Advisers play down capital gains impact

Advisers say a proposed capital gains tax on rental properties will not deter professional, long-term investors in the market.

Bruce Patten

The Tax Working Group today recommended that capital gains, including those from rental properties, should be taxed more. The TWG wants to implement a broad capital gains tax to fund lower tax rates elsewhere.

The move would not affect owner-occupier and family home sales. A capital gains tax would bring New Zealand in line with Australia, Britain, and the US.

CGT could raise about $8 billion a year, according to Sir Michael Cullen, chair of the TWG. The recommendations will enter a period of consultation, and would need to be passed through parliament.

Critics, including the National Party, say a capital gains tax will stop people from buying investment properties in New Zealand.

Advisers are more sanguine about the potential impact. NZFSG head of growth Bruce Patten said the capital gains tax could impact those thinking about buying one or two properties. "I expect an impact on mum and dad investors. This might make them reconsider whether they want to do it or not. That's unfortunate, and takes away an opportunity."

But he said established investors, or those with long-term plans, would not be deterred: "Our advice is if you want to be in this, be in it for the long-haul." 

Patten said the extension of the bright line test to tax properties held for less than 5 years had already created a de-facto tax for short term investors. "I personally see it as business as usual," he added. 

The Mortgage Supply Company's David Windler said some clients may need to seek tax advice, but expected little impact on his business. "It will not change the advice we give," he said.



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