Tax Working Group Recommendations – Attack on Kiwi Lifestyle or well timed re-balancing of our country’s wealth?

Business

The coalition government’s Tax Working Group has recommended a broad extension of taxing capital gains – here’s what you need to know:

  • Tax the capital gain on sale of land, shares, business assets, intangible assets such as intellectual property.
  • Tax to be imposed when the asset is sold, and levied at the seller’s marginal tax rate.
  • The tax would NOT apply to the family home, and personal assets such as cars, paintings, jewellery, and household appliances.
  • A holiday home WOULD be taxed on sale.
  • The capital gain on shares in companies would be taxed but in some circumstances capital losses would also be able to be offset against other income.
  • The capital gain on the sale of a business would be taxed, including the goodwill.
  • No changes to income tax rates, but a recommendation to raise the income threshold for low and middle income groups.
  • No change to GST and no exemptions for certain types of products, such as food and drink.
  • The government’s full response, including any planned new taxes, is expected in April.
  • The intention is to have legislation passed ahead of next year’s election, but changes won’t come in until 1 July, 2020.
  • National would have the opportunity to repeal the legislation if it wins the election.

Courtesy of https://www.radionz.co.nz/news/political/383015/live-the-tax-working-group-reveals-findings-on-review

These points are recommendations only and the government has promised a response in April 2019 so this is not a done deal by any means.  In addition, there will be a general election between now and anything being implemented so we will have our chance to vote on this as a package.

These are dramatic changes and, if implemented fully, would fundamentally alter the tax basis of New Zealand.  There will be tremendous pushback from many parties.

It is an attempt to re-balance the tax burden away from wage earners and pass it on to investors, whether that’s in property, shares or business.  A large part of the tax raised from the investment community would effectively be re-distributed to the people on lower incomes via a increased tax threshold. If the rate remains the same but the threshold increases from $14,000 to $22,000 then the additional tax saving for low income people will be $560 per annum.

Will it be good or bad for the country as a whole?  It depends on your point of view. There will be winners and losers and there will be unintended consequences.  The commentary from all parties over the next few months should at least provide some air on the proposals and hopefully a ‘more or less’ consensus will emerge.

What do you make of the proposals?  How will it affect you?

 

Next Article
Getting Ready for Tax Time
By Sue de Bievre March 11th, 2019 Business
Read Now