10 Aug 15
Capital Gains Tax - what's happening out there?
It has intrigued me somewhat the press exposure those baying for a capital gains tax have received lately.
None of them appear to know – including opposition politicians – that we have always had a Capital Gains Tax.
The tax is based on the ‘intent’ of the investor.
If the investor left a trail of emails with his accountant or bank that he intended to sell at some stage for profit, the Inland Revenue could access these and tax the investor on any gain. So It has always been a bit of a cat and mouse game.
An unwritten assumption by investors (and I’m guessing the IRD itself) is that selling after 10 years gets you off the hook. But be warned this is not law.
Governments have been loath to tighten this ‘window’ because apart from in areas like Auckland, Hamilton, Tauranga, Christchurch and Queenstown you could well make no gains and in effect a tax loss. This makes things very complex especially for the amount of overall tax that might be garnered.
Under pressure from the opposition and the reserve bank governor’s one man band campaign the government has introduced a ‘brightline’ test (wherever that term came from please elucidate me).
My lawyers tell me that the two years inside which you would pay normal tax on a gain is from the settlement of a property to the unconditional sale date (yes the logic loses me too).
It doesn’t really phase me because in Auckland, unless you went broke or suffered some other tragedy, why would you sell in two years or at all?
My message, as always, is you’ve got to do something.
Yes call us.