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

[Julian]

Ted,
I don't think too many people mind paying taxes for education, health, age care, roading and infrastructure. Many of us are getting a little fed up with the huge cost of social spending, which sadly is often doing the beneficeries very little real good either, as it reinforces the fact that they are not contributing to their society in any positive way. Paying someone a benefit is actually robbing them of their pride in many ways. From there it is a slippery slope into drugs, booze and crime, and your wife-to-be will end up picking up the pieces in many instances.
Julian

[Ted]

Hail brother Julian,

I see a good chat coming

Julian wrote
Many of us are getting a little fed up with the huge cost of social spending

Couldnt agree more well said!

Julian wrote
which sadly is often doing the beneficeries very little real good either, as it reinforces the fact that they are not contributing to their society in any positive way

Yes this bugs me but whats the answer? I once said to a friend of mine, "If they cant find work lets put them in the army!" "If they dont want to work lets make them" our armed forces just got a pay rise too.

But what do we do to a solo mum who doesnt have a partner because of what ever reason and cant get a job because she has a young family (under 2 for instance)?

Julian wrote
Paying someone a benefit is actually robbing them of their pride in many ways

An assumption, to me our schooling system has broken down where students do and say what they want at any time and they have no consquences for there actions. When I speak of this I also add,respect, admiration for others, role models etc etc.

Also I think of the many homeless people in the USA and dont want to go there, im not stupid enough to think it doesnt happen here however.

Julian wrote
From there it is a slippery slope into drugs, booze and crime, and your wife-to-be will end up picking up the pieces in many instances

Well it hasnt taken her long but I was in Wellington last weekend and the first night I got there we went to look for take out for dinner, she took me to Porirua. some teenagers around 17-20 maybe older were sitting outside a line of shops doing stuff all, the first thing that came into my head was "get a job" ( i know im evil 8***( ) the first thing outta her mouth was "get a job", she had just heard them begging a lady for money. And then she started telling me of stories about this and that.

For those that dont know my lady is currently at Police college and im doing it hard at home solo with my baby girl bless her little heart!

Well from what we have spoken about today I think we are on the same wave length Julian, I think however im either a) alittle more reserved or b) a little cowardly in what I say or c) all of the above.

Keep well Julian and great post

[krispedersen]

Agree with you completely Julian,

I've worked in consumer finance where you get pretty good exposure to a lot of where this money goes.

There are a large number of people on the DPB especially who are home owners where we pay for their mortgage and they have enough disposable income to qualify for finance.

I've seen a lot of applications where one parent is on the DPB with the mortgage under their name and the other partner earns a very respectable income. This leaves the family in a position where they often earn more than hard working couples, especialy after childcare is removed.

With situation like this, why would they go get a job? They would very like end up with less to spend each week

[toby]

Capital gains tax - it's good.

I've had a theory for a while that if the NZ government brought in a CGT in the following format, we as investors would actually benefit.

0 to 2 years 33% tax on gain
2 to 5 years 19.5% tax on gain
5 years or more no tax on gain

Why you may ask? we'll here's some reasons...

It's black and white
No extra entity costs
No extra accounting compliance costs
If you change your mind after purchase it doesn't matter if you sell or hold.
People who don't declare trades they do, would get wacked
It's simple and everyone know's where they are.

What do you reckon?

[roseneath_rat]

No thanks. Why volunteer for a tax that you wouldn't currently pay?? Unless perhaps you want to cause an artificial slump in house prices to purchase.

I support CGT for trading rather than investment. The system you mention above would likely punish a great number of owner occupiers too.

Implementing a CGT regime for property would likely also then splash on to other asset classes like shares.

[RentMaster]

If they do decide to bring in a CGT, then maybe they would adjust down other taxes. Maybe GST to 10% or Company tax to 30% or the top personal rate to 30%. At the moment the government does not need additional tax revenue.

Personally though I would still prefer no CGT.

[CJ]

Toby, what is to say it will be your system of reducing amounts avoer time. Other options is to exempt the family home (more politically acceptable) and then index everything else (incluing shares etc). That way a house bought 20 years ago for $10k with inflation (based on CPI) would now cost (say) $100k but you sell it for $200k. You pay tax on the sale price less indexed cost price ($200 - $100 = $100).

All the advantages you list are still there, but the long term invest is still worse off. If that was offset, by income tax at a flat 20% that might be ok??

[toby]

I think there is to much confusion between what is termed as "intention".
With black and white rules it will not affect long term hold people and it will get rid of Ma/Pa traders who are "intending" to keep the property but their "circumstances" change.
For creative finance deals it would be brilliant especially selling on terms.
I agree with the no tax on own home.
And yes it would create a slow down in the market - after all that's what the Government wants - isn't it?

[cube]

I can see that a scaled system like this would be easier to understand, but a true trader would then buy the house using a company and sell the company - the house doesn't change hands, therefore no CG to pay? Messing with the definition of 'ownership' would be a big can or worms to open up.

Personally, I think that long term investors should be rewarded (through tax breaks) for their forsight in removing themselves from the future pensions crunch, and if they make a gain over inflation as they go, well done them.

cube

[captaincrab]

Oh please, no more taxes. The way it works now with a "trader" being taxed if they take the gain or"profit" as income is fine.And fair. Please lets not encourage the government although I appreciate the intellectual excercise.

[cube]

Oh please, no more taxes. The way it works now with a "trader" being taxed if they take the gain or"profit" as income is fine.And fair. Please lets not encourage the government although I appreciate the intellectual excercise.

The trouble is that the definition of Trader is not clear, which leads to the tainting rules which make make things even more complicated.

A clearer set of rules to make PI easier to set up and understand would be good for all of us!

[donna]

So what are the rules?

My understanding is: Sell a property (not your principle place of residence) in under 2 years of ownership and the capital gain it is liable to CGT. Is this correct?

My uncertainity of the rules is a result of having a 'buy and hold' focus.

Cheers,

Donna

[cube]

From what I understand - may not be correct!

CGT is potentially payable on all property transactions, but is rated at 0%, so who cares!

If you buy a property with the intention of a quick sell, then GST is comes in to play on purchase and sale, and income tax is payable on the profits.

If you buy a property with the with the intention of keeping it long term, and then the next day your circumstances change and you have to sell (at a profit, because you brought 20% under value :-) ), then no GST or income tax is payable!

Of course, if your circumstances 'change' too often, you will attract the attention of the IRD and any profit you made will quickly vanish (along with you if its really bad!)

Who decides your intention at the time of sale - why, the IRD of course!

The generally accepted period after which your intention at the time of purchase is not an issue when selling is 10 years. After that time, you've been a long term investor anyway.

NOT AN EXPERT - MAY BE INCORRECT!

cube

[donna]

5 years average turn around time

Umm an Estate Agent I know said the average time for holding a house is 5 years.

That would mean that ALL property owners could at some time during their working life be viewed by the IRD as trading property unless PPOR (the home you live in) is exempt.

Say you purchased your first home at 25 and changed it every 5 years during your working life - that would mean by the time you are 65 you have bought & sold 8 properties. Maybe the IRD turn a blind eye to properties held for 5 years and over....or are we in for a big surprise in a few years?

Cheers,

Donna

[toby]

I think that's fair to say cube.
You are guilty till proven innocent.

The reason I like the idea is because you could trade tax free if you run the deal into the fith year.
Imagine trading without paying tax! Yher Baby!!!

Donna - that's the whole problem. There is so much confusion about what you can and can't do.
So far as timing I am only aware about having properties for more than ten years where you have tainted that entity are no longer subject to income tax.