Capital Gains Tax - I wonder if they'll rebate any tax if negative growth?

[ManDownUnder]

Saw this in the herald today and I'm way pleased the house is gone. I wonder if they'll provide a tax rebate if property values fall....

http://www.nzherald.co.nz/nz/news/ar...ectid=10576312

Yup - and they always have. Depreciating a house as an asset is the oldest trick in the book, until you sell it and pay the clawback to the IRD. Which actually isn't so bad because in the meantime it was an interest free loan... and there were ways to work around the clawback too - till the IRD really started to clamp down on them

[Winston001]

Trust law was originally designed to protect family properties (such as farms, or heritage homes) from potential mortgagee sale or the like, so the beneficiaries of the trust (kids, grandkids, etc.) were protected. Loopholes allow the greedy and unscrupulous to manipulate things so the property in trust, and income directed into the trust, is beyond the reach of the IRD.

Unfortunately, this state of affairs will continue on until there are no longer so many politicians, judges, lawyers, etc taking advantage of it. In other words, indefinitely, or forever, whichever comes first.

Just for clarity. Trusts arose in the 11th century when noblemen went on Crusades. Women and children could not own land, and furthermore some types of land such as fee tail could not be sold - the land was always inheirited. I believe the royal family holdings and others are still held this way today.

Anyway, the noble gentleman setting off to battle the Moslem hordes would transfer the land entrusted to the local bishop, or neighbouring knight, or whoever. The land was to be held for the benefit of the wife and kids until his lordship returned - which could be any years later.

The whole point of a trust is to protect assets - usually property.

Today trusts are often set up for disabled children, widows, and charitable purposes. Nothing wrong with that.

[Winston001]

However what Viffer alludes to is the discretionary family trust which has been flavour of the decade. Mostly this simply owns a house to protect against creditors.....such as rest home fees. Common, but not for everyone.

Then there are trusts which trade - and that is what you refer to. I can say that some lawyers are uncomfortable with this but accountants have enthusiastically embraced the idea. It seems quite contrary to trust law to engage in business risks - but its done.

Most people including those in the "professions" cannot take advantage of this because the law does not allow tax splitting with the trust. There's a case of a dentist who found this out. Took one for the team.

Dr Cullen was no fool and he changed tax law to remove loopholes with trusts, as well property investment. Indeed Bluechip may be a victim of those changes.

However there are people who can use trusts to reduce tax. Not a lot of them, but since we probably all know someone who skites about it, it feels like there are many tax-dodgers.

[vifferman]

It almost appears you harbour some small malice toward these people. Why?

No, not I.
The WAPP spent many years working for the IRD, and although what they are doing is within the law, it's not strictly ethical. While there is no malice on her part either (it IS her sister and brother-in-law, after all), she disapproves of what they are doing, particularly when they complain about "how the gummint is spending our tax dollars".
BTW - tax evasion is illegal, but avoiding paying more tax than you have to (tax avoidance) is not.

[The Stranger:Me]

BTW - tax evasion is illegal, but avoiding paying more tax than you have to (tax avoidance) is not.

Incorrect!
NZ is the only country in the world where tax avoidance is illegal.

[k14]

You don't get a hand out from IRD when if your bussiness makes a loss...why would they give you money if your house makes a loss??

I don't understand peoples thinking on this....

Or if your shares decrease in value, or if you had money in bridgecorp et al...

[The Stranger:Me]

Or if your shares decrease in value, or if you had money in bridgecorp et al...

If your shares increase in value you are not taxed - unless you are doing this as a business, so if your shares decrease you can not write off the loss - again, unless you are doing it for a business, in which case you can write off your loss.

Your money you invest in bridgecorp is similar in that it is capital and is not increasing, hence no tax liability. There is of course tax on the interest you receive for use of that money, however if you don't receive the interest you aren't actually out of pocket.

[Winston001]

BTW - tax evasion is illegal, but avoiding paying more tax than you have to (tax avoidance) is not.

That used to be the way of it. The courts have always said that you are entitled to arrange your affairs to reduce your tax liability. But evasion was not allowed.

However for some unknown and stupid reason, the law now refers to avoidance of tax as unlawful. So two perfectly good and different words now mean the same in tax law. Idiots.

[discotex]

Hmm "sky will fall in" argument. Well ok, but you are offering ideas as to possible outcomes without knowing the details too of course. So if it's good for you to speculate on the possible situation I feel it is acceptable for me to also.

Absolutely. I have no issue with my suggestions of how it could possibly work being considered "polished turd" for the same reason.

Until someone proposes anything of substance it's just an ideological debate.

My other point re long term investers not feeling the pain is that while they will be taxed more on a gross long term gain the NET return will still be higher than other investment classes. Especially if you introduce a sliding scale based on length of ownership.

[Hitcher]

It. Is. Not. Going. To. Happen.

[RantyDave]

Richer get richer still,
Middle class try to catch them!
Poor are fucked again.

[steve_t]

That used to be the way of it. The courts have always said that you are entitled to arrange your affairs to reduce your tax liability. But evasion was not allowed.

However for some unknown and stupid reason, the law now refers to avoidance of tax as unlawful. So two perfectly good and different words now mean the same in tax law. Idiots.

This isn't true. You are not "entitled to arrange your affairs to reduce your tax liability". You are entitled to arrange your affairs to protect your assets etc and any tax advantage you receive is incidental. You are not allowed to do anything with the aim of reducing your tax - tax avoidance

Oh and Trusts are still taxed at 33% while companies are "only" paying 30%. Not sure how long this will be for

[Timber020]

Interesting to see who really pays for a capital gains tax.
The same people who pay all tax, those who can least afford it, low to middle income earners.

So I have an investment property, it is currently rented well below market value. I rely upon the capital gain for a return. They introduce a capital gain tax and I will be looking for top dollar on my rent instead, as will all other investors.
What effect will this have on rents?
How will increasing rents help the people looking for a first home? They have enough problems now without having to cover my tax burden for me.

Currently about 35% of our housing stock is rental. Not that long ago (about 30yrs if I recall correctly) that figure was 10%.
It doesn't make sense to fuck with that many people's lives.

That said, the cynic in me says that National are unlikely to introduce a tax in which many of them would be caught themselves.

Bull.

If there is a capital gains tax, houses will become less of an attractive option for investors, some will look elsewhere, reducing demand on houses, lowering house prices and meaning more people will be able to afford to own rather than get stuck renting. Rents will reduce as house prices do, they will have to as buying houses becomes more accessable.
"Im not paying that, I can get a house for x amount more a week" etc
There are more rentals now because houses are more unaffordable than ever and thats because there are so many people buying rentals. Its a firestorm feeding itself, its about time we stopped providing it so much easy fuel.

The only looser to capital gains tax are the rental owners, everyone else wins.

If you own a rental you contribute to why so many young kiwi families are struggling or just failing to get into there first house, your fucking with other peoples lives.

[The Stranger:Me]

Bull.

- snip most clap trap -

If you own a rental you contribute to why so many young kiwi families are struggling or just failing to get into there first house, your fucking with other peoples lives.

Bollox.
Laziness, ignorance, apathy and "me now" is what stops people from purchasing thier own place.
The place was rented cashflow positive to the same tenant for 5 and a half years. At any stage during this time they would have been better off buying their own home. Though that would have meant sacrifice of their life style to save a deposit. Hell, they could even have done a 101% loan to get a place eliminating the need for any deposit. I can't make that sacrifice for them, they must do it themselves.

Think it through - the entire tax burden always (well near enough always) falls on the low and middle income earners. It always does, it always will. The only way to alleviate that is to reduce the tax burden. Sugar coat it, say it comes from here or there call it company tax, a tariff or a surcharge or whatever, but YOU always pay!

For example, who really pays company tax? Not the insurance company. The insurance company passes this burden on to the consumer in their premiums. They simply act as a collection agent for the govt.

So wish for an additional tax all you like, but hey, you are the one who will be paying it. This is why the rich get richer and the poor get poorer.
But have it your way if you wish, I couldn't give a shit.

[popelli]

National are left floundering trying to keep both our economy and local businesses viable thanks to Labour's anti-business practices, and this will be one of the options Treasury want to make public so it can be shot down and replaced with something more insidious like 15% GST.

15% GST would be easier to administer and raise more revenue.............

the real problem is NZ has a social security system that they can't afford

national super is far to generous and was an electrion bribe back in 1976, nobody has been game to tackle this sacred cow since then