Capital gain tax on property vs other investments.

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Forums › Finance and wealth management › Capital gain tax on property vs other investments.

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#1133337 22-Sep-2014 00:54

Tzoi:

Personally I don't like the idea that the government should be entitled to a percentage of everything we manage to scrape together in our lives.

So you believe that there should be some forms of income that are not subject to tax at all? Not having a CGT is very distortionary as it is a significant part of people's income, especially for the wealthier people.

He's far right wing. He doesn't believe the government should be allowed to tax you at all. He believes that "the market" will solve everything, because throughout history that's worked positively swimmingly. That or he actually believes the government can provide essential services with no funding.

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#1133350 22-Sep-2014 06:52

Kyanar:
Tzoi:

Personally I don't like the idea that the government should be entitled to a percentage of everything we manage to scrape together in our lives.

So you believe that there should be some forms of income that are not subject to tax at all? Not having a CGT is very distortionary as it is a significant part of people's income, especially for the wealthier people.

He's far right wing. He doesn't believe the government should be allowed to tax you at all. He believes that "the market" will solve everything, because throughout history that's worked positively swimmingly. That or he actually believes the government can provide essential services with no funding.

At the end of the day I am not sure how he tolerates people using the public health system, paying for those pesky kids to go to school, universities and all that jazz.

Just look how things have gone in the US with their insanely expensive health system that costs more than twice the UK but has a far higher mortality rate.

Just wait for it to come here.

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#1133367 22-Sep-2014 08:04

BarTender:
Kyanar:
Tzoi:

Personally I don't like the idea that the government should be entitled to a percentage of everything we manage to scrape together in our lives.

So you believe that there should be some forms of income that are not subject to tax at all? Not having a CGT is very distortionary as it is a significant part of people's income, especially for the wealthier people.

He's far right wing. He doesn't believe the government should be allowed to tax you at all. He believes that "the market" will solve everything, because throughout history that's worked positively swimmingly. That or he actually believes the government can provide essential services with no funding.

At the end of the day I am not sure how he tolerates people using the public health system, paying for those pesky kids to go to school, universities and all that jazz.

Just look how things have gone in the US with their insanely expensive health system that costs more than twice the UK but has a far higher mortality rate.

Just wait for it to come here.

Simply because there's no option!

Geektastic

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#1133369 22-Sep-2014 08:08

Tzoi:
joker97: if there is capital gains tax there should also be capital loss tax deduction?

if I buy an audi for the purposes of selling it, and lose 100,000 on it, I should be able get my tax annulled for 5 years?

what about losing $1000 on a canon camera when I sold it?

Generally when a CGT is imposed around the world, you can only deduct capital losses against capital gains, not against your other income. If you had lost 100,000 on it, you've decreased your tax a bit, but you've still lost that 100,000. If you had been using it for a few years for personal purposes, the IRD wouldn't consider it a capital gain/loss and you wouldn't be able to do anything with it.

joker97: if they want to make more money they should consider removing ways for tax avoidance.

When I was at uni I couldn't get a student allowance, coz my parents pay tax.

But I have mates whose parents are extremely wealthy who would get full student allowance - because their parents don't pay tax.

Removing ways for tax avoidance is a very broad statement and incredibly hard to do effectively. New Zealand has a GAAR - a general anti-avoidance rule, whereby the commissioner can deem some activity to be tax avoidance and then counteract it by undoing whatever transaction created it.

It's not so much they don't pay tax, it's that they don't have a reported income because their family has a business or trust that doesn't pay it out to them personally, it just accumulates in the trust or company. They'd still be taxed at the company/trust rate. At least I think that's how many people manage to get student allowance.

I think when the issue of capital gain comes up then it is seem more in the light of flipping houses where as someone who owns a house for 20 years to rent tends to value the rent with any sort of capital gains being the icing on the cake rather than the first motivating factor. IIRC isn't there a clause that if you sell your property within 10 years you have to pay back all the depreciation that has been claimed back? I remember my parents mentioning something to do with with that.

They shouldn't be able to depreciate a house that's being used for rental/personal reasons because they generally don't decrease in value. If they had been depreciating and then sold it for more than book value, they would have to pay tax on the depreciation recovery income, which is income based on the depreciation that has been deducted from your income but shouldn't have been. It's the same with any capital asset in a business - if they depreciate it too much they have to pay tax on the extra depreciation.

nova:
rayonline: Ok then on that argument why are shares not exempt ...

The tax treatment on shares is much the same as rental properties. If you buy shares to make money from their dividends, and happen to sell them at a later date for a profit, then the capital gain is not taxable. You of course pay tax on the dividends, just the same way you pay tax on your rental income.

Your intention at time of purchase is the key element, with the exception that once you are seen as a dealer in such items you are taxed regardless of what you claim your intention is.

Share funds are slightly different that individual shares, an actively managed share fund pays tax on the capital gains, but a passive index tracking fund does not. The former is viewed as trading shares for profit, whereas the later it is merely incidental.

It is possible to be taxed on capital gains of shares and it follow much the same rules as property - based on intention.

mattwnz: I know someone who purhcased a property, they never ended up living it, so they rented it out. However it was their intention to originally live in it. When they sold it, they were required to pay CGT on the profit they made. So NZ does have a CGT on property that you don't live in, and at least in some cases it is monitored. But I suspect in a lot of cases people never pay their share of tax on capital gains on the property, if the intention was to make money from it. So I can't really see how the current law is that much different to what labour proposed, apart from it being far less complex. Maybe just better policing of it is needed. The Labour CGT law would have created a huge number of jobs for the red tape involved, but as proven by the election, it wasn't a policy that the majority of people want

I find that quite surprising. I would not have thought they would have had to pay tax on that, though of course there may be extenuating circumstances there.

Personally I don't like the idea that the government should be entitled to a percentage of everything we manage to scrape together in our lives.

So you believe that there should be some forms of income that are not subject to tax at all? Not having a CGT is very distortionary as it is a significant part of people's income, especially for the wealthier people.

I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

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#1133372 22-Sep-2014 08:12

Geektastic: Simply because there's no option!

Yep... we have very different views on what the word society really means.

Me: The lowest part of society wins, everyone wins.

You: It's all about me.

itxtme

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#1133384 22-Sep-2014 08:36

Geektastic: I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

Interesting thought. What about those who havent been educated on negative gearing, or dont have the ability to purchase property and avoid tax? There is no doubt in anyones mind that the rich get richer by investing in ways that avoid tax revenue, not really sure how you think thats fair?

And you inferring that smart people dont get to keep their money is bizarr; they do get to keep it with a CGT, they are just taxed on the gain...

Kyanar

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#1133385 22-Sep-2014 08:37

Geektastic:
BarTender:
Kyanar:
Tzoi:

Personally I don't like the idea that the government should be entitled to a percentage of everything we manage to scrape together in our lives.

So you believe that there should be some forms of income that are not subject to tax at all? Not having a CGT is very distortionary as it is a significant part of people's income, especially for the wealthier people.

He's far right wing. He doesn't believe the government should be allowed to tax you at all. He believes that "the market" will solve everything, because throughout history that's worked positively swimmingly. That or he actually believes the government can provide essential services with no funding.

At the end of the day I am not sure how he tolerates people using the public health system, paying for those pesky kids to go to school, universities and all that jazz.

Just look how things have gone in the US with their insanely expensive health system that costs more than twice the UK but has a far higher mortality rate.

Just wait for it to come here.

Simply because there's no option!

Perhaps you should move to Somalia? I hear their societal construct would be more to your liking.

It annoys me how many people move to New Zealand because it's "so much nicer" then immediately campaign to destroy our society and bring in their inferior medieval structure.

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networkn

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#1133402 22-Sep-2014 09:21

itxtme:
Geektastic: I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

Interesting thought. What about those who havent been educated on negative gearing, or dont have the ability to purchase property and avoid tax? There is no doubt in anyones mind that the rich get richer by investing in ways that avoid tax revenue, not really sure how you think thats fair?

And you inferring that smart people dont get to keep their money is bizarr; they do get to keep it with a CGT, they are just taxed on the gain...

Education is a choice. There are plenty of free ways to get educated on NG if that is your chosen poison.

I wouldn't say I am rich, but I won't get more "rich" using any method you have spoken of. I will get "richer" by continuing to educate myself, offer better service and or products than my competitor and working harder. It's how I got when I am now, and I started from very humble beginnings.

The people who you seem to be targeting, get more wealthy by using the tax code applied to the letter of the law, which was all set up a long time ago by people elected to do so. People who fall outside this get penalized.

itxtme

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#1133418 22-Sep-2014 09:35

networkn:
itxtme:
Geektastic: I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

Interesting thought. What about those who havent been educated on negative gearing, or dont have the ability to purchase property and avoid tax? There is no doubt in anyones mind that the rich get richer by investing in ways that avoid tax revenue, not really sure how you think thats fair?

And you inferring that smart people dont get to keep their money is bizarr; they do get to keep it with a CGT, they are just taxed on the gain...

Education is a choice. There are plenty of free ways to get educated on NG if that is your chosen poison.

I wouldn't say I am rich, but I won't get more "rich" using any method you have spoken of. I will get "richer" by continuing to educate myself, offer better service and or products than my competitor and working harder. It's how I got when I am now, and I started from very humble beginnings.

The people who you seem to be targeting, get more wealthy by using the tax code applied to the letter of the law, which was all set up a long time ago by people elected to do so. People who fall outside this get penalized.

Huh!? You wont get more rich if you buy a house make a capital gain of $45,000 and dont pay tax on it? NZ is one of a few OECD countries not using a CGT. Private debt is out of control, if the housing bubble bursts there is going to be a lot of hurt, for a lot of people.

Housing investment is a false economy that doesnt promote employment, and adds to a multitude of reasons that housing prices are so inflated. Reform I say, reform!

Geektastic

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#1133419 22-Sep-2014 09:35

networkn:
itxtme:
Geektastic: I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

Interesting thought. What about those who havent been educated on negative gearing, or dont have the ability to purchase property and avoid tax? There is no doubt in anyones mind that the rich get richer by investing in ways that avoid tax revenue, not really sure how you think thats fair?

And you inferring that smart people dont get to keep their money is bizarr; they do get to keep it with a CGT, they are just taxed on the gain...

Education is a choice. There are plenty of free ways to get educated on NG if that is your chosen poison.

I wouldn't say I am rich, but I won't get more "rich" using any method you have spoken of. I will get "richer" by continuing to educate myself, offer better service and or products than my competitor and working harder. It's how I got when I am now, and I started from very humble beginnings.

The people who you seem to be targeting, get more wealthy by using the tax code applied to the letter of the law, which was all set up a long time ago by people elected to do so. People who fall outside this get penalized.

However, the 'richer' you get, the more you will begin to find that using those methods is of great assistance.

For example, you may decide to place your family home within a Trust for the simple reason that it removes it from your personal assets in the event that your business fails. NZ has a curious misunderstanding of the concept of limited liability companies in my opinion, meaning that they alone do not provide sufficient shelter for your personal assets in relation to a business failure.

The simplest way to encourage people to pay tax is to ensure that rates are reasonable and fair, systems simple to understand and use and that the State avoids wherever possible just using powers to 'decide' something is wrong after the fact.

At the moment it is manifestly unfair, for example, that if we overpay provisional tax (so the government has more of our money than it should) we get 3% or so interest until they repay us. If we underpay (so we keep money longer than they think we should) they charge us 8% or so! The rates ought to be equal. Just one minor example of why people seek methods to minimise their taxes within the law, which I regard as merely good practice.

No one is excluded from using any of the methods available if they choose to do so. People can educate themselves and get on with it. Within 12 months of moving here I had set up a business (using the now defunct LAQC structure) and got a $13,000 income tax rebate. I did nothing illegal - I just learned quickly how the tax system worked, saw an opportunity to use it to my advantage and did so. The fact that others are less willing or able to do that is not something I feel any responsibility for whatsoever!

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#1133421 22-Sep-2014 09:37

itxtme:
networkn:
itxtme:
Geektastic: I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

Interesting thought. What about those who havent been educated on negative gearing, or dont have the ability to purchase property and avoid tax? There is no doubt in anyones mind that the rich get richer by investing in ways that avoid tax revenue, not really sure how you think thats fair?

And you inferring that smart people dont get to keep their money is bizarr; they do get to keep it with a CGT, they are just taxed on the gain...

Education is a choice. There are plenty of free ways to get educated on NG if that is your chosen poison.

I wouldn't say I am rich, but I won't get more "rich" using any method you have spoken of. I will get "richer" by continuing to educate myself, offer better service and or products than my competitor and working harder. It's how I got when I am now, and I started from very humble beginnings.

The people who you seem to be targeting, get more wealthy by using the tax code applied to the letter of the law, which was all set up a long time ago by people elected to do so. People who fall outside this get penalized.

Huh!? You wont get more rich if you buy a house make a capital gain of $45,000 and dont pay tax on it? NZ is one of a few OECD countries not using a CGT. Private debt is out of control, if the housing bubble bursts there is going to be a lot of hurt, for a lot of people. Housing investment is a false economy that doesnt promote employment, and adds to a multitude of reasons that housing prices are so inflated. Reform I say, reform!

If I buy a house and sell it and make $45K which I already did once, it will be for personal use and wouldn't be subject to CGT regardless.

I am not a property developer and property developers pay tax on profits.

Geektastic

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#1133422 22-Sep-2014 09:37

itxtme:
networkn:
itxtme:
Geektastic: I believe smart people who make money deserve to keep it and the fact that some people cannot do that is unfortunate but irrelevant.

Interesting thought. What about those who havent been educated on negative gearing, or dont have the ability to purchase property and avoid tax? There is no doubt in anyones mind that the rich get richer by investing in ways that avoid tax revenue, not really sure how you think thats fair?

And you inferring that smart people dont get to keep their money is bizarr; they do get to keep it with a CGT, they are just taxed on the gain...

Education is a choice. There are plenty of free ways to get educated on NG if that is your chosen poison.

I wouldn't say I am rich, but I won't get more "rich" using any method you have spoken of. I will get "richer" by continuing to educate myself, offer better service and or products than my competitor and working harder. It's how I got when I am now, and I started from very humble beginnings.

The people who you seem to be targeting, get more wealthy by using the tax code applied to the letter of the law, which was all set up a long time ago by people elected to do so. People who fall outside this get penalized.

Huh!? You wont get more rich if you buy a house make a capital gain of $45,000 and dont pay tax on it? NZ is one of a few OECD countries not using a CGT. Private debt is out of control, if the housing bubble bursts there is going to be a lot of hurt, for a lot of people. Housing investment is a false economy that doesnt promote employment, and adds to a multitude of reasons that housing prices are so inflated. Reform I say, reform!

But all those things happen in countries with CGT - the only difference is that people give more money to politicians to waste on their behalf.

Geektastic

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#1133423 22-Sep-2014 09:39

Kyanar:
Geektastic:
BarTender:
Kyanar:
Tzoi:

Personally I don't like the idea that the government should be entitled to a percentage of everything we manage to scrape together in our lives.

So you believe that there should be some forms of income that are not subject to tax at all? Not having a CGT is very distortionary as it is a significant part of people's income, especially for the wealthier people.

He's far right wing. He doesn't believe the government should be allowed to tax you at all. He believes that "the market" will solve everything, because throughout history that's worked positively swimmingly. That or he actually believes the government can provide essential services with no funding.

At the end of the day I am not sure how he tolerates people using the public health system, paying for those pesky kids to go to school, universities and all that jazz.

Just look how things have gone in the US with their insanely expensive health system that costs more than twice the UK but has a far higher mortality rate.

Just wait for it to come here.

Simply because there's no option!

Perhaps you should move to Somalia? I hear their societal construct would be more to your liking.

It annoys me how many people move to New Zealand because it's "so much nicer" then immediately campaign to destroy our society and bring in their inferior medieval structure.

It annoys me how many NZers stubbornly insist that no one else in the world has a better way of doing things than the way it is done here...!

Geektastic

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#1133431 22-Sep-2014 09:51

BarTender:
Geektastic: Simply because there's no option!

Yep... we have very different views on what the word society really means.

Me: The lowest part of society wins, everyone wins.

You: It's all about me.

I tend more towards Baroness Thatcher -

"There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate."

The key phrase being 'by our own efforts' not 'by handing responsibility over to the government'.

Tzoi

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#1133637 22-Sep-2014 13:31

For example, you may decide to place your family home within a Trust for the simple reason that it removes it from your personal assets in the event that your business fails. NZ has a curious misunderstanding of the concept of limited liability companies in my opinion, meaning that they alone do not provide sufficient shelter for your personal assets in relation to a business failure.

Generally they do, however often with a start up company the bank will require a personal guarantee as well. It is quite difficult for creditors to pierce the corporate veil unless there is fraud/a sham

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