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

[CJ]

There is NO capital gains tax in New Zealand. There are certain situations when a gain (normally capital) is said to be income. For example if you are a trader, your income is what most other people will call capital gains BUT as your business is in buying and selling properties, the gain is your income. Subsitute in cars for a car dealer or cereal, jam, milk etc for a supermarket and it will make more sense - the houses become your stock in trade that you sell at a profit to create income.

Even if NZ had a capital gains regime, a trader might still come within the income test rather than the capital gains regime.

The problem with NZ is not this (it is fairly easy - you are trading or you are not) it is in the tainting. The tainting rules say that if you are a trader, builder developer you are always a trader, builder and developer so you cant be a long term buy and hold.

Donna - the perosnal home will always be safe you as your primary purpose is always to live in. the only time where it is dodgy is where you move every year after having majorly renovated. In which case it is not really a "home" but a renovation site that you are living at.

Other than the tainting, the main problem with NZ is enforcement. We have a self assessment system so it relies on the individual. This is where the Queenstown property speculators are getting caught as they deliberately miss applied the tax law (ignorance is no excuss).

[PeterEmpowerEd]

Olly Newland's April 06 column -- Is capital gains tax looming?

Always worth a read, Olly Newland's latest column looks beneath the surface of the recently-announced findings of the Reserve Bank/Treasury study into government options for cooling the housing market... and draws some conclusions.

As someone who's been a residential and commercial property investor for over 45 years, he sees patterns and possibilities others don't see.

Read it at www.EmpowerEducation.com/newland.bz (Please don't cut and paste it here.)

[Perry]

Pots, Kettles & Blackness

As with all such symptom-chasing measures, it seems to be
a breathtakingly ignorant appreciation of first principles. It
seems straightforward to me to ask the question, not about
what should be done about the property market; but why is
the property market the way it is?

As in, what is it about government policies that is causing
this phenomena? And what is there about government
policy that needs changing to relieve the pressures that
create distortions in property prices. I.e. if people see
property as the only realistic hedge against inflation eroding
their other savings efforts, the government needs to
implement policies that are non-inflationary, preserving
people's savings value.

On the matter of spendthrifts, instead of tut-tut-ing about the
indebtedness of the citizenry, perhaps the government could
lead by example and live within its means?

If the government is in the business of running the country,
it should be making business-like decisions for the country.
Not trying to fiddle while the standard of living burns for
the rest of the inhabitants, except them.

[mals69]

Will the Government now bring in a Capital Gains Tax ?

After todays media reports that confidence is upward that property prices will increase in the short term ?

The reserve bank with a 3-4% inflation target and New Zealanders not heeding the governor of the reserve banks warning that the property market needs to cool a capital gains tax could well be on the way ?

[McDuck]

As long as you didn’t get assessed yearly…but only paid on resale…that could be workable.

Would you pay if you did a two for one swap?...hmmm, interesting possibilities here.

[mals69]

Would you pay if you did a two for one swap?...hmmm, interesting possibilities here.

Interesting alright Duck

I'd rather it be workable once I have sold

How do the commercial Investors get on,do they face a capital gains tax at present

[RentMaster]

After todays media reports that confidence is upward that property prices will increase in the short term ?

The reserve bank with a 3-4% inflation target and New Zealanders not heeding the governor of the reserve banks warning that the property market needs to cool a capital gains tax could well be on the way ?

I think the quick fix is just to increase the interest rates the next time Mr Bollard gets a chance. That is the quickest way to influence the market. A capital gains tax will take quite a while to bring in with all the red tape and discussions and counter discussions etc.

[SuperDad]

A capital gains tax would hit investors and homeowners alike. Given that most homeowners see their house as their "nest egg" (or a significant part of it), I can't see the voting population buying a CGT.

If anything, a CGT might increase house price inflation, as people try to recover the tax by increasing price. (I'm just speculating here.)

Paul.

[CJ]

A capital gains tax would hit investors and homeowners alike. Given that most homeowners see their house as their "nest egg" (or a significant part of it), I can't see the voting population buying a CGT.

unless they exempt the family home!

How much does house price actually effect inflation? I have never understood why they focus so much on house prices (and price of fuel) rather than everything else. Most people only buy a house every once and a while. Rents haven't increased so why such the emphasis on houses. Rant over.

[Monid]

I believe house prices strongly affect inflation, sometimes making up to 1% of the total inflation.

Its basically because they are high priced items so if they go up by 10% that is a strong pressure on the cost of living.

Fuel is arugably even more inflationary because it underwrites almost any economic activity in our society so fuel increases so does the price of everything else.

I hope they don't introduce a capital gains tax, or if they do it is inflation adjusted otherwise you end up paying for inflation as well as geniune capital gains.

David

[Dean@Massiveaction]

This has been discussed here often before so here I go again.
If you are a trader you are already paying tax on the profit from your sales. If you are a long term buy and hold investor you won't be selling so won't have any CG issues.
So for any informed investor the net effect of a CG tax would be ummmmm...... absolutely nothing.

[Monid]

I suspect that a capital gains tax would increase the amount of tax that traders are already paying, making it less profitable so thats one effect.

Likewise some long term buy and holders intend to at some stage sell some properties to freehold the rest of their properties. Obviously a CG tax would impact on that strategy.

Finally the aim of a capital gains tax would be to repress the market, (and I might add favour long term buy and hold over frequent trading) this would have effects on public opinon and some effect on the prices of various properties although whether it would be repressive or not is a matter for speculation as SD points out.

Any change to taxation laws has an impact on the market for informed or uninformed investors, and it affects which strategies are best.

David

[Wezz]

Hi team.

In the November 2006 issue of The New Zealand Property Magazine (issue 36), page 5, there's an article headed: "No capital gains tax on the horizon".

The article starts out by saying: Finance Minister Michael Cullen has ruled out any tax changes to make investment in residential property less attractive.

It goes on to say: And he specifically ruled out a capital gains tax when asked about it by (Sue) Bradford.

We have to trust in our beloved leaders - (don't we)???

Surely they wouldn't fib to us - (would they)???

Besides all this, Dean is correct. The net effect of a Capital Gains tax would be absolutely nothing.

Cheers - Pete.

[mals69]

:

There is nothing stopping the government bringing in new legislation to say capital gains tax has to be payed no matter how long the property has been held for.
Micheal Cullen's own leader lied over paintagate,let her own civil servants take the rap over speedergate,spent way over the election campaign tariff (have no legal right to be governing) so anything well in truly possible.

[Monid]

I think technically it would only take an act of parliment rather than legislation since New Zealand has a capital gains tax, it is just currently set at zero.

David