Property investors: Capital gains tax wouldn't work

Monday, 10 September 2018

Property investors are welcoming news that a capital gains tax is looking increasingly unlikely, but say it probably wouldn't have affected them much anyway.

The Tax Working Group, which is developing a report for the government on the potential future direction of tax policies, is understood to have stopped short of recommending a broad-based capital gains tax.

The working group chaired by Sir Michael Cullen was tasked with designing a capital gains tax for consideration by the Government, but is believed to have pushed back any firm recommendation until it publishes its final report in February.

Andrew King, executive officer of the NZ Property Investors Federation, said he was 'surprised but delighted'.

**READ MORE:

* Rule changes could be bad news for tenants, investors warn

* Rents rise around the country as cost crunch goes on landlords

* Rents will rise or landlords will get out if property tax plan proceeds, landlords say**

'We've always objected to it, we don't think it's the right thing to do. They've argued it's a way of getting house prices down and driving people out of the rental property market is good for first-home buyers and potentially that's true but they're forgetting that most first-home buyers are tenants first and we need more rental properties at the moment not fewer.'

He said New Zealanders seemed to be starting to understand that property investors were not an 'evil group of people' but were instead providing a service that was needed.

Another landlord, Peter Lewis, said it would have very little impact on him.

'I have always bought rental property for income and treated any gain in value as a side-benefit.'

Lewis and King said capital gains taxes had not restricted house price inflation in other parts of the world.

'Where a capital gains tax exists but owner-occupied homes have been exempt, housing prices have risen rapidly as people have responded by spending the money they would previously have invested elsewhere on renovating and improving their own homes, secure in the knowledge that when they do sell that particular asset there will be no tax to pay,' Lewis said.

Investor Nick Gentle he had been unfazed by the prospect of a capital gains tax.

'Being a landlord is about more than capital gains, investors should be focusing also on cashflow and looking to provide quality accommodation. I think introducing a capital gains tax would be horrendously complex and expensive.

'Properties, farms, commercial property, shares, businesses and inheritances would all need to be considered as one because leaving some exempt would only encourage asset bubbles. Considering the years of sacrifice most business owners, investors and farmers usually work through, a big tax bill at the end would feel like a kick in the guts for many.'

The Australian experience showed it might just move money to accountants and tax lawyers, he said.

'The government has looked to discourage speculation with the negative gearing ring-fencing policy and extending the bright line from the initial two-year period to five. I'd hope they would stop there and see how this takes hold first before rushing into other decisions.'