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CGT - Lunacy much?

Tuesday, April 15, 2014

Capital gains tax

Just this Sunday, Labour's David Cunliffe was on Q+A lambasting a tax regime that hands out tax free capital gains to property speculators as nothing but pure lunacy.  And he would not be wrong. 

Problem is, he is wrong.  In a press release issued yesterday, the New Zealand Property Investors' Federation Executive Officer, Andrew King, rightly pointed out, 'Those who buy and sell property are already taxed on the income from this activity,' whereas the majority of rental property owners are investors not speculators - a distinction that Mr Cunliffe's Labour Party seems to have failed to grasp if their leader's frequent interchange of the two labels is anything to go by.

Property speculators are those who derive a living (i.e. an income) out of selling appreciated assets (i.e. properties) which had increased in capital value.  They are driven by capital gains which are already captured by our income tax regime each time they are made.  In essence, New Zealand already has a capital gains tax in all but name.  

Property investors are driven by reasons that are far more diverse:

  • Providing a passive income stream to supplement our retirement;

  • To have total control over the value of our investments (rather than investing in shares, currencies or finance companies the value of which investors cannot affect); 

  • To invest in an industry (accommodation supply) that continues to have strong demand (housing); 

While any incidental capital gains made throughout would not be un-welcomed, they are only illusionary (because they will be exhausted the moment investors buy back into the market).  

'So,' you wonder, 'where does a CGT leave investors?'  But perhaps more pressingly for me, 'Where does a CGT leave tenants?'  With or without a CGT, demands on the Auckland housing market will always make properties a realistic prospect for investors.  A tax raising scheme designed to dis-incentivise investors will only result in the increased costs be passed on to the tenants who, ironically, are the ordinary Kiwis Mr Cunliffe set out to protect.  




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Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

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Janice Bieleski
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Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

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Stella Shao

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Stephen Weatherall

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Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

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Tim Duffett, Plan A Investments Limited