Opinion & Analysis
OPINION: To wrap up the series, David Snell says what you should do now to be ready for any future capital gains tax.
A capital gains tax in New Zealand may be just a matter of time. The arguments around shifting investment away from housing, raising revenue and perceptions of fairness aren't going away.
And Labour and the Greens' support across successive electoral cycles adds to that conclusion.
Start preparing now. Maximising the opening value of your asset portfolio when the tax comes in will minimise any future tax.
Keep records of any money spent - for example, on renovating and upgrading your rental property or family bach. Those improvements potentially form part of your tax base and could reduce the ultimate gain.
- Identify all assets which could be subject to capital gains tax in the future
- Where you've got unrealised gains, look to sell before any tax comes in. (It's unlikely a capital gains tax would ever apply to past gains.)
- If you're looking at adding value through change of use - such as subdivision or land reclassification - do that now. That way, you'll have a higher base value on implementation day and lower overall gain.
- Conversely, delay selling loss-making investments. Hoard the capital loss to offset against future gains.
Any tax is likely to be implemented from an opening date, valuation or "V-day". Closer to time, expect valuers to be in high demand. A professional valuation is likely to be great opening cost-based evidence for taxpayers when the time to sell comes around.
Don't panic yet. Capital gains taxes are tricky beasts.
Labour and the Greens both plan to appoint an expert panel to work through design issues around the family home, small businesses, inflation, valuation, record keeping requirements and a raft of other issues.
Expect years between any decision to go ahead and the Governor-General signing off the final law.
But, as any good scout will tell you, be prepared.
David Snell is an executive director at EY. He used to work for Treasury.