Capital Gains Tax? Keep related posts in this thread, please.

[speights boy]

How about same tax laws for individual workers & companies? etc.

Yeah, you're right.
Next thing you know they'd be putting up the tax on petrol next week.
Ratbags.......oh, hang on a minute......

[Rosco]

Hi Jrad,

From a practical perspective, IRD is not normally worried about your personal house, as long as there isn't a very clear pattern of buying and selling. There was a recent case where a Trust purchased 12 sections, built 11 houses and sold them all quickly. Why they did get done for tax, the IRD only did them for a number, 7 of the trades of the top of my head. So as these were all personal home, IRD was much less aggressive. I think many would argue all 12 were taxable.
A property trader client of ours was audited by IRD late last year, and the IRD told our client that they weren't interested in their personal houses, as long as they were true personal houses, and not sold too quickly. They had a few personal houses sales over the last 10 year, some not tainted as before association rule changes, and some tainted as after.


From a technical perspective, it is a very complex area and I (or any other property accountant) would need to look at your situation fully.

Have a look at some of my other posts on PT or on my website. Happy to have a chat for 5-10 minutes, but I won't answer your specific question during that time.

Ross

[Winston001]

And the longer I have the rentals before passing them on to my kids and the more time they have them and capital gains add up.
They will never want to sell as it just wont make economic sense.

You buy a house for 300k, and have a mortgage of 250k, the value goes up to 1,200k over 20 years.

Just a reality check - most New Zealanders do not live in Auckland. I'm sitting in a modest 80yr old gentleman's residence purchased in 1991, the value of which has doubled in 20 years. To $350k.

Its just going to make property investor's and their family's hold on to rental property longer.

You'd think so wouldn't you but my 30yrs experience of dealing with deceased estates is that families fall apart once the will is read. Emotions rule. Which isn't really surprising. None of us can predict who our children will marry or what direction their lives will take.

[jrad]

Thanks for your reply Rosco.

I am overseas this week so will go over what you have said and get in touch when I am back.

cheers
James

[Perry]

One thing that Labour and all governments are good at is failing to learn from other's mistakes.
And failing to heed common sense advice. That way, tax industry lawyers & accountants prosper.

Mr Oliver (IRD) says the big tax issues don't change much over time – the rate, concessions
versus broad base, tax everyone or only some people – and there are still only three places
to turn for tax: labour income, capital income and land.

Yet he defends the lack of New Zealand capital gains and land taxes.

It’s not purist, just a practicality,” he says, noting that IRD changed from advocating capital
gains to believing it couldn't be done efficiently.

No one taxes the family home and, in New Zealand, what do you do about farming? The
common farming career progression is to trade to larger farms. A capital gains tax would
kill that. What would you do about communally owned Maori land? Capital taxes are levied
at death. You can't tax Maori land that way.”

The alternative is a capital gains tax as complex as Australia’s, where “they have whole
conferences on what should be in and what should be out”.

[flyernzl]

Labour worrying about farmers? That'd be new.

[Wayne]

Good points though!

[Perry]

Labour worrying about farmers? That'd be new.

That statement was from an IRD person - not one of the reds.

[Winston001]

The larger issue is whether a Capital Gains tax should be introduced in New Zealand. It is a complex and ultimately unanswerable question. Which means either the idea will fade away or it will be enacted by a future Parliament.

A pure CGT would capture major assets but not the arcane such as collectable cars, paintings, antiques, and stamps et al. Logically that would include the family home and superannuation fund but politicians are scared to do that so more work for lawyers and accountants. Mmm...win win.

Alternatively a tax on deceased estates would be very effective and even better, would deliver tax revenue to the IRD immediately. Indeed lets tweak it: tax each beneficiary ie. any inheiritance above $250,000 is taxed at 25%. Simple and easy to administer.

[Bob Kane]

The larger issue is whether a Capital Gains tax should be introduced in New Zealand. It is a complex and ultimately unanswerable question.

Not really IMHO.
Why introduce CGT?
If it's to rein in house prices then it won't achieve that - CGT in other countries hasn't reduced house prices.
If it's to raise revenue then it's an expensive and complicated method to achieve that - there are many simpler ways to raise revenue.
It seems to be an envy-tax which will somehow even up society.
I'm still waiting for a clear, reasoned argument why it should be introduced.

[Winston001]

The principle is to widen the tax base. Currently the government raises revenue from the population's income (PAYE etc) and spending (GST). Plus a bit from fuel, alcohol, tobacco etc.

But essentially there are no other tax streams.

Taxing the increases in wealth from capital assets spreads the load further across the whole of society. People who have low incomes and Family Support effectively pay no tax but may nevertheless gain substantial capital increases. Taxing the increase is a way to bring them into the tax net.

Unfortunately this argument is undone if the family home is excluded from CGT.

[PC]

How about less tax and less government.
All this stealing and wasting is annoying and inefficient.
Very little of what they take actually ends up helping anyone.

[eri]

can't do that

too many people

depend on YOU

for all their daily needs

this depresses them

so they can't raise their children adequately

so YOU are required to work longer and harder to support them too

but don't point this out to them or tell them what to do

because this would be demeaning to them

and their right

to not be demeaned

is higher than your right

to ask that YOUR time and money

is spent wisely

[Bluekiwi]

How about less tax and less government.
All this stealing and wasting is annoying and inefficient.
Very little of what they take actually ends up helping anyone.

The admin costs of charging people tax and then giving it back to them in the form of assistance, absolutely astounds me.

Just get it right first time through a tax rate that is well thought out.

Its hardly rocket science.

[speights boy]

The admin costs of charging people tax and then giving it back to them in the form of assistance, absolutely astounds me.

Perhaps some of the thinking with depreciation.