Capital. Gains. Tax. Three little words that strike fear into the hearts of many New Zealanders.
Opposition to a capital gains tax (CGT) is so deep-seated that it has crossed ideological barriers to gain a reputation as a highly effective vote killer.
New Zealand is somewhat unusual in its position as many similar countries - including our closest neighbour Australia – have long had capital gains taxes in place.
But resistance to it is such that it has been trialled and dumped as a tax policy many times.
Likewise a long series of tax reviews and working groups have considered a CGT before deciding not to recommend the introduction of one.
None the less, when the current Labour-led Government took power they quickly set up their Tax Working Group (TWG) to investigate how the tax system might be reformed to make it more equitable.
Since then, it’s been an open secret that the introduction of a CGT is on the agenda.
While the TWG’s remit is to advise on wide ranging tax reforms, public attention has been firmly fixed on whether or not it will recommend a capital gains tax on residential property.
That makes the conclusions of the TWG a big issue for property investors.
In September, the TWG released its interim report on the “Future of Tax”.
It makes it clear that the TWG believes capital income – gains from the sale of capital assets like property – is taxed inconsistently and that this situation needed to be rectified.
But rather than making a concrete recommendation on a CGT, as many hoped it would, the TWG emphasises that more work needs to be done before any conclusions can be reached.
So what does the report have to say and what are the implications for investors? In this month’s issue of NZ Property Investor magazine we find out.
To read more about the Tax Working Group’s interim report, click here to get the digital issue of NZ Property Investor magazine.
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