TAX WORKING GROUP INTERIM REPORT – IMPACT ON PROPERTY INVESTORS

The Tax Working Group (TWG) has published its interim report. What will be the impact on property investors? Please see the PDF below for an executive summary, courtesy of Forsyth Barr.

equity_strategy_2018-09-21_twg_looks_to_stretch_taxable_“income”.pdf

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THE GIST OF IT

Basically, the TWG wants to extend taxes on capital gains to things other than property. But, they are also looking at reintroducing building depreciation, so it is not all bad for property investors.  

TAX ON CAPITAL INCOME
A capital gains tax (CGT) regime for property and share traders/developers etc already exists in New Zealand, so this is nothing new. The TWG recommendation is to extend this to catch gains on assets that are not already taxed:

• Land and property (other than the family home)
• Intangible property, including goodwill
• All other assets held by a business or for income producing purposes that are not already taxed on sale (such as plant and equipment)
• Shares in companies and other equity interests

The Final Report arrives in February 2019.
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IMPACT ON INVESTORS

Some key points:

• Sir Michael Cullen has indicated that any new CGT would not be retrospective, so this is a huge relief for existing investors. 
• Losses arising from the sale of an asset would be carried forward, and subject to ring-fencing e.g. you sell a rental property, and make a loss: this loss can only be used against another rental property.
• No changes to company tax rates or GST.
• Won’t be introduced until 2021/22

For more information, please contact either Guy Johnson or Paul O’Driscoll or via the details below.

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