Capital Gains Tax proposed

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tdgeek

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#2193541 8-Mar-2019 12:55

GV27:

tdgeek:

Its an interesting one.

I feel we should tax everything on realisation. We do that for salary and wages, we do that for business income. We can't do that for CGT as we cannot spend paper gains. (Although we could by borrowing against them, thats a problem) Kiwisaver investment earnings is actually not one or the other. The earnings of interest are realised, but as the person has the funds locked up, they aren't realised. CGT is unrealised as that is locked away.

But, Cullen stated that there are a number of measures that nullify the KS CGT? Not for everyone or for every $ but thats the premise of it.

It would be far easier to exclude KS investments from CGT, as the end result was planned that these gains would be offset and KS would not be affected. So exclude it so its not affected.

I would have thought so too. Instead we've got some extremely weird arrangement where the majority of benefits flow through to people who will be earning less than a 40 hour week and more burden on those earning 70K+. At some point it just becomes change for the sake of change instead of rewarding those legitimately struggling to get ahead.

However I would guess that there is a revenue component to this; the fact the Govt gets to tax gains as they accrue means they have money coming in year on year. It's the only reason I can think of that they'd bother with the political risk of taking such an aggressive approach to Kiwisaver.

A minor correction :-) You refer to what I bolded, but its actually the TWG. The Govt has been extremely mum on this, not a peep. All we have seen is National bagging it, which is fine, and Cullen saying no thats not right. Right now, the Govt has stated zero in what it will be.

My feeling is this. The Govt says it will be tax neutral, so its a redistribution of wealth. To make the rich pay some more, and help the lower income. 70k is not rich. Plus the TWG plan is too complex. I feel the Govt will exclude Kiwisaver, and the rest will be milder in parts. Simpler. They can't take the political risk that it will be fairer, unless it is in fact fairer. I dont feel it will be 85% of the TWG plan, more like 45%

GV27

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#2193586 8-Mar-2019 13:33

tdgeek:

A minor correction :-) You refer to what I bolded, but its actually the TWG. The Govt has been extremely mum on this, not a peep. All we have seen is National bagging it, which is fine, and Cullen saying no thats not right. Right now, the Govt has stated zero in what it will be.

My feeling is this. The Govt says it will be tax neutral, so its a redistribution of wealth. To make the rich pay some more, and help the lower income. 70k is not rich. Plus the TWG plan is too complex. I feel the Govt will exclude Kiwisaver, and the rest will be milder in parts. Simpler. They can't take the political risk that it will be fairer, unless it is in fact fairer. I dont feel it will be 85% of the TWG plan, more like 45%

The Govt is still the one doing the taxing ;)

Funny you mention 45%; the Minority Report suggests almost this much of the total revenue in the TWG report could be clawed back by just extending the Brightline to 10 years.

tdgeek

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#2193599 8-Mar-2019 14:01

GV27:

tdgeek:

A minor correction :-) You refer to what I bolded, but its actually the TWG. The Govt has been extremely mum on this, not a peep. All we have seen is National bagging it, which is fine, and Cullen saying no thats not right. Right now, the Govt has stated zero in what it will be.

My feeling is this. The Govt says it will be tax neutral, so its a redistribution of wealth. To make the rich pay some more, and help the lower income. 70k is not rich. Plus the TWG plan is too complex. I feel the Govt will exclude Kiwisaver, and the rest will be milder in parts. Simpler. They can't take the political risk that it will be fairer, unless it is in fact fairer. I dont feel it will be 85% of the TWG plan, more like 45%

The Govt is still the one doing the taxing ;)

Funny you mention 45%; the Minority Report suggests almost this much of the total revenue in the TWG report could be clawed back by just extending the Brightline to 10 years.

The 45 was just a number I chose, but I was thinking about Brightline to 10 years while typing. I think all the issues will end up being perhaps that or at least a just a very small number of relatively simple changes. Unsure why they will decide this though

GV27

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#2193895 8-Mar-2019 18:20

Have you had a chance to read through that Herald piece, TD?

tdgeek

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#2194502 9-Mar-2019 14:30

GV27:

Have you had a chance to read through that Herald piece, TD?

Yes, makes sense. Taxing on realisation is better as the taxable earnings are being retained till its sold. The other factor is comparing an investment fund where you invest your money, and an investment property where you invest your money and get the use of 4X that of other money. Leverage works well.

GV27

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#2194924 10-Mar-2019 09:39

tdgeek:

GV27:

Have you had a chance to read through that Herald piece, TD?

Yes, makes sense. Taxing on realisation is better as the taxable earnings are being retained till its sold. The other factor is comparing an investment fund where you invest your money, and an investment property where you invest your money and get the use of 4X that of other money. Leverage works well.

I mean I broadly agree, but the article explicitly says rental property income is undertaxed because mortgage interest gets offset against it. That's not right by any stretch; You can make a strong argument that you should be denied a deduction for mortgage interest against rental property (in fact I'd rather do that and shift the low value asset threshold to at least $1K instead of $500 to encourage owners to do more work on their properties) but you can't say claiming a legitimate deduction for financing costs makes something 'undertaxed'.

Otherwise you're effectively arguing that taxes have to be on revenue to be fair, and the idea that it is 'undertaxed' is a bit naff given that the finance costs of literally any business asset are deductible, be they a house, machinery, computers, whatever.

This is one of the frustrating things about this whole debate; there's very strict rules about accountants staying in their lanes when it comes to giving financial advice, but anyone can have opinions about tax and conflate concepts like 'revenue' and 'profit' without any consequences at all. These words mean specific things and aren't interchangeable.

clevedon

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#2220301 18-Apr-2019 07:27

Excellent news, CGT has been canned.

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Batman

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#2220456 18-Apr-2019 10:13

Can delete the thread now

floydbloke

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#2220464 18-Apr-2019 10:27

Filthiest look I've ever seen on Jacinda's face at the announcement.

It's what the people want apparently. I guess Winnie is one of the people.

Did Eric Clapton really think she looked wonderful...or was it after the 15th outfit she tried on and he just wanted to get to the party and get a drink?

MurrayM

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#2220481 18-Apr-2019 10:54

Very disappointing.

rugrat

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#2220613 18-Apr-2019 14:00

Very happy.

It would’ve created a more complicated tax system, costs and arguments determining asset value on commencement date. Questions about costs of maintaining asset, money spent on improvements, not fair if that can’t be written off, and more record keeping for non business people I.e if a Bach owner.

And asset prices can go down as well as up.

If they want to get more money off people when they liquefy an asset find a better way.
There’s probably flaws in this idea but just an example: increase GST and drop income tax so lower incomes are not effected, then when people spend capital gains they will be paying more tax.

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