Capital Gains Tax finally on a major party's agenda

[Scuba_Steve]

What do you think?

No sir I do not like it one bit

[Banditbandit]

In most parts of the world capitol gains tax has been passed onto tenants or the property never gets any capitol improvements, they become cash focused, birth of the slum lord.

Yeah .. naaa .. that idea doesn't make sense ... We own rental properties ... and I can see that if I increase rents then I increase income and therefore pay more tax ... and if I become "cash focussed" and do no maintenance (which is tax deductable) then my income increases and I pay more tax ...

Now - most of us are wage earners and pay tax through PAYE .. if a Property investor makes money buying and selling houses ... and there is no capital gains tax ... how does their income get taxed? Are they, right now, paying no tax on the income they earn from selling houses? (They pay tax on rents) but most of their earnings are from selling at a profit ...

We're carrying these bastards ... our income tax through PAYE lets them get away with paying no tax ...

That does not seem fair to me.

[Winston001]

Labour's CGT smacks of the politics of envy. Hating the "rich pricks" even though this includes much of middle class NZ. Instead of strengthening the economy Labour's big idea is more tax. This from the party of thinkers and idealists.

Lets look at what CGT will not achieve:

1. Extra tax revenue. The Australian CGT took 15 years to take full effect.

2. A reduction in house prices. Most countries already have CGT including the USA and Australia - and almost every OECD country had huge house price increases since 2000. CGT didn't stop that.

3. New rental homes being built - why would an investor bother?

4. A shift to productive investment because there are few opportunities.

On the positive side CGT will mean lots more work for lawyers and accountants so it isn't all bad.

[merv]

Current rules are similar to those that trade shares regularly, you can be taxed on capital gain as it is a profit for a trader. So if you buy and sell houses to make money you are a trader (or developer) and IRD will be looking at you if you are a regular at this. If you are a person that doesn't trade as such but buy and hang on for a long time then you don't get charged capital gains tax and why should you? Same applies to such things as antiques and collectibles.

Question for those stupid enough to support this idea - if you sell an item on TradeMe for more than you paid for it should you be taxed on that capital gain? If not why not? Why is that any different to any long term property ownership?

The other point at the moment is there is no death duty in this country. If your olds die and leave you their house and you already own a house and you support capital gains tax on second or more properties then you should pay tax on 100% of the value of the house you just inherited or else you are a hypocrite in my view.

The real rort was those hiding behind trusts, LAQCs and the like and saying they were so "poor" their kids could claim student allowance, the family could get family allowance etc but the current Government has already made changes there so I don't see that capital gains tax is at all fair on anyone nor should be considered necessary if you close off the other real loopholes.

Capital gains tax be damned.

[bogan]

Just another way of shifting money from our existing revenue around. I'd be far more interested if any of the parties have plans for increasing that revenue in the long term. Keep as much of the primary sector and the associated secondary and tertiary sectors production/processing in NZ, would seem like a good start right? Seems like it's all going in the other direction these days.

[Big Dave]

I suspect people would be in favour - or not - depending on whether they own Rental Property.

Then the experts tell us that there is' too much personal wealth emphasis on Real Estate'.
Yet the financial institutions will allow 30% of income to be committed in repayments
and a decent abode in whoop-whoop costs hundreds of thousands of dollars.

[neels]

It'll just create more work for lawyers and accountants, instead of individuals buying and selling houses they'll do it through companies and claim all of the associated expenses against any profit.

There is still a means to claim property losses against personal tax, the changes to the LAQC rules are only to prevent people splitting property between two companies to claim losses at the maximum tax rate and pay tax on profits at the company tax rate.

Nice window dressing so the poor people think the rich people are being hit in the wallet to score some cheap votes.

All of which reminds me, must off to the accountants to change my company structure so I still get my tax refund next year....

[HenryDorsetCase]

I'm interested in this proposal, but I want to see the detail first.

I suspect it will be so riddled with exemptions, loopholes, and exceptions that it will do nothing more than cause a massive compliance cost, with no real revenue generated*. Basically its just so Labia can say "See how we look after the working man or woman in the street, and our voter base (beneficiaries), see how different we are from those bastards over there." JOhn Keys response "Nyah nyah suck on my poll lead, hippie"

bear in mind that if you buy and sell property with a view to taking a profit then its already taxable.

Meh.


*which is the reason they are talking about getting rid of gift duty

[Spearfish]

Yeah .. naaa .. that idea doesn't make sense ... We own rental properties ... and I can see that if I increase rents then I increase income and therefore pay more tax ... and if I become "cash focussed" and do no maintenance (which is tax deductable) then my income increases and I pay more tax ...

Now - most of us are wage earners and pay tax through PAYE .. if a Property investor makes money buying and selling houses ... and there is no capital gains tax ... how does their income get taxed? Are they, right now, paying no tax on the income they earn from selling houses? (They pay tax on rents) but most of their earnings are from selling at a profit ...

We're carrying these bastards ... our income tax through PAYE lets them get away with paying no tax ...

That does not seem fair to me.

Thats how it stands now but there are also limits to what is maintenance and what is classed as adding value to a property its all been revamped and closely watched now.
A leaky roof requiring replacement isn't maintenance your adding value (and tax under labour) but replacing one sheet of iron is or 1/3 a roof a year is maintenance.
Depreciation on the building stopped this year so the 5% or so claim for the building has gone already but when you sell, the Govt will claw back some of that depreciation you have already claimed up to the cut off point at a percentage = to you tax rate, that's how it stands now.
Laqc's are dead and buried so nothing for labour there.
With labours Tax any money over and above what you brought it for would also be taxed no matter how long you had owned the property so it will be interesting if the capitol gained tax is in addition to the dep claw back or what.

Property traders are like any other sales business, sell something for more than you pay for it deduct the expenses and pay tax on the left over. So labour are blowing bubbles there as well.

So Labour gets nothing unless a landlord sells something or will they tax the landlord every time there in a new valuation done?
Remains to be seen how things will suddenly need to be tweaked once the Pinko's are in.

[DangerMice]

Its interesting what is condidered a starter home now compared to say 30 years ago.
30 years ago the house was a three bed rectangle with a choice of kitchen bench lengths in the middle of a muddy section with the expectation of "go to it".
I remember the whole cul-de-sac doing concrete parties, hand mixing concrete for drives and fences, all helping with decks..etc

My first house is exactly as you describe, if ya'll wanna come round and concrete my drive that'd be sweet. Thanks!

Tis true though, a lot of people want for their first house what their parent's house currently is, conveniently forgetting the steps their parents have taken along the way.

[Spearfish]

My first house is exactly as you describe, if ya'll wanna come round and concrete my drive that'd be sweet. Thanks!

Tis true though, a lot of people want for their first house what their parent's house currently is, conveniently forgetting the steps their parents have taken along the way.

Many drives and garage floors were ruined by cracking the keg to early, usually a line across the floor where the troweling stopped and the 4x2 screed marks finished of the second half in a rush or a few ruts in the last couple of meters of drive.

[slowpoke]

Current rules are similar to those that trade shares regularly, you can be taxed on capital gain as it is a profit for a trader. So if you buy and sell houses to make money you are a trader (or developer) and IRD will be looking at you if you are a regular at this. If you are a person that doesn't trade as such but buy and hang on for a long time then you don't get charged capital gains tax and why should you? Same applies to such things as antiques and collectibles.

Question for those stupid enough to support this idea - if you sell an item on TradeMe for more than you paid for it should you be taxed on that capital gain? If not why not? Why is that any different to any long term property ownership?

The other point at the moment is there is no death duty in this country. If your olds die and leave you their house and you already own a house and you support capital gains tax on second or more properties then you should pay tax on 100% of the value of the house you just inherited or else you are a hypocrite in my view.

The real rort was those hiding behind trusts, LAQCs and the like and saying they were so "poor" their kids could claim student allowance, the family could get family allowance etc but the current Government has already made changes there so I don't see that capital gains tax is at all fair on anyone nor should be considered necessary if you close off the other real loopholes.

Capital gains tax be damned.

Good post this one.

Someone said it quite well earlier on: the politics of envy. Create a stereotypical demographic that people feel enmity towards and you are half way there.

More tax is not the answer, it's just lazy policy. You should be encouraging people to strive and grow, not hitting them with a stick everytime they manage to get slightly ahead of the pack.

Good ol' NZ, it's one of the few places in the world where it is actually frowned upon to succeed. Great message we're sending our kids.

[Usarka]

I always find these political discussions amusing because I'm sure if it was National that suggested it then most people would be arguing the opposite of what they've said in this thread.

Lets look at what CGT will not achieve:

1. Extra tax revenue. The Australian CGT took 15 years to take full effect.

So because it takes a while we shouldn't do it? Auckland's traffic problems are a testament to how bad that thinking is.

2. A reduction in house prices. Most countries already have CGT including the USA and Australia - and almost every OECD country had huge house price increases since 2000. CGT didn't stop that.

Good point, but one could also argue that Australia and USA (until recently) had higher wages too....

3. New rental homes being built - why would an investor bother?

Because they want somewhere to live. And just because there is a tax it doesn't mean there are NO profits.

4. A shift to productive investment because there are few opportunities.

Would you like some chicken with that egg?

[Usarka]

I suspect people would be in favour - or not - depending on whether they own Rental Property.

I did consider doing a poll.

I support it - and I own a rental property.
I oppose it - and I own a rental property.
I support it - and I'm a national voter.
I oppose it - and I'm a national voter.

etc.

More tax is not the answer, it's just lazy policy. You should be encouraging people to strive and grow, not hitting them with a stick everytime they manage to get slightly ahead of the pack.

Good ol' NZ, it's one of the few places in the world where it is actually frowned upon to succeed. Great message we're sending our kids.

Peoples response to political issues like this is as bad as arguing relgious issues. Seriously. The policy has not been released, so your feverent argument about more tax or lazy policy making at this stage is pure speculation.

If they were to reduce the other taxes (which they haven't said either way yet) then a capital gains makes it more fair and doesn't discourage you from working hard and doing well.

[mashman]

The rich have become victims of their own success... by hiding ?some? of their income from the govt, the govt have to get creative and go after the tax money in other ways... I'm for it