There’s lots of talk flying around about what our Capital Gains Tax (“CGT”) proposals do and don’t cover.
Here’s a short post to debunk the most common myths which our opponents have been scaremongering with, and to set out why CGT will help our economy, make our country fairer and help solve our housing crisis.
Setting the record straight:
- With Labour, CGT won’t ever apply to your family home. No matter how it’s owned. Never. Ever.
- Our CGT proposal is not a tax on an inherited family home either. It’s not charged on the estate of someone who dies.
Our proposal does not tax historic gains. CGT will only be due on increases in value after the law has passed.
Through all the talk, it’s hard to forget that all but three countries in the developed world have CGT - and that there are great economic and social reasons to introduce it.
It’s about fairness – CGT will mean that people who make money from selling houses pay tax just as people who make their money in wages do. It’s only fair that speculators pay tax just like salaried Kiwis do.
It will help stabilise the housing market – CGT will cool down property speculation and free up space in the market for Kiwi families who want to buy a first home.
It helps build a productive economy – CGT will shift investment from housing speculation to investment in New Zealand’s productive businesses.
CGT and inherited property - some further facts:
When people inherit assets, no CGT is paid at the point of inheritance. If it is the family home of the deceased then it bears no CGT liability.
If the children of a person who dies already have a family home and sell it to move into their parents’ former home, the children will pay no CGT on the sale of their former family home.
If someone inherits a property, and sells it at a later date, they only pay CGT if and when they sell it for more than it was worth when they inherited it.
If the inherited family home becomes the family home of the children, no CGT will apply if and when the home is sold.
If a family home is inherited, and then becomes a rental property, then only gains after it is inherited are taxed.
I hope this has helped to clear up some of your questions. If not, you can contact us here. You can also read more about our CGT policy here.