Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 4:24pm

slumdog wrote:The CGT bill comes out of the profit only remember, they will still have 85% (say) of the profit from the sale.

I did hear an interesting arguement against the excluson for personal homes. Evidently this encourages active investment in your home, i.e. you don't invest in other types of investment, you pump the money into buying as big and flash a house for your personal home as possible,because the gain is tax free.

Not saying i agree with the arguement against the exclusion, but it is a compelling idea, and bad news for the sharemarket/property prices increasing/ business investmet etc.


There is no profit..nought narda, its purely artificial.
If you buy another equivalent house are you any better off ?. NO, thats why your primary residence should not be subject to CGT.

So once on the property ladder so to speak you buy your first house for

$200k
You decide to move somewhere else and sell it a few years later for
$300k (Pay $15k CGT tax)

Now you have to try and buy an equivalent house for $300k, which you cant afford as you had to give the GOVT $15k, so you go backwards, with each house move taking you further and further backwards.

Most people just buying their own homes are doing so as a family home not an investment.

This will also encourage kiwis to spend even less on their houses for fear of increasing its value, NZ has some of the worst housing stock in the world, cold damp and without heating.

From a practical point of view, having CGT on your primary residence is a big no no.
Last edited by ThingOne on Tue 12/Jul/11 4:31pm, edited 1 time in total.
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Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 4:27pm

philstar wrote:
Spyder wrote:At a minimum you have to take inflation out of the capital gains.


why they don't do it on term deposits ( even though I think the should).


There are no capital gains on a Term Deposit, you get interest income which is taxed.
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Re: Capital Gains Tax

Postby philstar on Tue 12/Jul/11 4:34pm

ThingOne wrote:
philstar wrote:
Spyder wrote:At a minimum you have to take inflation out of the capital gains.


why they don't do it on term deposits ( even though I think the should).


There are no capital gains on a Term Deposit, you get interest income which is taxed.


why should CGT get a inflation exemption when tax on interest does not?
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Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 4:38pm

philstar wrote:
ThingOne wrote:
philstar wrote:
Spyder wrote:At a minimum you have to take inflation out of the capital gains.


why they don't do it on term deposits ( even though I think the should).


There are no capital gains on a Term Deposit, you get interest income which is taxed.


why should CGT get a inflation exemption when tax on interest does not?


What?.. that doesnt make any sense..

Interest is a return on investment, its not a capital gain, capital gain is the increasing value of an asset over time, completely different,
You should get an inflation adjustment on capital as ALL assets have increased in this manner with inflation, hence its not a real profit..
You really want to pay tax on artifical profits?

Answer these 2 simple questions.


Heres the scenario...
Family A buys a house for $300k
Family B buys a house for $300k right next door

Both families live in houses for 2 years then the decide to swap and buy each others house.

Family A pays Family B $500k
Family B pays Family A $500k

Question 1 Should both familes pay CGT?, they are neither better or worse off financially.


NOW, 2 more years down the track a massive recession hits town and prices fall.

Family A and Family B decide to swap homes again

Family A pays Family B $200k
Family B pays Family A $200k

Question 2 Should both families be able to claim a tax refund?
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Re: Capital Gains Tax

Postby brian245 on Tue 12/Jul/11 5:46pm

Well with Phils' economics, yes :crazy:
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Re: Capital Gains Tax

Postby Wobbler on Tue 12/Jul/11 6:00pm

ThingOne wrote:
philstar wrote:
ThingOne wrote:
philstar wrote:
Spyder wrote:At a minimum you have to take inflation out of the capital gains.


why they don't do it on term deposits ( even though I think the should).


There are no capital gains on a Term Deposit, you get interest income which is taxed.


why should CGT get a inflation exemption when tax on interest does not?


What?.. that doesnt make any sense..

Interest is a return on investment, its not a capital gain, capital gain is the increasing value of an asset over time, completely different,
You should get an inflation adjustment on capital as ALL assets have increased in this manner with inflation, hence its not a real profit..
You really want to pay tax on artifical profits?

Answer these 2 simple questions.


Heres the scenario...
Family A buys a house for $300k
Family B buys a house for $300k right next door

Both families live in houses for 2 years then the decide to swap and buy each others house.

Family A pays Family B $500k
Family B pays Family A $500k

Question 1 Should both familes pay CGT?, they are neither better or worse off financially.


NOW, 2 more years down the track a massive recession hits town and prices fall.

Family A and Family B decide to swap homes again

Family A pays Family B $200k
Family B pays Family A $200k

Question 2 Should both families be able to claim a tax refund?


replace family with slumlord and is the answer the same?
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Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 6:09pm

Wobbler wrote:
ThingOne wrote:
philstar wrote:
ThingOne wrote:
philstar wrote:
Spyder wrote:At a minimum you have to take inflation out of the capital gains.


why they don't do it on term deposits ( even though I think the should).


There are no capital gains on a Term Deposit, you get interest income which is taxed.


why should CGT get a inflation exemption when tax on interest does not?


What?.. that doesnt make any sense..

Interest is a return on investment, its not a capital gain, capital gain is the increasing value of an asset over time, completely different,
You should get an inflation adjustment on capital as ALL assets have increased in this manner with inflation, hence its not a real profit..
You really want to pay tax on artifical profits?

Answer these 2 simple questions.


Heres the scenario...
Family A buys a house for $300k
Family B buys a house for $300k right next door

Both families live in houses for 2 years then the decide to swap and buy each others house.

Family A pays Family B $500k
Family B pays Family A $500k

Question 1 Should both familes pay CGT?, they are neither better or worse off financially.


NOW, 2 more years down the track a massive recession hits town and prices fall.

Family A and Family B decide to swap homes again

Family A pays Family B $200k
Family B pays Family A $200k

Question 2 Should both families be able to claim a tax refund?


replace family with slumlord and is the answer the same?


Hence the reason to differentiate between investment and primary residence.
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Re: Capital Gains Tax

Postby Wobbler on Tue 12/Jul/11 6:16pm

But why? Why should said slumlord pay cgt but a family living there would not?
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Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 6:53pm

Wobbler wrote:But why? Why should said slumlord pay cgt but a family living there would not?


My house is NOT an investment. I purchased my house to live in with my family, think of it like buying the family car vs being a car dealer, only the car dealer is in the car business for profit.

A landlord purchases a house as an investment to eventually sell on for profit.

Distinct difference.
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Re: Capital Gains Tax

Postby philstar on Tue 12/Jul/11 7:03pm

ThingOne wrote:
My house is NOT an investment.


my term deposits are not an investment they are just somewhere safe to put my money ?
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Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 7:13pm

thats it? That's all you can come up with.
Good grief what a stupid argument.
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Re: Capital Gains Tax

Postby Oli on Tue 12/Jul/11 7:28pm

I think ThingOne's rationale is clear and correct. Good stuff.
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Re: Capital Gains Tax

Postby ThingOne on Tue 12/Jul/11 8:00pm

Oli wrote:I think ThingOne's rationale is clear and correct. Good stuff.


Thanks Oli. :)
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Re: Capital Gains Tax

Postby philstar on Tue 12/Jul/11 8:10pm

ThingOne wrote:thats it? That's all you can come up with.
Good grief what a stupid argument.


I was applying your argument for houses to term investments, to point out how stupid it is that just cos you say it's not an investment you should not have to pay tax on it?
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Re: Capital Gains Tax

Postby Slim on Tue 12/Jul/11 8:37pm

philstar wrote:
ThingOne wrote:thats it? That's all you can come up with.
Good grief what a stupid argument.


I was applying your argument for houses to term investments, to point out how stupid it is that just cos you say it's not an investment you should not have to pay tax on it?



When you deposit your money with the intention of living in it, then I am sure the argument will be different ;)
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