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

[Perry]

Capital gains tax plan not geared for capital losses

The fact that the Tax Working Group wants to ring-fence capital losses shows that they haven't come to grips with how a proposed capital gains tax would work when assets are losing value, Tenancies War spokesman Mike Butler said today.

Property values have been increasing for a relatively long time so that the proposals released today appear to have assumed that prices will continue to increase forever, creating a goldmine for the Government, Mr Butler said.

But the golden weather for investors is ending. The proposed capital gains tax comes on top of a raft of punitive changes for rental property owners which make property investment no longer attractive, driving property values down, he said.

Talk to any accountant. Now, many owners are unloading rental properties that have become loss-making liabilities and the Tax Working Group appears to have resorted to loss ring-fencing to avoid giving capital loss refunds to investors, Mr Butler said.

It won't be a matter of investors timing the sale of assets to their advantage, he said.

It will simply be a matter of investors selling for whatever they can to stop haemorrhaging cash to a loss-making investment, he said.

We already have 116,000 negatively geared rental property owners who declare an average annual loss of $7138 who will sell if losses are ring-fenced if and when the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill becomes law.

Without those 116,000 owners, by the time a capital gains tax may become law the property investment environment will be vastly different than it is now with many selling at a loss, he said.

Weakness on capital losses is just one of the many problems with the proposal.

Capital gains will be charged at 33 percent for the majority of taxpayers – one of the most punitive capital gains tax regimes in the world, and more than twice the rate proposed by the Labour Party at the 2011 and 2014 elections.

The announcement of the proposed new tax was badly timed and coincided with news that more than 10,000 people are now waiting for a state house when under the previous government it was around 4000, he said.

Where will renters live when rental properties will be even harder to find than now? Mr Butler said.

Stop the War on Tenancies is a group that - since last October - has been highlighting the evidence that successive governments have ignored while creating problematic rental property policy.

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Contact:
Mike Butler 27-277 7295
[email protected]

[artemis]

... Where will renters live when rental properties will be even harder to find than now? Mr Butler said.....

There are 'rentals' where construction is already under way and able to scale up quite quickly to meet increased demand.

They are retirement villages where residents have a licence to occupy. So a type of rental but much more secure and long term.

Some older rental owners will sell the rentals and their own home, take the tax free proceeds, sign up for a retirement unit and toddle off on a luxury cruise while the unit is being built.

The retirement village sector will be smiling.

[flyernzl]

You really have to look at why they want to do this.

The Government already has enough money. They are currently running a surplus. Any shortfall 'for hospitals and schools' is therefore right now a political rather than an economic decision.

The wealthy probably have medical insurance, are sending their children to fee-paying private schools, and have arranged their finances to cater for themselves in their old age. Therefore they are actually - right now - paying more than 'their fair share of tax'.

The claim is that any CGT will be 'revenue neutral'. Note the careful choice of words here. Any new tax system will cost money (lots of money) to administer - office, staff, forms, stamps, paper. So to pay for that and be revenue neutral the total tax take will need to go up to cover that extra administrative cost.

So my view is that a Capital Gains Tax is purely an envy tax - you have it, I hate that you have it, so I'm going to punish you for having it - just because I can.

[Cpt707]

So is it possible to have a Holiday home owned by a 'Trust' and another property as your excluded asset in your own name and in the future sell the Holiday home owned by a 'Trust' with out capital gains tax..?? If the Future of Tax -Final report is activated.??

[eri]

the view this morning

seems to be that the coalition

will whittle away at all the recommendations to tax business, shares, farms etc

and after careful consideration

decide to only go after rental property owners

Such are their differences, it is quite possible that when the Government's final position is revealed in April,
that the only new tax on which they all agree is a capital gains tax on residential investment property.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12206113

given the make-up of the group, and the brief it was given, its hard to believe the Government wasn't well aware of what would be delivered today.

On that basis you'd assume they have a grand strategy at play.

reset the dial on Capital Gains Tax to the extent that introducing a tougher regime targeting property investors now looks mild-mannered and relatively uncontroversial.

https://www.nzherald.co.nz//business...998&ref=clavis

[Perry]

With no indexing for inflation, the socialists' greedy grab is exposed for just what it is.

[north shore]

Someone on interest.co.nz also had this comment:
I was open for changes to tax regime. But removing cost deductions from people working from home?

[Perry]

Full report available here.

The TWG avers (glibly) that it examined the "fairness and balance of New Zealand’s tax system."

Of note and not surprising - there is no definition of "fair" or "balance" is in the Report's glossary.

Funny, that.

[007Chip]

Capital gains tax!!

What are your thoughts on the proposed CGT for landlords and the likely implications? My thoughts are rents will increase, some landlords will sell, creating slightly more supply, however a lot of renters can’t afforf to buy. Therefore renters suffer, with increased rental costs and less overall supply for renters. I think the tax groups recomendations are penalising landlords and hardworking kiwis with rental properties trying to get ahead. No doubt Jacinda will try and make this happen. Watch this space.

[jimO]

lets do this...........or not, people will be starting to remember why the last labour government got the heave ho

[flyernzl]

What we are building up to is a retraction of the proposals to 'just' a CGT on residential properties.
Brian Gaynor is already publicly advocating this.

[Perry]

What we are building up to is a retraction of the proposals to 'just' a CGT on residential properties.

Wasn't it part of the spin that PPOR residences are exempt?

Or do you mean residential rental properties?

[flyernzl]

Yes.

MMAC

[Perry]

Garner Grates Again

Capital gains tax is Labour's death wish - they should dump it now
23 Feb 2019

It's just the politics and, of course, the stark fact the tax would target the very hard-working mum-and-dad business owners who scoff at being called rich. Stop taking from these exhausted but ambitious people. There are hundreds of thousands of them.

Truth is, this is likely to be a tax switch. Workers will get a tax cut of, say, $16 a week and mum-and-dad business owners will be taxed when they sell their business, shares, farm, and the list goes on. I'm confused because I thought we were meant to invest in businesses and not houses. Sorry, where is the incentive?

Some sense up to that point, but Garner completely loses the plot, here:

For many Kiwis, the house appreciated so much over the past 20 years it earned more than they did.

The house didn't earn anything, Duncan.

The house just adjusted its numbers because of inflation.

We can most certainly see your confusion.

No wonder PIs and others with more than half a brain think they're all soliloquists.

[klauster]

Do people actually understand the problems with CGT?
Any asset depreciates because of age, wear & tear, incidents like damage etc. For those reasons money needs to be spent for repairs, renovation and improvements and not to forget the impact of inflation on those costs. These expenses are paid with taxed income, materials & services taxed by GST and by inflation (tax for excessive spending & govt deficits).

Why are replacement costs (set by insurers) e.g . for a house of 250K set to 500,000 Dollars? The land that appreciates (driven by whom?) is not included.

But that isn’t my point because looking at the election campaigns the initial driver for CGT was been told to resolve the housing crisis (homelessness and availability of housing). The entire CGT issue is widely way off the target people have voted for. I feel sorry for people on increasing waiting list for emergency accommodation and rental housing.

CGT – the consumer pays for increasing costs, right?