 am Sooky1 said:

There is one thing that we all have to come to grips with all Labour Governments always have an insatiable demand for money they will not gve a hoot as to where it comes from so long as they get their hands on it and that money will get redirected to the lower echelons of society! as their Socialist beliefs determine that those feeding on the bottom, deserve to have an identical standard of living as the rest of society, whether they get out of bed before lunch time or not! I'm in my 70's now and it 15 years NZ will become a Socialist Country dominating with Beneficiaries simply because they are the human breeders in society, and it is my belief in time the numbers of them will dominate Elections! and that being the situation a Labour led Government is going to be searching relentlessly to dream up all sorts of new Taxes, you will have already noticed the first thing this current Government did was to introduce the Tax committee, this committee will dream up Taxes from all over the shop to fund their giveaway strategies, the other massive thing they are in the process of installing is 100's of thousands of State owned houses so they can house their decipals!! take a look at the wider picture!! we the taxpayers will!! house the bottom feeders with a freeish house to live in at a peppercorn rent, now this is what this Labour Government is all about voters got wise to it when Mizzz Clarke was in and she got a DCM but she went far too far with her power and started to interfere within our homes and family lives! remember light bulbs and showering with a bucket between out legs etc! Tax is going to cripple this countries workers and the bottom feeders will dominate the country watch wait and see, we owned 13 rental properties at one stage got Taxed on everything and had to pay all credits back when we were forced to sell up because I had an irreparable Accident 20+ years of blood sweat and effort for very little return the Government of the day took it all, even if this Government institutes a Capital Gains Tax it's only going to be one of many new Taxes we will just have to find ways around it, but it will take a huge amount of investors out of the market and it's going to push up house prices incredibly work it out people!! in time we will need to rename the IRD after one of the Socialist/Communist dictators like the IDI Imin dept of income perhaps?

The Tax Working Group’s interim report means the possibility of a capital gains tax is the talk of the town, so NZ Property Investor finds out what it means for investors.

Monday, November 5th 2018, 9:31AM 2 Comments

Comments from our readers

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