Capital Gains Tax

The following key recommendations were made:

• Capital Gains Tax

The report recommends that capital gains tax should be extended to cover gains and losses from all types of land, including commercial property, farms, rental properties, family baches, and land owned overseas by New Zealand residents, shares, intangible property such as goodwill, intellectual property, software and insurance policies, and business assets.

Personal assets such as the family home, cars, boats, jewellery or other household use items would be excluded from being taxed.

Tax would be payable upon the sale or disposal of the asset at your normal income tax rate and there would be no allowance for inflation.

The report further recommends that the taxing of capital gains would only apply to those gains and losses that arise after implementation date (“Valuation Day”). Tax payers would have 5 years from Valuation Day to determine the value for their assets as at Valuation Day, or the date of sale if this is sooner.

• Environment Taxes

The report recommends that agriculture is added under the scope of the Emissions Trading Scheme. It is also recommended that tax is used to address water pollution, water abstraction, and waste disposal issues.

• Companies

The report recommends that the tax imputation system is retained and for the Government to keep the current company tax rate.

• Personal Income Tax

It is recommended that the bottom income tax threshold is increased from $0 - $14,000 to $0 - $20,000 or $30,000.

• Retirement Savings

In order to encourage greater participation in KiwiSaver, it is recommended that there are tax benefits for low to middle income earners, for example, refunding the employer’s superannuation contribution tax for KiwiSaver members earning up to $48,000 per annum, increasing the member tax credit from 0.50 to 0.75 per $1 of contribution and reducing the PIE rates for KiwiSaver funds.

What happens next?

The Tax Working Group’s recommendations will be considered by the Government, and a full response to the report is expected in April. The Government intends on passing legislation to implement any policy changes before the end of the parliamentary term, however these would not come into effect until 1 April 2021.

We will keep you updated as to the Governments’ full response to the recommendations in April.

Author: Natalie Kong

The above information is of a general nature only. You should contact our firm for advice relating to your specific circumstances.