whats your thoughts on the CGT

[Ocean1]

I'm not concerned too much how it will affect me. I've had around a decade of intense activity that would have attracted a CGT, that activity has now tapered off & will remain somewhere down around nil for the foreseeable future, so I'm not concerned how it is going to affect me.
My concern is for the change in kiwi behaviour & lifestyle.
I can see the arse dropping out of the beach settlements & maybe a shift to large boats instead.
I also worry for people currently renting.
Landlords can't just haul money out of their arses & won't be prepared to inject some cash to top up the mortgage of a rental property out of their wages to keep the rent reasonable, as many have done in the past, in the knowledge that there is a tax free carrot waiting for them at the end, because they will now be taxed on the profit of said property.
Rents will definitely rise & while I'm sure it will turn a few tenants into home owners in the short term, the long term will be a bit grim if you aren't a home owner.
Also, for landlords that have done a monthly top up from their income over the years, there had better be an accounting system in the CGT maths that takes their input off, as that needs to come off the taxable profit, as it was taxed income before it went to propping up a tenant & isint a gain, as it was a landlord contribution.
Yes, I have done that to make sure my tenants pay market rent for a property that had decent capital gain and a fairly hefty mortgage.

I don't know anyone with a residential investment that doesn't use their own wages to help pay it off. In my case it amounted to more than the rents, and that's pretty common.

Add all of the other costs involved in house ownership, (a lot of it bureaucratic compliance costs) and the annual costs are often tens of thousands a year more than the rent covers. That means extra work, lots of it, for fucking years. The "profit" is deferred until you either pay off the mortgage or sell it. And if you take inflation out of that profit on the sale it's not really much of an investment, for me just barely better than cash in the bank over the same time frame. Just.

Not that they'll allow depreciation based on inflation for a CGT, of course, for the same reason investors will get out of the business if and when they introduce it: take out the tax on inflation and it's not worth doing it.

But like you it doesn't worry me any more. I got sick of not only Working For Everyone Else's Family but then being blamed for the need to do so in the first place, so I sold the last residential investment last year. Funny you should mention boats, I blew the resulting funds on one. Best investment I ever made.

Nobody ever seems to learn about how badly governments screw the taxpayer, there isn't a savings nest egg or hard earned investment that isn't targeted, simply because it's there, and they can. Kiwisaver? I was hopeful it might work to encourage saving, reducing the need for subsidies in retirement, but as the quantity of savings has grown successive governments haven't been able to resist the temptation to raid it to buy votes. They raided EQC investments. Gone. Happens every time a savings scheme reached a useful size: it's plundered to buy votes. This time it's a coordinated attack on all of them, property, farms, kiwisaver, (again), business investment, anything anyone's worked to accumulate for any reason whatsoever is being stripped. Because, apparently, it's only fair.

[Scuba_Steve]

I also worry for people currently renting.
Landlords can't just haul money out of their arses & won't be prepared to inject some cash to top up the mortgage of a rental property out of their wages to keep the rent reasonable, as many have done in the past, in the knowledge that there is a tax free carrot waiting for them at the end, because they will now be taxed on the profit of said property.
Rents will definitely rise & while I'm sure it will turn a few tenants into home owners in the short term, the long term will be a bit grim if you aren't a home owner.
Also, for landlords that have done a monthly top up from their income over the years, there had better be an accounting system in the CGT maths that takes their input off, as that needs to come off the taxable profit, as it was taxed income before it went to propping up a tenant & isint a gain, as it was a landlord contribution.
Yes, I have done that to make sure my tenants pay market rent for a property that had decent capital gain and a fairly hefty mortgage.

See this is it, people keep ignoring the man behind the curtain.
If my costs for a rental increase the price of said rental will increase. This is the same with CGT & "rental WoF" they keep talking about, etc, anything that tries to take money from me will inevitably be taking it from the tenants. We try not to burden the [good] tenants with too much cost (in fact right now we're prob below "market rates") but end of day we're not gonna take a hit to make renting "affordable". Our costs go up, their costs go up.
If anything these systems only see to push out the "mum & dad investors" bringing about more corporate investors

[Black Knight]

Stay away from Kiwisaver. The point of it is to ... ah .... save for retirement because the state are spending too much on old people. And they propose taxing it more?

Here is my prediction - so far it is nothing but a working party wish list suggestion paper. Featuring all types of horror taxes for the media to get so excited over I swear Duncan Garner on the AM show actually had a boner on screen the other morning.

So all the PM has to do is let the media run their mouths off about 30% tax etc and when she announces it will only be 10% the country will sigh a collective sign of relief and thank her for being so reasonable. The polls will love her more and Mr Bridges will be oust.

Asking for more(30%) than is really required then "dropping"the rate is the oldest trick in the book be it property developers asking for 6 stories but really only wanting 3,private marina developments asking for 4 when they only want 1,etc etc-I am sure this trick will be tried and will prolly get through,bastards.

[TheDemonLord]

I'm going to add that I did see a fairly good argument for a CGT (even though, as a principal, I'm not in favor of the Tax)

It goes something along the lines of:

As an area appreciates in value, one of the factors in this, is investment by the Govt/Council (think Roads, infrastructure etc.) and a CGT is a way of recovering a portion of that investment, for future investment.

That all said, I think that anytime a politician says or insinuates 'We should tax the rich more', they should be slapped by someone, who will then promptly read out exactly how much Tax the rich pay (something like 20% of NZers pay 80% of the income tax), followed with a brief historical lesson on every Socialist hell-hole that implemented very steep, progressive tax system.

[merv]

I'm not concerned too much how it will affect me. I've had around a decade of intense activity that would have attracted a CGT, that activity has now tapered off & will remain somewhere down around nil for the foreseeable future, so I'm not concerned how it is going to affect me.
My concern is for the change in kiwi behaviour & lifestyle.
I can see the arse dropping out of the beach settlements & maybe a shift to large boats instead.
I also worry for people currently renting.
Landlords can't just haul money out of their arses & won't be prepared to inject some cash to top up the mortgage of a rental property out of their wages to keep the rent reasonable, as many have done in the past, in the knowledge that there is a tax free carrot waiting for them at the end, because they will now be taxed on the profit of said property.
Rents will definitely rise & while I'm sure it will turn a few tenants into home owners in the short term, the long term will be a bit grim if you aren't a home owner.
Also, for landlords that have done a monthly top up from their income over the years, there had better be an accounting system in the CGT maths that takes their input off, as that needs to come off the taxable profit, as it was taxed income before it went to propping up a tenant & isint a gain, as it was a landlord contribution.
Yes, I have done that to make sure my tenants pay market rent for a property that had decent capital gain and a fairly hefty mortgage.

You're right on it there bob. The one thing that always amazes me is the whinging about negative gearing and people being said to get their tax back if they had shown enough losses on their properties to offset it against their other income like wages.

The actual real winners out of all this are the banks. Landlords can claim interest costs as an expense quite rightly and as you and Ocean are saying a lot of money has to be tipped in to pay the mortgage i.e. mainly the interest to the bank, which in the early days of rental ownership isn't covered fully by rents. So the landlord might get a maximum of 33% tax rebate, but still has to pay 67% of expenses, most of which goes to the bank as interest.

So people that whinge about negative gearing seem to have no understanding and never ever comment on the fact of just how high the landlords costs must be for them to be in that position and sure the light at the end of the tunnel is to have the mortgage paid off and finally be able to reap something off the rents and pay tax on that like any other income, or to be able to sell at a gain and that is where CGT will pull this down. Meanwhile the banks keep on winning.

As for bikers I am assuming bikes aren't in the category of boats or art mentioned in the working group's report so how do KBer's feel about having an old bike that starts to appreciate in value, or you did a bike up a few years ago, and when you get too old for it and you want to sell, you may have to front up with CGT out of the money you sell it for?

[HEsch]

See this is it, people keep ignoring the man behind the curtain.
If my costs for a rental increase the price of said rental will increase. This is the same with CGT & "rental WoF" they keep talking about, etc, anything that tries to take money from me will inevitably be taking it from the tenants. We try not to burden the [good] tenants with too much cost (in fact right now we're prob below "market rates") but end of day we're not gonna take a hit to make renting "affordable". Our costs go up, their costs go up.
If anything these systems only see to push out the "mum & dad investors" bringing about more corporate investors

This.

I'm a new landlord (bought the property 2 years ago and have had tenants for just over 1 year). I want to keep the rent low but I put it up by $20pw 6 months ago and the same now (6 months on ie as soon as I could do it again).
Factors in upping the rent include 1) unexpected renovation that cost nearly 20k (due to a leaking HWC) - bonus, the tenants now have a brand new kitchen and bathroom - but that 20k didn't come from nowhere, darrrrrrling, 2) market rent increasing (my brother rented a similar house in similar area and was paying $20pw more than I've just told my tenants they will need to pay shortly... Ie $40pw more than I currently get).
Ultimately, I don't want to subsidise someone else living in my home "just because." I own the financial risk and regardless of what they do (stay, leave, trash the place), I have to keep paying the mortgage...

[neels]

I can understand the principle, that being if someone is buying and selling something for a profit then it's generating income and can be taxed. However;

Ignoring inflation is bollocks, just because the value of money decreases and the number gets bigger, it doesn't mean something is really worth more. If the amount you sell something for can buy the same number of widgets as the amount you paid for the thing could when you bought it, then there has been no gain, so therefore there should be no tax.

I am struggling with the link between CGT and increased rents, unless the landlord is projecting their future sale price and the tax payable and trying to recover it now it doesn't make sense.

The main beneficiaries of this will be the accountants and lawyers finding the best way to structure ownership to minimise tax, as is their purpose in life. With the ability to offset losses against other income now gone, the previously favoured company structures are relatively pointless, so the net logical step to completely remove the linkage to personal income meaning any profit will be taxed within a company after any previous losses and expenses are deducted.

Of course the obvious way to avoid any of this is to sell your property to one of your kids for what you paid for it, then when they sell their CGT exempt own home for a huge profit, they can gift you a sum of money as a thank you.

[HenryDorsetCase]

If you are buying and flipping property you are also meant to pay tax on that also Nothing new There either.

Pretty Sure national created the Residential land withholding tax.



Fairer than upping GST

In 2015 it came in. Since then we have done in our firm literally hundreds of conveyances of property. We have a body of clients skewed to the Asian pursuasian but we get all flavours through the door. Since RLWT came in we have been forced to learn about it, add extra forms to the forms people sign, upskill the support staff, and generally get to grips with it. There are flowcharts and everything.

Ask me how much money we have returned to the gubblemunt from RLWT, go on.



No really, I want you to ask.



OK fine. Since you asked. It is ZERO. Nil, nada. Not one red cent. Not one pink dollar. Not a fucking razoo.

IMO it is the same as Gift Duty if anyone remembers that. It cost the gubblemunt $70M a year to administer, and they got in $2M in revenue in any given year.


The biggest thing is the change last year introduced by the newgov which classified all "residential" land as sensitive for the OIO.

I have a client currently who is in the throes of building an $8M project on a site that is "classified" residential under the local plan, but has an operative resource consent (with building consent issued and sitework about to start). They've had a punter approach them to buy the project on completion. The gotcha is that they have to get a fucking OIO consent because notwithstanding our RC the site is "classified" residential. Oh, and no one can tell us the process, who to contact, how much it will cost, or when we might have a decision. The buyer will almost certainly walk I reckon. Not the end of the world for our guys but fucking annoying because the onsale de-risks the project considerably.

Bah Humbug

I have a theory that it is important to be seen to be doing stuff from a pollies perspective, but what they achieve might be a bit hit and miss..

[TheDemonLord]

Ask me how much money we have returned to the gubblemunt from RLWT,

So Henry, Just how much Money have you returned to the Government from the RLWT?

[husaberg]

In 2015 it came in. Since then we have done in our firm literally hundreds of conveyances of property. We have a body of clients skewed to the Asian pursuasian but we get all flavours through the door. Since RLWT came in we have been forced to learn about it, add extra forms to the forms people sign, upskill the support staff, and generally get to grips with it. There are flowcharts and everything.

Ask me how much money we have returned to the gubblemunt from RLWT, go on.



No really, I want you to ask.



OK fine. Since you asked. It is ZERO. Nil, nada. Not one red cent. Not one pink dollar. Not a fucking razoo.

IMO it is the same as Gift Duty if anyone remembers that. It cost the gubblemunt $70M a year to administer, and they got in $2M in revenue in any given year.


The biggest thing is the change last year introduced by the newgov which classified all "residential" land as sensitive for the OIO.

I have a client currently who is in the throes of building an $8M project on a site that is "classified" residential under the local plan, but has an operative resource consent (with building consent issued and sitework about to start). They've had a punter approach them to buy the project on completion. The gotcha is that they have to get a fucking OIO consent because notwithstanding our RC the site is "classified" residential. Oh, and no one can tell us the process, who to contact, how much it will cost, or when we might have a decision. The buyer will almost certainly walk I reckon. Not the end of the world for our guys but fucking annoying because the onsale de-risks the project considerably.

Bah Humbug

I have a theory that it is important to be seen to be doing stuff from a pollies perspective, but what they achieve might be a bit hit and miss..

I am not surprised as even before then there were rules relating to flipping property that never resulted in any tax being paid.
Anyone rich has a half decent accountant anyway but you do what you can within the rules that you work.
But did you see the list of countries that ddnt have a CGT they were nearly all tax haven countries.
I remember when i brought my first house the lawyer doing the conveyancing was abe to somehow date the sale so i never paid the stamp duty, Still dont know how they done it, filed it late or something i was glad. It was a fair chunk of change in those days. If you are clever you can still buy as going concerns but selll as GST exclusive, Ramp down the Curtilage or up if it suits claim off the office areas hybrid GST 6 monthly and invest it in the bank when selling and keep ther interest etc etc etc.
You will never shut all the loop holes but we can try and make it fair as just increasing GST every few years is not fair.
What we need to do is get the speculators out of NZ and stop them manipultaing our economy Remember back in the early 80's one trader, Nearly killed our Dollar he made 100's of millions for doing nothing and we paid for it all.
Can remember his name but 300,000,000 million in one day i think it was. John Key later worked for him.

[sidecar bob]

If you are buying and flipping property you are also meant to pay tax on that also Nothing new There either.

Pretty Sure national created the Residential land withholding tax.



Fairer than upping GST

This has nothing to do with "flipping property" , this has to do with long term, conciencious landlords getting their arse screwed.
I guess the real weekly cost of being one of my tenants just became absolutely all my outgoings on said property for the year, plus 20% (only fair to make a modest profit for my trouble) divided by 52.
Look forward to seeing my tenants faces when I dump that one on them come Monday.
They can write a letter of thanks to the tooth fairy.

[husaberg]

This has nothing to do with "flipping property" , this has to do with long term, conciencious landlords getting their arse screwed.
I guess the real weekly cost of being one of my tenants just became absolutely all my outgoings on said property for the year, plus 20% (only fair to make a modest profit for my trouble) divided by 52.
Look forward to seeing my tenants faces when I dump that one on them come Monday.
They can write a letter of thanks to the tooth fairy.

Really because CGT only apply when a property is sold so that Conscientious landlord is a crock of Katman. Not to mention it hasnt came in yet either or even got a bill drafted yet.
You remember the CGT that practically everyone else has but NZ has the CGT that National tried to implement on property a few years ago, that you never complained about then?
Maybe the reason you never complained then was because they did a total piss poor job of it.
Hike your rent up if you want but at least be honest about the reason why you want to do it.

[sidecar bob]

Really because CGT only apply when a property is sold so that Conscientious landlord is a crock of Katman. Not to mention it hasnt came in yet either or even got a bill drafted yet.
You remember the CGT that practically everyone else has but NZ has the CGT that National tried to implement on property a few years ago, that you never complained about then?
Maybe the reason you never complained then was because they did a total piss poor job of it.
[URL="https://i.imgur.com/k41V9sG.jpg"]Hike your rent up if you want but at least be honest about the reason why you want to do it]

Well no, I have a beautiful family home & have no desire to occupy my rental property.
It's just that the last incentive I had to give my tenants a subsidised by me, sharp as deal using my tax paid disposable income (which I should have spent on a Porsche for me, rather than housing for a family I barely know) is about to disappear. I'm not in it to be Santa Claus, so it's user pays now I guess.
Don't try to tell me what my motives are.
If they're talking about screwing me over I'd rather be on the front foot when it happens. Game on.

[husaberg]

Well no, I have a beautiful family home & have no desire to occupy my rental property.
It's just that the last incentive I had to give my tenants a subsidised by me, sharp as deal using my tax paid disposable income is about to disappear. I'm not in it to be Santa Claus, so it's user pays now I guess.
Don't try to tell me what my motives are.
If they're talking about screwing me over I'd rather be on the front foot when it happens. Game on.

Its clear what your motives are BOB
If you are worried about a tax that not only is it not even been implemented it is only ever going to be implemented when a property is sold, and you are saying its costing you profit. the only logical conclusion is you intended selling the properties for a Profit.
There is nothing wrong with that,Selling stuff for a profit, but at least fess up to the reasons why you are pissed about it.
Why should you not have to pay tax on profit that is income when others pay tax on income, Just because you want make a living by selling property.
Its just a loop hole that should have been shut years ago.
Ps the only one around here that has mentioned screwing you is Katspam. Pretty sure he doesn't want to go around the front way.
The only reason you would have to be worried is if you put all your eggs in one basket, As long as you took the advice and spread your investments over a number of different things rather than just all in rental properties, you will be fine.

[Madness]

Fuck I hate agreeing with Husaberk!