A glimpse into NZ First’s attitude to CGT

A lot of people are saying that the Capital Gains Tax will not go ahead because Winston will not allow it. Winston has always said that he is dead against it, and with good reason, since many of his voters are older-generation Kiwis with assets who do not want to see a big chunk of their inheritance go to the government.

Broadcasters like Mike Hosking are convinced that Winston will pull the plug on it. I’m not so sure. Winston has campaigned to reduce immigration for decades and yet he signed the UN Migration Compact, which gives anyone arriving on our shores full resident’s rights. Also, in spite of election promises to reduce immigration numbers, he has done no such thing.

NZ First are running a survey on their website on tax issues, appearing to be consulting its membership and the public in general. You can take the survey here. The wording of some of the questions is interesting however, and provides a glimpse into the way NZ First is heading on the gnarly question of CGT.

No. This is incorrect.

Yep. Introduced by Michael Cullen in 2008, the FIF rules affect only foreign investments, but not shares on the ASX 200. The FIF regime taxes unrealised gains.

This is not a tax on capital gains. People who buy and sell houses regularly are classed as being in the business of selling houses, and therefore the proceeds of the sales are taxable, like any other business income. A political party in government ought to understand some of these basic definitions.

The “brightline tax? It is very poor when people like you and me understand this stuff better than those who are in government, although this happens a lot with the present Coalition of Losers.

The Brightline Test is not a tax on capital gains either. The Brightline Test defines a property speculator.

Introduced in October 2015, it identified a speculator as anyone who sold a property other than their family home within 2 years. Speculators are in the business of selling property. Once again, that makes the tax payable a form of income tax, not capital gains tax. The 2 year limit was increased to 5 years in March 2018.

That is correct, and is technically an anomaly, but as there is legislation on the way to ringfence losses on rental properties, maybe it is not surprising.

This is factually incorrect. The Brightline Test was established by the National government in 2015. It was ‘strengthened’ by Labour in 2018, when the 2 year threshold was increased to 5 years.

Here is my take on this survey. NZ First is trying to soften everyone up for CGT by telling people that we already have it. This is incorrect. The FIF rules were introduced because it was perceived that the government was missing out on tax revenue from foreign investments, and that it created a disadvantage to the local sharemarket. But even if the FIF rules can be seen as a form of CGT, the Brightline Test is not a capital gains tax at all; it is a tax on property speculation.

What is more, it looks as if NZ First are going to try to blame National for CGT by saying they introduced (or rather ‘strengthened’) the Brightline Test. Remember that Winston did this when signing the UN Migration Compact, saying National started the process. Maybe they did, but it was the current government that signed it, and no one twisted their arm.

So everyone who thinks Winston will scuttle CGT is likely to be disappointed. These questions indicate that they are very seriously considering supporting it, and are trying to decide on what their angle will be.

They will blame National if there is any way they can, but National has not introduced taxes on the sale of businesses, shares, KiwiSaver funds, lifestyle blocks, farms or the sale of rental properties owned for more than 5 years. Nor do they propose taxing family homes that are used as home office locations, or where rooms have been rented out from time to time. The responsibility for that will lie entirely with the current government, if that is the path they choose. The only way to stop it now is to vote these clowns out of government once and for all.