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

[flyernzl]

The Greens 2014 election policy goes one step further by saying it would introduce a capital gains tax on all realised assets except the family home.

Exactly the policy that killed Labour's chances in the last election.

[Perry]

Slow learners, eh?
Or masochists.
Or both.

[Perry]

Labour, Greens and the rest of you cranially challenged lot - read this!

Top 10 Things People Don't Understand About Money
7 Sep 2016

5) Your house shouldn't be an investment
With all the talk of capital gains, it can be tempting to think of your homeowner self as an investor. But in general, your house is not an investment. Often it's a purchase made with emotional factors in mind, it provides somewhere for your family to live – but if you sold it, you'd have to buy something else in the same market, so the "gains" you might make on any increase in value are wiped out. That said, paying off a mortgage so you hit retirement without repayments or rent to worry about is a key part of being comfortable in old age.

So if someone in the media can get it, will the rest eventually wake up? Probably not.

Bold emphasis is mine.

[Cpt707]

....OK.. if that's the 'bottom line'..just go Equity Release' until the day you depart...

[azinda]

How will CG Tax work

Example;

Purchase price of investment property in 1993 - $160,000

Work done on house by self and employed builders, plumbers, electricians consists of:

New roof, recladding, new kitchen, new bathroom, replumbed, rewired - whole house, new flooring, new carport and drive, added a consevatory, gardens, regibbed, repainted interior and exterior, removed testyred ceiling coating, redid ceilings, new window frames, some new windows, some new doors, built laundry, new floors, joists, piles, new clothesline, window treatments, new insulation to meet legislation, new heat pump, security, alarm system, etc - 24 years of constant work , managing various tenants and paying tax on profit. Also paying accountants fees yearly and legal fees on a couple of occassions with tenant issues unresolved by joke of TT.

Now say house with all this work and upgrades done over the years sells for $760,000.
So $600,00 difference. Not $600,000 profit - as all the improvements and repairs cost after tax money and gst was paid on everything - materials and tradesmen when sometimes employed. the work I did myself was thousands of hours of labour - to get to this end result of a vastly better property now worth ($760,000 say).

So, is GC tax paid on the differential of $600,000 - created by 24 years of work and sinking money in?


Do we know what percentage CG tax will be?

Thanks

[eri]

imho

if labour get to make a coalition a CGT will still be a quite a way off

(national will be under a lot of pressure to introduce it too)

the easiest first step would be to just push out the existing 2yr bright-line test to 5yr

that could be done pretty quickly as all the solicitors etc. understand it and the legislation is largely in place

a quick step on that would allow the focus to shift to foreign buyer legislation etc

a 5 yr bright-line would only effect purchases before 2012 if introduced this year

[artemis]

Welcome to Propertytalk Azinda. As eri said it will be years before a CGT is brought in. Legislation would need Labour's working group to report first and the bill would go to select committee. There will be plenty of citizens making submissions. (Not that select committees necessarily take much notice.) So hang on to your example and use it to make a submission if or when the time comes.

[Don't believe the Hype]

How would a CGT work? ... frankly it won't, CGT has not kept house prices down in Aus where there has been a CGT since the late 80's (1986 from memory).

[eri]

to the liberal left

it means nothing that a CGT will be ineffective in controling housing prices

they want/need more money

to throw at intractable social issues

not because they can be fixed by throwing money at them

but because they NEED to feel

they are spending YOUR money

for the greater good

as THEY see it

[Anthonyacat]

When Labour was proposing a CGT six or so years ago there was the discussion of a "V-Day", where all assets in the country are valued or assigned a value, and that is the starting point for your CGT.

A proper, fair CGT as exist in some countries allow for capital improvements to be deducted, and also indexes for inflation.

No way of knowing what a NZ CGT will look like when it happens.

[Bob Kane]

Absolute waste of time trying to work out how a CGT would look like in NZ.
Wait until a government proposes it and they'll tell you how it will work.

[azinda]

Thanks for your views - Eri, Artemis, Anthonyacat, Hype, Bob.

It will be deflating if CG tax is passed - I gave one example of one property but I actually have 5 - to worry about the CG tax on.

Am thinking of methods to decrease/ ameliorate - the CG tax to be paid ( if this rip off tax is introduced).

One idea is to sell at a fraction of market value to kids (who, anyway, would eventually inherit a few but not all), as an early inheritance. They would then hold them long term as IP.

[Perry]

Any CGT will not do what the politicians et al say it will - improve housing affordability. Every o'seas example shows that, but the W'gton woodenheads never let the facts get in the way of another potential revenue stream. All a CGT will do will allow the government to take in revenue in real-todays-dollar-purchasing-power terms, all the while basing the tax on illusory inflated values - much of that inflation being a purchasing-power-mirage being caused by said government.

As others have commented, trying to guess at and prepare for the actual mechanics of it is wasted mental effort.

[Rosco]

Hi Azinda, the devil is always in the detail. At the moment there is no detail, so it would just be a big guess.

If a capital gain tax is introduced, it will go through different steps and the first draft will give you an idea of what is to come.

Ross

[Bluekiwi]

CGT could be nominal rate of return where you pay capital gains tax each based on the calculation that property double in value every 10 years.
You might not have to ever sell the rental to pay this tax annually.

Point being.
Their a million types of capital gains tax.

To my mind we already have it in place, its called "Rates".
The provision of services and infrastructure for everyone that doesn't own a house, paid for by home owning capitalists.

Hopefully we do get a "Capital Gains" tax and not just a "Capital" tax.