Capital Gains Tax proposed

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#2185374 22-Feb-2019 13:19

tdgeek:

If he business floor area is 8%, you are taxed on the capital gain of the entire home?

"The rules get more complicated for people who work from a home office.

They would be able to claim an exemption on any gain in the value of that home, like other home owners. But they would then no longer be allowed to deduct any costs related to their property, such as rates or mortgage payments, from their taxable income.

Alternatively they could choose to keep those deductions, but pay tax on any capital gain on the proportion of the home that they used for business, when they sold it."

No, it's based on floor area; but that begs the question about things like a two bedroom apartment, or a storage garage or people who have a yard on their family home like some contracting companies.

In a two bedroom apartment, you could conceivably be giving up a massive portion of any capital gain that isn't inflation-adjusted.

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#2185388 22-Feb-2019 13:59

I in concept don't object to a CGT, but implented in line with the recommendations by the TWG I don't support it.

For starters the two big deal breaker issues are :

1) Recommended Tax Rate (I believe it should be locked at say 15-16%, It's crazy to be twice that of almost any other OECD Country that has it. $8B projected tax take over 5 years is a huge amount to take out of Kiwi's pockets.

2) Kiwisaver should be exempt, and in my view anything that is in some way earmarked for retirement which lessons the drain on the pension requirements.

There are a bunch of other more minor issues I have concerns over, but those are my inital two based on a very brief read.

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#2185390 22-Feb-2019 14:07

Its income, its taxed at Income Tax rates. KS is having some other action to nullify the effect. If we prefer tax free income then stop the TWG recommendations and just remove all the other CGT and be dumb with it, I'd be more than happy with that

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#2185392 22-Feb-2019 14:10

tdgeek:

Its income, its taxed at Income Tax rates. KS is having some other action to nullify the effect. If we prefer tax free income then stop the TWG recommendations and just remove all the other CGT and be dumb with it, I'd be more than happy with that

It's income in every other country too, and they don't tax it at those rates. Also, since it's not possible to tax deduct the captical cost of improvements which contribute to the gain, it seems unreasonable to tax it at Income rates. That doesn't even take into account the time spent.

Don't know what all the other stuff means. Perhaps a little less brevity might improve readability.

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#2185395 22-Feb-2019 14:23

networkn:

tdgeek:

Its income, its taxed at Income Tax rates. KS is having some other action to nullify the effect. If we prefer tax free income then stop the TWG recommendations and just remove all the other CGT and be dumb with it, I'd be more than happy with that

It's income in every other country too, and they don't tax it at those rates. Also, since it's not possible to tax deduct the captical cost of improvements which contribute to the gain, it seems unreasonable to tax it at Income rates. That doesn't even take into account the time spent.

Don't know what all the other stuff means. Perhaps a little less brevity might improve readability.

The other stuff means remove CGT entirely if it's that bad an idea. If it seems unfair.

Oddly, the TWG is made up of of 80% non Coalition people, so there is no party push there. There are a number of business people, entrepreneurs and investors who thing its a good idea. Conversely, groups of these people think it will break everything. that in itself is quite bizarre for what is a political hotcake of an issue.

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#2185432 22-Feb-2019 14:38

tdgeek:

Its income, its taxed at Income Tax rates. KS is having some other action to nullify the effect. If we prefer tax free income then stop the TWG recommendations and just remove all the other CGT and be dumb with it, I'd be more than happy with that

It's taxed at fixed, lower rates in other parts of the world. Plenty of 'income' is taxed at other rates: RWT, PIEs, etc.

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#2185433 22-Feb-2019 14:38

tdgeek:

networkn:

tdgeek:

Its income, its taxed at Income Tax rates. KS is having some other action to nullify the effect. If we prefer tax free income then stop the TWG recommendations and just remove all the other CGT and be dumb with it, I'd be more than happy with that

It's income in every other country too, and they don't tax it at those rates. Also, since it's not possible to tax deduct the captical cost of improvements which contribute to the gain, it seems unreasonable to tax it at Income rates. That doesn't even take into account the time spent.

Don't know what all the other stuff means. Perhaps a little less brevity might improve readability.

The other stuff means remove CGT entirely if it's that bad an idea. If it seems unfair.

Oddly, the TWG is made up of of 80% non Coalition people, so there is no party push there. There are a number of business people, entrepreneurs and investors who thing its a good idea. Conversely, groups of these people think it will break everything. that in itself is quite bizarre for what is a political hotcake of an issue.

I am *well* aware that this is not a coalition proposal, and I have made no implications that the recommendations are party related.

Having said that, the TWG is not made up of unbiased members. Just because you have people from all walks of life, doesn't mean they aren't potentially sharing a common bias. I felt it was exceptional poor form to have a former labour finance minister who was vocal about his support for a CGT during his time, LEAD the group.

The idea behind the TWG was to come up with a FAIRER system, and taxing at 33% AND not allowing people to offset capital expediture against that gain, especially when income tax (and GST) was paid on the income that paid for the improvements, isn't fair, It's taxing a tax of a tax.

An $8 tax take over 5 years isn't a reasonable first step. I haven't seen what the offset personal tax rates are and what the reduction of tax take as a result of that is, but I would imagine it's still going to be a MASSIVE take.

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#2185434 22-Feb-2019 14:40

networkn:

Also, since it's not possible to tax deduct the capital cost of improvements which contribute to the gain

This is not the case. The worked examples show the cost of renovating a property get added to initial purchase price. A $700K property with $70K of renovations post V-Day that sells for $800K triggers a CGT on the $30K, not the $100K.

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#2185435 22-Feb-2019 14:44

GV27:

networkn:

Also, since it's not possible to tax deduct the capital cost of improvements which contribute to the gain

This is not the case. The worked examples show the cost of renovating a property get added to initial purchase price. A $700K property with $70K of renovations post V-Day that sells for $800K triggers a CGT on the $30K, not the $100K.

Hmm, I have missed that in my brief look. That does seem fairer. What sort of things can be claimed in the 70K renovation? Owners time? Loss of income as a result? It's going to be a nightmare to administer I think.

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#2185438 22-Feb-2019 14:49

networkn:

Hmm, I have missed that in my brief look. That does seem fairer. What sort of things can be claimed in the 70K renovation? Owners time? Loss of income as a result? It's going to be a nightmare to administer I think.

The same rules around "taking the piss" will apply: You'll have to prove you've actually incurred the cost; and if you're planning on billing your own time to renovating your own house, you need to declare it as income in your name.

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#2185441 22-Feb-2019 14:54

networkn:

I am *well* aware that this is not a coalition proposal, and I have made no implications that the recommendations are party related.

I never said you implied that. I merely stated it as its quite unique to put together a group that are almost all from the otherwise of the political spectrum. As to bias, that's impossible to weed out.

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#2185445 22-Feb-2019 15:02

tdgeek:

networkn:

I am *well* aware that this is not a coalition proposal, and I have made no implications that the recommendations are party related.

I never said you implied that. I merely stated it as its quite unique to put together a group that are almost all from the otherwise of the political spectrum. As to bias, that's impossible to weed out.

I don't think it's unique (it should be as much as possible apolitical), and I don't think they stacked it with people from the other side of the political spectrum. I am not aware of the leanings of every member but there are certainly some high powered members who should of in my view been excluded because of their prior statements and support for a particular outcome. I view it very much in line with allowing someone to serve on a jury who has previously said he or she supports a particular outcome from the trial prior to hearing the evidence.

I believe that Labour are Pro CGT, and by appointing Cullen as Chair, they have essentially been able to say "this is the outcome we would like to work toward, without actually saying it (which would be inappropriate).

I haven't heard what Winston said the other day about the TWG findings and CGT recommendations? He has previously been pretty anti IIRC, was he consistent with those values, or has everything changed now?

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#2185446 22-Feb-2019 15:03

tdgeek:

networkn:

I am *well* aware that this is not a coalition proposal, and I have made no implications that the recommendations are party related.

I never said you implied that. I merely stated it as its quite unique to put together a group that are almost all from the otherwise of the political spectrum. As to bias, that's impossible to weed out.

I am very surprised that the unionist wanted businesses and people with capital to pay more tax.

Almost begs the question what business they have on the panel in the first place. But that is a discussion for another time.

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#2185447 22-Feb-2019 15:13

networkn:

tdgeek:

networkn:

I am *well* aware that this is not a coalition proposal, and I have made no implications that the recommendations are party related.

I never said you implied that. I merely stated it as its quite unique to put together a group that are almost all from the otherwise of the political spectrum. As to bias, that's impossible to weed out.

I don't think it's unique (it should be as much as possible apolitical), and I don't think they stacked it with people from the other side of the political spectrum. I am not aware of the leanings of every member but there are certainly some high powered members who should of in my view been excluded because of their prior statements and support for a particular outcome. I view it very much in line with allowing someone to serve on a jury who has previously said he or she supports a particular outcome from the trial prior to hearing the evidence.

I believe that Labour are Pro CGT, and by appointing Cullen as Chair, they have essentially been able to say "this is the outcome we would like to work toward, without actually saying it (which would be inappropriate).

I haven't heard what Winston said the other day about the TWG findings and CGT recommendations? He has previously been pretty anti IIRC, was he consistent with those values, or has everything changed now?

I agree it should be apolitical but they never are. I feel its unique as they could have stacked the deck, passed the law, that's it. But they have set it up to be robustly discussed. The end result is 3 disagree whicb is positive, more discussion. Peters will disagree, and what will happen is it will be diluted down to what they all can live with. if that's what happens its a success. Maybe the diluted version is not worth bothering with so it gets canned. End of the day, its been thrashed to death and a result, whatever it is, will be made

You will never get a team that everyone agrees with. Everyone has a bias, and everyone will view the bias differently depending on the outcome. "it was a good team" It was terrible team" Cannot avoid that

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#2185456 22-Feb-2019 15:38

Sure, I understand about the bias thing.I agree, impossible to eliminate entirely, but I remain convinced Cullen was in my view one of the worst they could have appointed to head it. Same in my opinion with the business working group that doesn't include members of the small business community.

I don't agree with "they could have stacked the deck and passed the law". They were elected as no new taxes in term 1 (though I feel they have been sneaky in actually doing so) but they were clear they would propose the new structure clearly prior to the next election and then if elected they have a mandate to execute it, which I agree was the right thing to do. They weren't going to be voted in this term with the original stance of "we will decide and that's that".

People in general are more politically aware and interested, a crappy tax proposal won't get passed near as easily.

National in my view are between a rock and a hard place. I'd like to see them constructively contribute, and if they actually agree, say so, but only support with the changes they propose. If they agree however, they are really giving the green tick to a Labour Greens Government in 2020.

If they do indeed disagree with it, then it should be clearly communicated as why. Using phrases like "attacking our way of life" looks like hysterical babble, even if they believe it. It would do them the world of good to come up with a different tax structure that is better if such a thing exists, and campaign on this in opposition to a CGT. That is how I'd like to see them win the next election. It's doable in my view, but they need to move quickly.

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