More good news… oh wait!

It looks like the laws of unintended consequences have visited the muppets running the country… again:

The Government has gone too far with its attempt to dampen property speculation through an extension to the bright-line test, says Dunedin tax expert Scott Mason.

The proposed changes would have unintended consequences if the circumstances of owners changed and had overreaching characteristics, Mason said.

Revenue Minister Stuart Nash announced this week the bright-line test on residential property sales would be extended from two years to five years in legislation currently making its way through Parliament.

The extension of the previous government’s bright-line test would help dampen property speculation and make homes more affordable.

The extension to five years meant profits from residential investment properties which were bought and sold within five years would be generally taxable, he said.

“This proposal will ensure residential property speculators pay income tax on their gains and makes property speculation less attractive.

“We need investment which grows the economy and creates jobs, not the sort of investment which distorts the residential housing market.”

The measure would bring fairness back into the tax system, Nash said.

Really? How has capital gains tax worked in Australia? Houses more affordable in Sydney? Melbourne? No, didn’t think so.

Current exemptions would remain, including the exemption for the main home of the owner-occupiers of the residential property.

Polson Higgs tax partner Michael Turner said it was “interesting” to read in the regulatory impact statement the new test might push up rents and house prices, despite what Labour said it was thinking of doing.

“From our perspective, we have already seen the two-year test create unintended consequences that have prevented family restructuring or have taxed families in what seem inappropriate circumstances. So we see a five-year test as adding to these unintended consequences.”

Mason said a change from two to five years might exacerbate the concerns of ordinary New Zealanders, who were not property speculators, but simply might hold a rental or a holiday home for less than five years, about being taxed as if they were speculators.

“Life changes.This change could result in what were main homes changing their status to being taxed.”

People with holiday homes or rental properties were at risk of being branded speculators, he said.

“If I buy a holiday home, I am not doing it for the short term and if circumstances — death, relationship, location — [occur] within two years, I might think bad luck, but OK. The chances of these unforeseen circumstances over five years are much greater.”

Nash will introduce a Supplementary Order Paper to the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill to introduce the changes.

The minister said the extension to the bright-line test would apply to residential investment properties purchased from the date on which the Bill was passed, probably in March.

The passage of the Bill would also enable the tax working group to factor the change into any consideration of a comprehensive capital gains tax.

Give Labour half a chance and they will bring in a full capital gains tax.

 

-NZ Herald


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As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.

To read Cam’s previous articles click on his name in blue.

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