21 Feb 2019

Capital gains tax recommendations: What you need to know

4:08 pm on 21 February 2019

The coalition government's Tax Working Group is recommending a broad extension of taxing capital gains. Here's what you need to know.

Sir Michael Cullen at the Tax Working Group announcement.

Sir Michael Cullen released the Tax Working Group's recommendations this morning. Photo: RNZ / Rebekah Parsons-King

The group, chaired by Sir Michael Cullen, has recommended the following:

  • Tax the capital gain on sale of land, shares, business assets, intangible assets such as intellectual property.
  • Tax to be imposed when the asset is sold, and levied at the seller's marginal tax rate.
  • The tax would NOT apply to the family home, and personal assets such as cars, paintings, jewellery, and household appliances.
  • A holiday home WOULD be taxed on sale.
  • No change to GST and no exemptions for certain types of products, such as food and drink.
  • The capital gain on shares in companies would be taxed but in some circumstances capital losses would also be able to be offset against other income.
  • The capital gain on the sale of a business would be taxed, including the goodwill.
  • No changes to income tax rates, but a recommendation to raise the income threshold for low and middle income groups.
  • Environmental taxes: changes to the emissions trading scheme to be more like a carbon tax.
  • Dirty taxes on solid waste to reduce volumes to landfills.
  • Taxes on water pollution and water extraction.
  • Taxation of fertiliser use. Consider congestion charges to tackle traffic issues.
  • The government's full response, including any planned new taxes, is expected in April.
  • The intention is to have legislation passed ahead of next year's election, but changes won't come in until 1 July, 2020.
  • National would have the opportunity to repeal the legislation if it wins the election.

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