Capital Gains vs Interest deductibility

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Forums › Politics › Capital Gains vs Interest deductibility

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#3084808 4-Jun-2023 17:38

sir1963:

And what is YOUR credibility ?

What is YOUR experience ?

Please provide references for anything you have claimed, because you have never supplied any.

I'm not pouring hours of my limited time on a long weekend putting academic references for the reasonable and correct responses I've already made in this thread and subform that you've already chosen to dismiss, nor am I going to sit there and complete a homework assignment from someone who seems incapable of accepting any position on a subject other than the one they hold.

sir1963

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#3084865 4-Jun-2023 18:33

GV27:

sir1963:

And what is YOUR credibility ?

What is YOUR experience ?

Please provide references for anything you have claimed, because you have never supplied any.

I'm not pouring hours of my limited time on a long weekend putting academic references for the reasonable and correct responses I've already made in this thread and subform that you've already chosen to dismiss, nor am I going to sit there and complete a homework assignment from someone who seems incapable of accepting any position on a subject other than the one they hold.

So not an accountant

Not a lawyer.

And Pot...meet Kettle.

GV27

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#3085124 5-Jun-2023 13:18

sir1963:

So not an accountant

Not a lawyer.

And Pot...meet Kettle.

And if I were, would that change anything? Would you accept that your views are perhaps misinformed, or do not line up with reality, even though you've gotten intensely personal with anyone who offers a counter to your ZB-level ranting?

Remember, if you're going with this argument, I'd have just as much formal training as you do - but there's absolutely no way you could possibly be wrong and someone with the same level of training or background could possibly be right. That's not a super water-tight approach, is it?

sir1963

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#3085129 5-Jun-2023 13:56

GV27:

sir1963:

So not an accountant

Not a lawyer.

And Pot...meet Kettle.

And if I were, would that change anything? Would you accept that your views are perhaps misinformed, or do not line up with reality, even though you've gotten intensely personal with anyone who offers a counter to your ZB-level ranting?

Remember, if you're going with this argument, I'd have just as much formal training as you do - but there's absolutely no way you could possibly be wrong and someone with the same level of training or background could possibly be right. That's not a super water-tight approach, is it?

How would we know about your formal training.... apart from the fact you now admit you have none.

You asked for my qualifications, I gave it, openly , honestly, no equivocation, no delays.

I also gave sound reasoning based on my actual 20 year real world experiences + my real world formally qualified professionals I get information & advice from.

But you do you. I have all the information I need to know now anyway.

GV27

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#3085133 5-Jun-2023 14:24

sir1963:

How would we know about your formal training.... apart from the fact you now admit you have none.

You asked for my qualifications, I gave it, openly , honestly, no equivocation, no delays.

I also gave sound reasoning based on my actual 20 year real world experiences + my real world formally qualified professionals I get information & advice from.

But you do you. I have all the information I need to know now anyway.

Reading isn't your strong point. I did not admit anything of the sort. I just refused to let you dictate terms and set demands in an argument that you were almost certainly going to ignore if you got shown up, and in doing so, probably saved us both a lot of time. You're welcome, by the way.

You gave no 'sound reasoning' when labelling people conspiracy theorists. You have a track record of being confrontational when people present evidence to the contrary of how you seem to think anything works.

If you want to continue having a conversation about the thread topic, I am more than happy to continue. But I refuse to accept my contributions be labelled as 'conpsiracy theory' simply because it doesn't reinforce your world view.

mudguard

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#3085140 5-Jun-2023 15:27

Maybe add back the beloved interest deductability and just charge 39% capital gains when it's realised?

And by realised, it could be when someone uses existing equity as the deposit for the next property? That would be a reasonably elegant solution surely?

IE Owner occupied house was purchased for $500,000, now worth $800,000. The owner wants to buy a rental for $500,000 and needs $100k deposit, so in order for them to access that equity, charge the capital gain then? So it would be 39% (or whatever it will) on the $300k. So the owner occupier gets the $100K they need for the deposit, but then they also need to stump up the capital gain on their old property.

I don't know though. It doesn't seem that elegant now that I type it. I'd probably prefer some kind of handbrake on using equity in the first place. I can only speak from my time at the bank, but so very few subsequent properties were bought with an actual cash deposit, it was always, oh the Devonport place is now worth X, the holiday home in Omaha was Y, the rentals in Northcote, Z...

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sir1963

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#3085158 5-Jun-2023 17:20

That is how all businesses expand, they leverage existing equity.

Imagine being an engineering firm who needs to buy a large water cutting machine, ie $200k-600k in cost.

They would be doing that exact same thing, using equity to leverage funding to buy a capital item.

A capital gains tax that high would kill investment.

Again, if you have an engineering firm and need to make your workshop space twice the size which means shifting you get hit with a massive disincentive.

This could also impact Kiwi Saver as they divest one asset for another there could be significant additional taxes to pay.

So much of what we have in NZ is imported, we have zero control over those costs, yet they impact inflation and over all cost for the entire country.

We should however stop choosing to be a poor country with low wages.

Primary produce look good because of how much we sell, but inflation adjusted per ton, we made far more in the 1920s

Tourism looks great, but it too is a low income source of money per tourist.

we export whole logs instead of pre-cut lumber, ie no value added income

we allow NZ Intellectual Property to be bought by overseas companies at extremely cheap rates, we should be keeping this IP as NZ property.

we should be putting money into NZ industry, high tech, high profit products instead of sports stadiums , off road cycle tracks, etc.

we should be investing in tertiary education, not run it into the ground like we have been doing for decades

we do NOT need more fast food outlets, more coffee shops, more gymnasiums, more $2 shops.

we need to be adding a more than full cost recovery recycling tax onto all products, this can get discounted if your products lasts longer, is repairable. We must demand local service centres that have full access to service parts and manuals. We CAN do board level repairs on electronics here in NZ not just board swapping.

we need minimum levels of goods like food, timber, etc to stay in NZ, that will help keep down those consumer costs.

we do what other countries do, you do not add import taxes, but your can add costs. For example the UK massively increase the hygiene standards required in NZ freezing works, that increase our costs which resulted in higher price meat in the UK, making local products more competitive.

Want steel from China, sure but before payment can be made a random 2% of the product needs to go though quality control/inspection here in NZ at Chinas cost. Likewise increase requirements for boarder controls, fumigation, testing, etc with massive fines for each failure in compliance. This will make NZ produced goods cost competitive leading to more employment in higher wage jobs.

Meantime while people are yelling at "greedy landlords" which is a nice distraction

Mental health is failing

Health is failing

2/3 of GPs are due to retire within 10 years, there is no plan in place, Otago and Auckland have been refused a bigger med school intake

Primary/intermediate/high schools are failing, international grading is falling substantially

Tertiary education is starting to collapse because of lack of funding

Crime is rising (labour was proud of how many fog machines they had subsidised...)

Youth crime is rising

Gang numbers are increasing

Repairs and maintenance on our roads is falling behind

We do not produce enough electricity to be fossil fuel free, not by a LONG shot

Our infrastructure in ageing

And we will need massive amount of investment in climate change mitigations

new tropical diseases
new invasive species
climate refugees
higher cost of weather related damage
higher costs of insurance
moving communities away from high risk areas
trying to buy resources (copper and other raw materials) at the same time all nations will want them for their climate change issues.

We need higher incomes

We need higher tax revenue ( eg recycling taxes, quality control, higher wages)

We need to lower external costs by encouraging local production, The USA, China,EU,Japan all do massive subsidies for their industry.

We need a higher skilled/qualified workforce

Want investment to shift from housing , them make other option better.

mudguard

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#3085168 5-Jun-2023 18:15

Surely in your example of an engineering firm they'd have to show decent profits of some kind?
No bank would touch them otherwise?
Ironically I work in commercial lending but not that side of it 🤣

sir1963

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#3085243 5-Jun-2023 21:03

mudguard: Surely in your example of an engineering firm they'd have to show decent profits of some kind?
No bank would touch them otherwise?
Ironically I work in commercial lending but not that side of it 🤣

Yes, they do make a profit, but they are unlikely to have $600k floating around, hence the loan leveraged against other assets.

The point is, using one asset to leverage against to acquire another asset is common business practice

Given its likely to be depreciated over 20 years, they would likely have to show that they would be making $30k + a year from it.

GV27

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#3085303 6-Jun-2023 06:25

sir1963:

A capital gains tax that high would kill investment.

Again, if you have an engineering firm and need to make your workshop space twice the size which means shifting you get hit with a massive disincentive.

This could also impact Kiwi Saver as they divest one asset for another there could be significant additional taxes to pay.

Wow, something we agree on. The CGT debates NZ has had have been immensely flawed for this exact reason. Other countries have specific rates for capital gains taxes that are lower than their highest marginal rate as a means of removing an incentive for avoidance and NZ likes to think it is special in that regard. Often you will hear how 'other countries have capital gains/inheritance taxes so we should too!' but those people almost always neglect to mention carve-outs and rollover relief that mean they either kick in at massive levels designed to hit plutocrats instead of mere mortals, or they just get carried over (e.g. you don't pay if you move into a parental home and make it your main residence instead of selling it).

Here we often miss these important caveats that make these taxes socially acceptable to people, and go for a hugely black and white version that would capture almost everyone.

But the Kiwisaver point is the most important; in other countries, retirement scheme earnings are tax free and you get the benefit of them accumulating over time - you pay tax on withdrawal. Here, you get charged tax on the income you earn (so you lose the benefit of the compounding effect of the tax component. But what's even dumber is the proposed CGT would have meant you also paid a capital gains tax when you made a capital gain.

The tax treatment of Kiwisaver is an absolute critical first-up change that needs to be made before we accept any changes to the super scheme. It's pretty poor that it's been allowed to continue this way for so long. I'd go so far to say it's almost as important as automatic indexing.

mudguard

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#3085646 6-Jun-2023 16:23

sir1963:

Yes, they do make a profit, but they are unlikely to have $600k floating around, hence the loan leveraged against other assets.

The point is, using one asset to leverage against to acquire another asset is common business practice

Given its likely to be depreciated over 20 years, they would likely have to show that they would be making $30k + a year from it.

Oh absolutely. But surely if that business is not showing any sign of making a profit, they aren't likely to be lent the money regardless of the assets?

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sir1963

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#3085660 6-Jun-2023 16:56

mudguard:

sir1963:

Yes, they do make a profit, but they are unlikely to have $600k floating around, hence the loan leveraged against other assets.

The point is, using one asset to leverage against to acquire another asset is common business practice

Given its likely to be depreciated over 20 years, they would likely have to show that they would be making $30k + a year from it.

Oh absolutely. But surely if that business is not showing any sign of making a profit, they aren't likely to be lent the money regardless of the assets?

Are we going down the road of landlords make no profit ?

Because that is untrue.

mudguard

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#3085689 6-Jun-2023 18:01

sir1963:

Are we going down the road of landlords make no profit ?

Because that is untrue.

I've no doubt they make a profit. But surely for most it's not much more than expenses.

Median sale price, $780k, median rent, $600. At a historical average interest rate of 8% the rent is not even close to covering a mortgage. Even at 4% it's still short. Now I know investors aren't looking at the average properties, it's just a simple example.

The only ones I know who actually profit are friends who have had multiple properties, then sold off the ones that have appreciated the most and cleared the debt on the remaining and have the rent as additional income.

I get it, I'm not trying to bag landlords. I just fundamentally think more owner occupiers makes for a better society. More stability for kids, stay at the same school for longer etc.

As for NZer's investing in other things, why would they? Housing is too much a safe bet. Housing is surely different in your engineering example, a bank loans the $600K and want's to know how that will be serviced, as like you say, it will depreciate, whereas the house is doing the opposite. I think most property investors are happy to break even and wait for the gains, there is virtually no other reason to be in it surely.

tdgeek

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#3085697 6-Jun-2023 18:39

sir1963:

No business pays CGT, so even if you owned a super market that was started for $1 Million and got sold for $10 million, there is no capital gains tax paid.

I support your stance, but a business has a Profit or Loss on a Fixed Asset, so the 9 mill is taxable.

tdgeek

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#3085698 6-Jun-2023 18:42

sir1963:

PAYE does not pay rates.

I did not say remove rates all together, I said everyone over 18 contributes. Home owners, businesses, etc etc etc all still pay rates

It gets divided up based on how many people pay the poll tax in your area.

Is it fair that 6 high paying adults who use more water, sewerage, etc, make more use of sports fields and other ammenities only pay the same things as the retired person next door ?

It could be as low as $50-$100 a year, I am not talking thousands a year.

This would be great for places that do not have water meters for example in that high use properties with adults would actually contribute more but not impact young families.

All SENSIBLE stuff, not histrionics .

Yep, User Pays, thats pretty fair

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