Tax Working Group recommends introducing capital gains tax and reducing personal tax rate
The final report by the Tax Working Group lead by Sir Michael Cullen came out today and unsurprisingly it recommended that the Government implement a capital gains tax. There is already a capital gains tax in the form of the bright line test which applies to residential properties bought and sold within 5 years.
The tax working group recommends that a comprehensive capital gains tax be introduced which will cover assets such as land, shares, investment properties, business assets and intellectual property.
According to the report “Unlike most other developed countries, New Zealand does not generally tax income in the form of capital gains (except in some specified instances). The inconsistent treatment of capital gains reduces the fairness of the tax system. It is also regressive, because it benefits the wealthiest members of our society.”
Key Recommendations of the Tax Working Group
- Capital gains tax on sale of resident property except the family home, commercial property, business, shares and intangibles.
- Art, boats, cars, bikes, jewellery, personal household items and the family home to be exempt
- Tax will only be applied to capital gains made after 1 April 2021
- Losses on the sale of assets can be used to offset capital gains made from the sale of other assets
- The threshold of the lowest tax rate of 10.5 per cent to be increased, meaning that more income will be taxed at the lower rate benefiting all low-income earners
- Houses on farms and land surrounding up to 4500 sq meters to be exempt
- Increase in prices of Emissions Trading’s Scheme
- All emissions should have a price including agriculture
- Increase tax on water pollution
- ETS to be more like a tax and raise revenue
- Encourages savings by refunding tax paid by KiwiSaver contributors who earn less than $48,000/year and cutting KiwiSaver tax rates for low and middle income earners
Click here for the full report from the tax working group.