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

[flyernzl]

Which returns me to my original argument.

If someone buys a property, rents it out, runs it at a loss for the entire time that they own it, and then sells that property for more than they paid for it then - in the absence of any other valid reason - they bought it with the intention of making a profit on the resale.

Therefore, under current tax law they should pay tax on that profit.

No need to wally around with any new taxes, the IRD should just apply the tax law they already have.

[Lovethiscountry]

Exactly and speculators who are buying and selling are trading, so should be paying tax. Just enforce the existing law.

[speights boy]

If someone buys a property, rents it out, runs it at a loss for the entire time that they own it, and then sells that property for more than they paid for it then - in the absence of any other valid reason - they bought it with the intention of making a profit on the resale.
Therefore, under current tax law they should pay tax on that profit.

And if it's 5 years at a loss and then ten years at a profit what then?

What if they make $1 pa for all 15 years, is their capital gain taxable.

Just what is the cutoff for what is an acceptable profit for the rule to be applied as to whether they pay tax on the gain or not ?

So, you are saying the IRD use profit and loss as one way to prove intention under their interpretation of the law.
Are you 100% sure of that, or is that just your measure ?
If it is the IRD measure how much profit is required ?

[artemis]

There was an example posted here last week in which someone bought a rental recently that was costing them $10,000 pa out of their own pocket to run. Why on earth would someone do that as an investment, if not for eventual tax free capital gains ? They weren't growing a business by hiring another worker, they were simply sitting on the house and waiting for the price to increase (tax free)

Not necessarily. Time passes. Principal is paid down. Rents rise with the market. Break even point is reached. Profits begin to accrue. Income tax is paid. Eventually borrowing is repaid and there is a surplus of income over expenses.

That is a very common scenario. Been there myself several times, topping up while on a good income with a view to an income stream later.

[flyernzl]

The IRD already have their own guidelines as to what is a business and what can be classified as a hobby (and thus is not tax deductable).

To use the current Labour/Greens all-purpose cop-out line: "The exact details of how this will work will be looked at by our expert panel".

We all know that the experienced, knowledgeable and wise people on secure inflation-proofed salaries who are employed in the Public Service are far more capable of deciding how business should run and what profit margins should be allowable than any grasping mean-spirited rip-off merchants who are unlucky enough to comprise the business part of the economy.

[speights boy]

Not necessarily. Time passes. Principal is paid down. Rents rise with the market. Break even point is reached. Profits begin to accrue. Income tax is paid. Eventually borrowing is repaid and there is a surplus of income over expenses.

That is a very common scenario. Been there myself several times, topping up while on a good income with a view to an income stream later.

And if borrowings are kept being increased on that property in order to "recycle equity " and buy more rentals.....what then if no profit is made.?
What if only a small profit has been made over all the years before selling.....is the gain taxed or not ?
Where is the cutoff ?

[speights boy]

The IRD already have their own guidelines as to what is a business and what can be classified as a hobby (and thus is not tax deductable).

I can't see the relevance.
One single rental.....interest, rates, insurance etc are deductible....or are you saying IRD classify owning one rental as a hobby ?

[artemis]

And if borrowings are kept being increased on that property in order to "recycle equity " and buy more rentals.....what then if no profit is made.? What is only a small profit has been made over all the years before selling.....is the gain taxed or not ?

You could put that to the 'expert panel' If there ever is one.

[speights boy]

Interesting one today on your mother's house.

If Mum is on her deathbed and sells her house the week before she goes, there would be no CGT liability because it was her family home.

If she dies with the house unsold, and leaves it to you in her will, and you sell it a week after she dies then CGT applies (based on the price she paid for it so many years ago) because it is not your family home.

Out of interest flyer, where did you get this information from ?

[Maccachic]

There was an example posted here last week in which someone bought a rental recently that was costing them $10,000 pa out of their own pocket to run.
Why on earth would someone do that as an investment, if not for eventual tax free capital gains ?

They weren't growing a business by hiring another worker, they were simply sitting on the house and waiting for the price to increase (tax free)

To get a foot on the property ladder? For kids to live in while at Uni. Expected eventual rent rises like most businesses there is a few years where they run at a loss. Bad investment. Moved towns and family home now rented.. there are loads of reasons.

[eri]

this afternoon on radio live?

they asked cunliffe if he had consulted with the tax department and asked them if they could implement a cgt

he said yes, labour had absolutely done that

then they asked the tax department

who said

"no, we talk with the gov. not the opposition, so we haven't had any talks with labour about a cgt at all, if they win the election and form a gov. then and only then, will we talk with them about what they want and how we'll implement it"

???

you know when something is either incredibly complicated or poorly thought out

when all the people who should be able to answer questions about it

either can't answer questions or contradict each other

i generally take this to mean

half-baked idiots in control

do not get on the bus!

[speights boy]

"no, we talk with the gov. not the opposition, so we haven't had any talks with labour about a cgt at all, if they win the election and form a gov. then and only then, will we talk with them about what they want and how we'll implement it"

A couple of times during the debate John Key said we already have a CGT.
He even offered to send the legislation to Cunliffe.

[Winston001]

We all know that the experienced, knowledgeable and wise people on secure inflation-proofed salaries who are employed in the Public Service are far more capable of deciding how business should run and what profit margins should be allowable than any grasping mean-spirited rip-off merchants who are unlucky enough to comprise the business part of the economy.

Mmm...have you ever met any IRD staff? They don't have devils horns, they are just mum and dads like the rest of us.

[Winston001]

To get a foot on the property ladder? For kids to live in while at Uni. Expected eventual rent rises like most businesses there is a few years where they run at a loss. Bad investment. Moved towns and family home now rented.. there are loads of reasons.

Well you haven't dealt with ordinary folks. People who put their life savings into a business which doesn't have a profit become bankrupt. Simple and sad. I've looked across the desk at many.

[donna]

I read on NZH - someone asking Labour what happens when a small business owner leverages the family home to build the business - would CGT apply - no clear answer was forthcoming.

So many small businesses have leveraged off their number one asset over securing a business loan - one of the main reasons for doing so - 'it's easy' and quick and also there are more hoops to jump through going down the business loan path. So for a small business owner it also works out cheaper to up your mortgage than get the business loan.

What a minefield -