Capital Gains Tax myths 08-07-2011

There are a couple of myths about capital gains tax in NZ. Myth 1 - NZ does not have a capital gains tax. Actually if you buy anything with the intention of selling it then the gain is taxable. Why because regardless of the nature of an item if you buy it to resell then the gain is a trading profit - not a capital gain. Myth 2 - business owners get different treatment to investment property owners when they sell their business. In both cases any capital gain or loss is not taxable. So if you build up a great business and sell it with a capital gain (goodwill) of $1m that is all tax free. So there is no distortion in the current rules. On the other hand a targeted capital gains tax will cause a distortion and will create opportunities for tax management - so those who have access to good advice get to pay the least tax. In addition, the policy seems to be about popularism rather than strategy. So presumably the extra tax will be spent on treats to tempt voters (pork barrel politics). That approach was taken through the 90s and has not created a long term future for our country. It has made the vulnerable more vulnerable and the capable continue to move offshore. On reflection. I'd better stick to business advice, I haven't got time to run the country......