Capital Gains Tax proposed

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#2185015 21-Feb-2019 19:55

surfisup1000:

I would put money on house prices falling if they introduce a CGT... as investors dump properties now that they are more expensive.

How much money do you bring in from capital gains tax revenue if house prices steadily drop?

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#2185016 21-Feb-2019 19:57

mattwnz:

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 %

Its already in! Its been in for ages! :-)

Art. It should be on art BUT, art is very very niche. What is a painting I painted worth? (Probably about 18 cents :-) ) Its very very niche, this work might be valued at $35k, it sells for 8k or 90k, too hard. And how many invest in art? few

Family Homes. I feel that's your conspiracy theory. I know a bit about this. First house was age 19. Ive invested in property. There is NO money in residential family homes. None. Nada. Mathematically there is, but its paper money, its not physical money, so as there is no gain there cannot be a tax.

Yes, GST was raised in 2010, secret, not the election policy, thats POOR. Labour included CGT as a policy, when it comes in, it will be after the next election, thats transparent. Now, I HATE party lines in the debates, but this is a fact. You can vote them out and get rid of CGT

surfisup1000

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#2185019 21-Feb-2019 20:02

GV27:

surfisup1000:

I would put money on house prices falling if they introduce a CGT... as investors dump properties now that they are more expensive.

How much money do you bring in from capital gains tax revenue if house prices steadily drop?

The way I understand, people can claim CGT losses against other income. But house prices are not going to steadily drop.

My prediction is that house prices will drop initially, then return to the normal trend of increasing over the long term. Investors will certainly take the CGT into consideration when deciding to invest. Previously property was a slam-dunk.

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#2185020 21-Feb-2019 20:04

Bluntj:

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.

Good points.

1. Now, the tax will be returned to ALL residential taxpayers. Rich people included. Yes, it grows. The litmus test is when a Govt gets all this cash what do they do with it? Govt is a non profit organisation its for the people, doesn't matter if its National, Labour or ACT. if any Govy was stashing cash there will be a revolt, aka voted out. In a prefect world the Govt sorts everything. If they cant, it waits. If they can they out the excess Consolidated Funds back into the economy.

Winston will have issues as his constancy are old and affected. National bores are generally wealthier so affected. so these sectors will vote against it, nit because it is fairer, but because they are directly affected. The bottom line is everyone should pay tax on their income.

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#2185021 21-Feb-2019 20:05

Aredwood:
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?

No idea, but that happens now. It now only affects DPB or whatever they call it now?

GV27

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#2185022 21-Feb-2019 20:05

surfisup1000:

The way I understand, people can claim CGT losses against other income. But house prices are not going to steadily drop.

Other capital income. The only way to use the loss is to continue investing and making capital gains.

I also note a lot of the marginal tax discussion on residential renting is ignoring that rental loss ring-fencing is about to end; and the initial discussions e.g. The Spinoff's campaign pieces even used pre-Brightline data. That data is now three years old.

tdgeek:

If they can they out the excess Consolidated Funds back into the economy.

Too bad about the compliance costs and central govt overheads that will drain away at that money before it can be returned to the economy; if it ever is. The Clark Govt (wisely IMO) used it to pay down debt and offered no tax relief at all, while massively growing the public sector.

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#2185024 21-Feb-2019 20:09

Aredwood: 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?

Thats cashflow not income, two very different things. You dont pay any tax on cashflow or what's in the bank, or more correctly, liquid assets. You pay it on income.

You can earn income and be taxed on it, and have a negative cashflow. You can run at a loss, and have positive cashflow. Its about income

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#2185025 21-Feb-2019 20:11

GV27:

surfisup1000:

I would put money on house prices falling if they introduce a CGT... as investors dump properties now that they are more expensive.

How much money do you bring in from capital gains tax revenue if house prices steadily drop?

This is a problem - as govt ends up not being able to forecast future revenue based on unknown capital gain tax due to the "vagaries or the market", and compromised in that policy to make homes "affordable" probably reduces capital gains, thus the government is incentivised to set policy to encourage increase in asset values.

CGT is the wrong answer to a known problem.

GV27

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#2185026 21-Feb-2019 20:12

Fred99:

GV27:

surfisup1000:

I would put money on house prices falling if they introduce a CGT... as investors dump properties now that they are more expensive.

How much money do you bring in from capital gains tax revenue if house prices steadily drop?

This is a problem - as govt ends up not being able to forecast future revenue based on unknown capital gain tax due to the "vagaries or the market", and compromised in that policy to make homes "affordable" probably reduces capital gains, thus the government is incentivised to set policy to encourage increase in asset values.

CGT is the wrong answer to a known problem.

Indeed, it's not hard to predict a situation where prices plunge and all of a sudden other excises or levies are needed to maintain revenue. The Minority Report makes a note of this:

The extra revenue forecast to be raised from the more comprehensive approach to taxing
remaining gains seems relatively low, reflecting the additional fiscal risks the Government
would assume.

tdgeek

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#2185027 21-Feb-2019 20:13

mattwnz:

Or another one. A single woman buys a house, then a single man enters a relationship with that woman, but he currently rents. They both spend alternate days at each others home, or they may spend days apart from one another. Then the single man buys his own house to move into but is still in the relationship. They have no intention of living in the same home permentally. This is actually quite common especially with people whose children have grown up. It just gets so complex, and despite with governments may think, not everyone lives in a certain way.

In terms of finding out when a relationship started, that would be incredibly creapy if the government started investigating that sort of thing, by looking up people bank statements etc. Best to stay single I think.

Thats happens now. I had a GF in the US. Plan was to live here. They told us thats fine, get a visitors visa, then fiance visa, we might pop in at any time (I think there was actually a limit, to catch you out. But this is normal, it exists now, bit a valid point.

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#2185028 21-Feb-2019 20:13

It's a shame cars are excluded. But for some rare collectors items, the value of cars only heads in one direction. I would love to be able to claim the loss of value in the non-familly car against my tax burden.

I can only assume there is no money in it for the Govt so that's why it's excluded despite generally being people's second biggest asset.

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GV27

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#2185029 21-Feb-2019 20:17

Dingbatt: It's a shame cars are excluded. But for some rare collectors items, the value of cars only heads in one direction. I would love to be able to claim the loss of value in the non-familly car against my tax burden.

I can only assume there is no money in it for the Govt so that's why it's excluded despite generally being people's second biggest asset.

After the family home, that's probably actually going to be people's Kiwisaver in the long run.

tdgeek

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#2185030 21-Feb-2019 20:18

MileHighKiwi:
mattwnz:

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?

If this was about lower earning people paying less tax why not do something far more simple and adjust tax brackets?

E.g. make the first $15k tax free, 15% 15-25 , 25% 25-60, 30% 60-90, 35% 90+ etc.....I thought of those thresholds off the top of my head, no idea what it would need to look like but taxing me more to reimburse a cleaner on minimum wage doesn't nake sense to me. And anyways that cleaner probably gets an additional 15k-20k per year WFF and tax credits etc.

CGT will have all sorts of loop holes and it will not achieve a 'fairer nz', that's complete bollocks. There's tons of examples of it not working I.e. doesnt stop house prices rising.

There is tax creep. Where I earn the average income, I always do, but my tax rate rises by the numbers, all Givts need to adjust that in the tax tables annually, bit they dont. Labour and National then give us tax cuts, yippee but they are actually reverting back. They all gain by what they ripped us off between tax creep adjustments.

Keen to discuss in detail what you mean. We already have CGT. Not all of us pay tax. Im ok if CGT is expended, thats fair. Im also ok if we cancel CGT but that has to be ALL of it. If we do that tomorrow, Friday, I know what I'll be doing Monday...

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#2185031 21-Feb-2019 20:18

BlueShift:
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?

This is the bit that I am not sure about.

If one buys a house cash up front for $500k, and sells it a year later for $550k - the 50k may be taxed as income.

My view, its pay as you earn.

However, I am not sure how one calculates profit on a house - if one buys a 500k house for 20% down with a 25 year mortgage, by the time one factors in interest, rates, insurance, maintenance and inflation etc. how does one work out the bit that is the capital gain.

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#2185034 21-Feb-2019 20:22

My biggest concern is the effect it will have on people planning for retirement.

NZ already levies more tax on retirement saving, and lacks a proper company/private pension environment when compared to many similar countries.

Saving for retirement by permitting tax saving on the money is widely accepted and encourages people to make provision for that time of life.

This just looks like an excuse to tax just about everything they can think of.

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