21 Sep 2018

Two options proposed for taxing capital gain

4:14 pm on 21 September 2018

A straight capital gains tax, at a set rate, is not among the options presented in the Tax Working Group's interim report.

An auction sign outside a house for sale in Auckland.

Tax Working Group has released an interim report proposing two options for taxing capital gain. Photo: RNZ / Claire Eastham-Farrelly

There are two proposals for taxing capital however.

The first is taxing any gain from the sale of assets at roughly the marginal income tax rate, and the second taxing a portion of the value of certain assets, for example rental properties, annually.

The head of the working group, Sir Michael Cullen, said the current system creates some inequities, using the example of two taxpayers.

"If it's say one worth $50,000 a year of capital income and $50,000 a year of labour income, on the same as somebody who's on $100,000 a year of labour income, the first person's paying a lot less tax at any point, than the second person. So, is that fair?" he asks.

The National Party said the government should be upfront about whether it intends to take more tax out of the pockets of New Zealanders.

Finance spokesperson Amy Adams said New Zealanders have a right to know the government's intentions.

"The Government should be making it very clear, whether this is an attempt to take more tax. I asked Grant Robertson to confirm that it will be tax neutral, and he won't do it.

"I think the clear message is that this is an opportunity for the Government to take more tax from New Zealanders."

Finance Minister Grant Robertson said no changes would be implemented this term, and the family home, increases to income tax or GST, inheritance tax, and a financial transactions tax.

The government won't make any decisions until it receives the final report in February, said Mr Robertson.

He said he's not in a position to rule anything in, but has written back to the group with his expectations.

"Governments will always reserve the right to be able to adopt the recommendations that we want and there will be a Cabinet process to do that.

"But what our letter is indicating is we are looking for a coherent package where we can understand what the trade-offs are."