Researchers: Keep CGT out of retirement savings
The Tax Working Group’s recommended tweaks to KiwiSaver are proof that any capital gains tax shouldn’t touch shares, retirement policy researchers say.
Tuesday, February 26th 2019, 6:00AM 
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Susan St John
The group released its final report last week, recommending a broad capital gains tax across all investment assets, including shares and business IP.
It would mean fund managers would have to apply a capital gains tax to Australasian shares bought and sold by their funds.
The group tried to offset the impact of that by making KiwiSaver more appealing to low-income people – suggesting a refund of the employer contribution tax credit for low-income earners, a reduction in the two lowest KiwiSaver PIE rates and increasing the rate at which the $520 member tax credit is earnt.
But Susan St John, director of the Retirement Policy Research Centre, said the group should not recommend tinkering with retirement savings policies to solve the problems a CGT might create.
She said it indicated that there were reasons to doubt the wisdom of any CGT regime that included shares.
St John said there were issues with all the suggestions, but the worst was the tax rate adjustments for the KiwiSaver PIE rates.
It would be a great pity to introduce these selective tax incentives with no analysis as to their impact or effect. One obvious problem is that to constrain the lower PIE rates to KiwiSaver alone would mean that people would potentially have two PIE rates. There would be inevitable pressure to extend the favourable treatment to all PIE schemes which would be very expensive and compound the inequity between PIE and non-PIE saving.
“None of these suggestions has been analysed for its distributional or gender effects. Retirement income policy should be left to the experts in retirement income policy,” said Claire Dale, research fellow at the centre.
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Kiwisaver (or any super fund) can only invest into the same 3 asset classes that individuals can; SHARES,PROPERTY, & FIXED INTEREST.
All 3 classes produce capital gain (rises & falls in capital value) and also produce income (ie; respectively, dividends or rent or interest).
"Absurdly" such retirement funds automatically deduct tax on both the capital gains and the income at a flat 33% and distribute the remainder of the profits as tax-paid.
The very people who are saving for their retirement are therefore cursed with a 33% capital gains tax (for which they are normally ZERO-rated) and here is the 'kicker' they are also cursed with a 33% income tax rate which is much higher than their own personal rate !!? The CGT thingy has been discussed for decades, and the proposed introduction details remain such a farce that it can only be an indication that the current government has been advised of some large economic "storms" ahead and may be considering using this CGT threat as an easy way out of being voted into another session in power?
How many people in 'power' or on the streets realise that CGT has been with us for 'yonks?'