Capital Gains Tax proposed

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#2184909 21-Feb-2019 15:43

mattwnz:

There are a lot of older single people who are widowed or split up, who prefer to live by themselves, but a still in full a relationship. For example they may meet later in life, and form a new relationship. It is a lifestyle choice, so I wonder how they are going to police that. It seems very big brother if they were then to force one of those peoples homes to be excluded, and almost seems like the government is dictating how people should be living their lives.

Wee bit of a stretch, but the overall point is a good one. Im not sure you would police that as you would on a benefit fraud issue

If your couple moved it next week, the sold house, if it was sold is the sale of a family home. Same of it was next year. A good point though that does need to be clarified. The other side is that there is actually one family home, the other is not now? Its being kept, as its not needed. For gain.

id like to know how that works, I'm not up with how they decide who is in a relationship. They fail as well. Interesting

mattwnz

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#2184910 21-Feb-2019 15:49

tdgeek:

mattwnz:

There are a lot of older single people who are widowed or split up, who prefer to live by themselves, but a still in full a relationship. For example they may meet later in life, and form a new relationship. It is a lifestyle choice, so I wonder how they are going to police that. It seems very big brother if they were then to force one of those peoples homes to be excluded, and almost seems like the government is dictating how people should be living their lives.

Wee bit of a stretch, but the overall point is a good one. Im not sure you would police that as you would on a benefit fraud issue

If your couple moved it next week, the sold house, if it was sold is the sale of a family home. Same of it was next year. A good point though that does need to be clarified. The other side is that there is actually one family home, the other is not now? Its being kept, as its not needed. For gain.

id like to know how that works, I'm not up with how they decide who is in a relationship. They fail as well. Interesting

These types of tax changes do create lots of grey areas and complications. A lot of people prefer to live separate lives, in separate houses for inheritance reasons, so that any new relationships wont affect the inheritance their children will get. I am guessing they also have to sign some form of prenup type of legal agreement, as under NZs laws, if people have been in a relationship for a certain amount of time, they are as good a married, when it comes to splitting assets.

antoniosk

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#2184911 21-Feb-2019 15:49

alasta:

Does anyone have a plain English explanation of how this would impact managed funds?

I always understood that portfolio investment entities currently incur tax on all income, both capital growth and dividends, but am I wrong about that? If I'm right, then surely a capital gains tax would have no impact?

Tax on PIE's is only due on earned income, not capital growth.

Here's what the report suggests could be used, which is a terrible example and a sign of how much the working didnt really think about the detail (its only a few pages compared to the reams of analysis of other items in the document). An MRPIE is basically an acronym for a vehicle that invest in shares, bonds, property, cash etc (like most kiwisaver funds)

Example 75: Australasian shares in MRPIEs

Fund X is an MRPIE. It invests in Australasian shares. The opening value of its Australasian share portfolio for the 2025 income year is $1 million. At the end of the 2025 income year, the value of the
Australasian share portfolio is $1.25 million. During the year, the fund derives $500,000 from selling shares and incurs costs of $400,000 in purchasing new shares. Fund X also receives $200,000 of
dividend income during the year.

Fund X’s taxable income from its Australasian shares will be calculated as follows:
Income = (closing value + gains) – (opening value + costs)
= ($1.25 million + $200,000 + $500,000) – ($1 million + $400,000)
= $550,000

A combination of the income, change in value and DIFFERENCE IN PRICE OF PURCHASING SHARES. The $550k 'income' would then be pro-rata'd amongst customers....

________

Antoniosk

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#2184924 21-Feb-2019 16:09

mattwnz:

BlueShift:

The real question is why isn't tax paid on all capital gains

If I buy a house for $500,000, and 10 years later sell it for $1,500,000, why should I not pay tax on that $1 million profit?

But with this new CGT , you still wouldn' t be paying tax on that million dollar gain if it is your home, as it excludes the family home. If anything this is going to push house prices up, as it makes owning a family home more attractive, especially an expensive one. I read somewhere that people are just going to put more and more money into their home to make it more valuable.

mattwnz

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#2184937 21-Feb-2019 16:35

antoniosk:

Fund X’s taxable income from its Australasian shares will be calculated as follows:
Income = (closing value + gains) – (opening value + costs)
= ($1.25 million + $200,000 + $500,000) – ($1 million + $400,000)
= $550,000

A combination of the income, change in value and DIFFERENCE IN PRICE OF PURCHASING SHARES. The $550k 'income' would then be pro-rata'd amongst customers....

Guessing Accountants will be welcoming this change. Can see a lot of work for them. Also can see a lot of tax type websites being setup to help people manage this This sort of thing end up creating a lot of extra work and jobs, and maybe that is part of the intention.

tdgeek

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#2184940 21-Feb-2019 16:40

mattwnz:
antoniosk:

Fund X’s taxable income from its Australasian shares will be calculated as follows:
Income = (closing value + gains) – (opening value + costs)
= ($1.25 million + $200,000 + $500,000) – ($1 million + $400,000)
= $550,000

A combination of the income, change in value and DIFFERENCE IN PRICE OF PURCHASING SHARES. The $550k 'income' would then be pro-rata'd amongst customers....

Guessing Accountants will be welcoming this change. Can see a lot of work for them. Also can see a lot of tax type websites being setup to help people manage this This sort of thing end up creating a lot of extra work and jobs, and maybe that is part of the intention.

Ok how many rentals do you have? :-). Under 5 or over 5!

MileHighKiwi

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#2184943 21-Feb-2019 16:46

Why do we need to raise more tax when the government is in surplus?

I'd rather they focused on cutting costs and creating more efficient public services.

I'm opposed to a CGT.

We're already taxed on our income, pay gst, rates, tax on savings etc...and it's the top 10% of households that pay 2/3 of tax in NZ. As I fall into that category they can go f**** themselves. I pay plenty of tax. fairness? Yeah right! Fairness is subjective.

Sharesies

Trade NZ and US shares and funds with Sharesies (affiliate link).

tdgeek

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#2184948 21-Feb-2019 16:55

MileHighKiwi: Why do we need to raise more tax when the government is in surplus?

I'd rather they focused on cutting costs and creating more efficient public services.

I'm opposed to a CGT.

We're already taxed on our income, pay gst, rates, tax on savings etc...and it's the top 10% of households that pay 2/3 of tax in NZ. As I fall into that category they can go f**** themselves. I pay plenty of tax. fairness? Yeah right! Fairness is subjective.

The govt is NOT raising more tax for themselves
If you don’t feel CGT is fair they can remove ALL CGT, that’s an option
If we all pay income tax, except truck drivers that’s not fair is it? Same thing

tripp

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#2184949 21-Feb-2019 17:03

tdgeek:
MileHighKiwi: Why do we need to raise more tax when the government is in surplus?

I'd rather they focused on cutting costs and creating more efficient public services.

I'm opposed to a CGT.

We're already taxed on our income, pay gst, rates, tax on savings etc...and it's the top 10% of households that pay 2/3 of tax in NZ. As I fall into that category they can go f**** themselves. I pay plenty of tax. fairness? Yeah right! Fairness is subjective.

The govt is NOT raising more tax for themselves
If you don’t feel CGT is fair they can remove ALL CGT, that’s an option
If we all pay income tax, except truck drivers that’s not fair is it? Same thing

There would be a lot more truck drivers :P

Bluntj

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#2184955 21-Feb-2019 17:15

mattwnz:

antoniosk:

Fund X’s taxable income from its Australasian shares will be calculated as follows:
Income = (closing value + gains) – (opening value + costs)
= ($1.25 million + $200,000 + $500,000) – ($1 million + $400,000)
= $550,000

A combination of the income, change in value and DIFFERENCE IN PRICE OF PURCHASING SHARES. The $550k 'income' would then be pro-rata'd amongst customers....

Guessing Accountants will be welcoming this change. Can see a lot of work for them. Also can see a lot of tax type websites being setup to help people manage this This sort of thing end up creating a lot of extra work and jobs, and maybe that is part of the intention.

Accountants and Valuers!!!

mattwnz

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#2184956 21-Feb-2019 17:16

tdgeek:
MileHighKiwi: Why do we need to raise more tax when the government is in surplus?

I'd rather they focused on cutting costs and creating more efficient public services.

I'm opposed to a CGT.

We're already taxed on our income, pay gst, rates, tax on savings etc...and it's the top 10% of households that pay 2/3 of tax in NZ. As I fall into that category they can go f**** themselves. I pay plenty of tax. fairness? Yeah right! Fairness is subjective.

The govt is NOT raising more tax for themselves
If you don’t feel CGT is fair they can remove ALL CGT, that’s an option
If we all pay income tax, except truck drivers that’s not fair is it? Same thing

NZers are supposedly one of the lowest taxed countries. But I am not sure if this is about increasing the tax collected, rather, lower earning people with few assets paying less tax.

The thing is we do already have CGT, (although not on Kiwisaver) so I think the law is about making everyone pay it and removing the grey areas. For example, shares, if you are a trader and regularly buy and sell shares, you do already have to pay tax on captial gains. Likewise when buying a house, if you live in it and do it up to sell with that intention, you have to pay tax, a;although how many people actually do?

mattwnz

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#2184958 21-Feb-2019 17:19

Bluntj:

Accountants and Valuers!!!

Yes valuers. I am surprised art wasn't included. Although once a tax like CGT comes in, they can easily extend it to things like art, family homes etc. I remember when they brought in GST, they said it would only be 10% so wouldn't be that bad. But these types of taxes can be raised without going to an election, like when GST was raised from 12.5 to 15 %

Bluntj

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#2184959 21-Feb-2019 17:19

tdgeek:
MileHighKiwi: Why do we need to raise more tax when the government is in surplus?

I'd rather they focused on cutting costs and creating more efficient public services.

I'm opposed to a CGT.

We're already taxed on our income, pay gst, rates, tax on savings etc...and it's the top 10% of households that pay 2/3 of tax in NZ. As I fall into that category they can go f**** themselves. I pay plenty of tax. fairness? Yeah right! Fairness is subjective.

The govt is NOT raising more tax for themselves
If you don’t feel CGT is fair they can remove ALL CGT, that’s an option
If we all pay income tax, except truck drivers that’s not fair is it? Same thing

They are raising more tax for themselves..in fact billions....just not for 10 years after implementation. It will ramp up over time and initially offsets to primary taxation will be made.

The intention of Cullen is NOT to make a fairer system but to make a system fairer AND capable of much higher taxation on capital items over time.

I can't see any government or prospective government implementing it as recommended. Unless Winston gets Billions more for pet projects it wont go anywhere.

Aredwood

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#2184974 21-Feb-2019 17:58

tdgeek:
mattwnz:

There are a lot of older single people who are widowed or split up, who prefer to live by themselves, but a still in full a relationship. For example they may meet later in life, and form a new relationship. It is a lifestyle choice, so I wonder how they are going to police that. It seems very big brother if they were then to force one of those peoples homes to be excluded, and almost seems like the government is dictating how people should be living their lives.

Wee bit of a stretch, but the overall point is a good one. Im not sure you would police that as you would on a benefit fraud issue

If your couple moved it next week, the sold house, if it was sold is the sale of a family home. Same of it was next year. A good point though that does need to be clarified. The other side is that there is actually one family home, the other is not now? Its being kept, as its not needed. For gain.

id like to know how that works, I'm not up with how they decide who is in a relationship. They fail as well. Interesting

Another scenario- A single woman sells her house, then not long after starts a relationship with a man who owns a house. IRD might allege that the relationship was already happening, before the woman sold her house. What if she was previously friends with and or had an occasional sexual fling with that man? How would you prove when the serious relationship started?

Aredwood

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#2184976 21-Feb-2019 18:05

And how would sales for the purpose of reinvesting be treated? As profits from sales are only income, when they are not reinvested.

What if someone owns a company, and that company then owns shares, property etc? Say the company sells a house, then uses the money from the sale to buy another house. At the end of the tax year, the company still has the exact same amount of money in its bank account, that it did at the beginning of the year. Will the company or the owner of the company have to pay a CGT?

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