Posts by Matthew Poole
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OnPoint: Election 2011: GO!, in reply to recordari,
Mind you, perhaps if there were such taxes, the overall house prices would have stayed lower, allowing greater flexibility in any case.
Which is pretty much my argument. If the benefit of buying for capital gain is significantly reduced, property turnover rates are reduced which reduces the upward pressure on property prices.
When you're incentivsed by the tax system to sell for the highest possible price because you get to keep it all, of course you're going to seek the greatest possible gain. Which puts pressure on the values of surrounding properties, etc etc ad nauseum. -
OnPoint: Election 2011: GO!, in reply to giovanni tiso,
I’d be tempted to leave these hardy souls alone for the sake of simplicity. How many can they be
How many might there become if the loophole remains? I'm sure someone said about the family trust tax issue before Labour raised the personal rate - "Leave them. How many trusts can there be?"
Give an inch, and people will take it a mile. Buy, reside, flog, move on. If the requirement is simply that you lived in the house for the period of ownership, that gives a lot of inches. There has to be some kind of hard test, otherwise people will take the piss as they do currently.
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OnPoint: Election 2011: GO!, in reply to BenWilson,
I put it to you that it’s not very difficult to buy and hold, but still with the main intention of profiting from the resale – that could just be endlessly deferred, but it’s still sitting there as a sack of gold at the end of the ownership
It's recognised by IRD that there's almost always an underlying expectation of resale, unless you're buying a unit at a retirement village for your own use. At some point the majority of investments are disposed of by the owner, and you buy expecting to sell at some point. It gets very grey about where the purpose and intent of purchase became profit from resale rather than enjoyment (such as an art work) or income (such as a rental property), which is one of the biggest problems with the law as it stands.
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OnPoint: Election 2011: GO!, in reply to Jacqui Dunn,
The solution to that is to set an arbitrary time limit, say five years, during which the house must be the primary residence, in order to be the "family home". Sell before that and justify the extraordinary circumstances that required it before having the CGT waived: relationship ended, partner died, illness, retrenched, moved to another town, etc, with supporting evidence required.
The "family home" waiver doesn't have to be absolute, and shouldn't be for precisely the reason you identify: it's not impossible to be in the business of property development while still only owning and residing in one house at a time.
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OnPoint: Election 2011: GO!, in reply to DexterX,
The point I am making is that penalites are harsh and as a result tax payers don’t go out of there way to take the risk to be subject to the penalty regime.
Actually, the penalties for a mistake are pretty reasonable. You have to go well out of your way to get into the 150% and 175% penalty charges. IRD even go out of their way to help people deal with tax debt. But you do have to ask, because they're not going to offer.
Your position is pretty much that IRD say these things happen, so people comply. My tax lecturers (one of whom was Craig Elliffe, and all the others are past or current consultants to the IRD) were uniformly cynical about just how much tax actually gets paid voluntarily under our limited capital gains regime, even with IRD trying to enforce the law. And to settle your doubting mind, I studied tax in 2008 so your case about the meaning of "purpose and intent" was very much covered.
So right now you leave me in a predicament: take your word for it, anecdotal and single-data-point that it is, or take the word of tax practitioners who work for the tax collectors. In my position, who would you consider to have the best understanding of how this really works? Hint: I'm not inclined to accept your position.
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OnPoint: Election 2011: GO!, in reply to Paul Williams,
the position of the Vice Chancellors and others is that we need to shift some of the funding currently provided to students back into funding direct to institutions.
Well, of course. When your Minister of Tertiary Education includes student loans in the overall education budget, that's quite a significant distortion on what's really available to institutions themselves.
If the lie that student loans are tertiary funding were ended, the true, woeful state of investment in tertiary education would become readily apparent. -
OnPoint: Election 2011: GO!, in reply to DexterX,
The IRD Tax guide on rental property provides that if you sell an asset for more than its adjusted tax value the difference between the sale price and the adjusted tax value is to be included in your taxable income.
The IRD with regard to intent and purpose take the default position that the purpose was eventually to sell particularly if the ppty was negatively geared and deprecation and interest were offset against rent. It is up to you to prove the intent and purpose was otherwise – to hold onto the ppty indefinitely – if you are selling a rental ppty where you have claimed mtge interest and depreciation then it is hard to prove don’t you think??
I read somewhere in the press that one year it may have been 2010 or 2009 that the IRD nationally investigated over 6,000 cases of rental property sales to see that the sums were done right.
Wooo. 6000 cases in a year. That’s gotta be, like, a vanshingly tiny percentage of the total number of transactions. No possible way people could get away with anything with that intense scrutiny going on, oh no siree.
There’s also the loophole in the law that provides that if the purpose of purchasing the property was for generation of income, you’re free on the capital gains. Buy a property, rent it out for a couple of years, flog it, voila, tax-free capital gain. Of course you meant to use it for income, and you did, look, two whole years, but then your car broke down and you needed a new oven and your wife really wanted a holiday in Hawaii and, well, you had all this money available to you in that house.What the law says and what IRD has the resources to enforce are quite different things. Because the law lacks a bright line test on what constitutes “purpose or intent”, all a taxpayer has to do is dispute the assessment and it drags on through the TRA and then, potentially, into the courts. That ties up IRD resources, and uses enforcement funds that then can’t be used to investigate other potential tax dodgers. Accountants don’t even have to be very creative in finding ways to avoid the limited taxes that exist on capital gains when the holes in the law would accommodate a 747 with room to fit a couple of T 282B dump trucks on the sides.
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OnPoint: Election 2011: GO!, in reply to DexterX,
Where is the proof re
“In this country it was a field day, because all those capital gains were tax free”.
You mean proof other than the University of Auckland Business School’s Professor of Taxation Studies saying that a CGT would be beneficial? Which then, if you are correct, raises the question: why do we need a CGT if capital gains are not tax-free?
Or proof other than the myriad of OpEd pieces and general news articles talking about how the lack of capital gains tax puts NZ out of step with most of the rest of the world?
Or maybe even proof in the form of the Income Tax Act 2007, which provides that gains in the value of an asset that was not bought with the “intent or purpose” of resale are not taxed when realised at time of sale? Is that sufficient proof? Because it’s right there in the legislation, which I’m not going to quote since it’s probably time you familiarised yourself with the law.
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OnPoint: Election 2011: GO!, in reply to Paul Williams,
NZ has very high tertiary participation rates and currently also loses alot of people to overseas. I don’t advocate decreasing tertiary education funding but we might want to acknowledge that, for the moment at least, we’re not capturing the value of the investment and might need to do some rethinking.
I support bonding, and this is being done with doctors in hard-to-fill rural vacancies. Much else, however, has all kinds of potential to go horribly wrong, especially since few other educational pathways have nearly-guaranteed demand on graduation.
As for decreasing funding, we already spend less on tertiary education than a lot of the OECD. Remove student loans from the funding calculations, which is a truthful representation since loans aren't funding, and the national tertiary education spend is quite pathetic.
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OnPoint: Election 2011: GO!, in reply to Steve Parks,
You made me read it, you nasty man. Ugh. I feel dirty.
What an incoherent load of shit! I mean, advocating that you not be allowed out of the country if you have an outstanding student loan balance? And decrease tertiary education funding? Way to ensure the population gets stupid, stays stupid, and anyone with any desire to get educated leaves: and likely never returns.