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Government's CGT decision expected today

Author
Newstalk ZB,
Section
Audio,
Publish Date
Wednesday, 17 April 2019, 7:32a.m.
The Government is expected to release the details of the Capital Gains Tax today.

The Government is expected to release its Capital Gains Tax decision this afternoon.

The timing of the announcement has been veiled in secrecy, and Prime Minister Jacinda Ardern has been at pains to say nothing more about the timing of the announcement except to say that it will be in April.

Labour MPs will meet in a conference call at lunchtime today, and an announcement will follow.

The subject of the tax has been hotly debated since the Tax Working Group reported back in February, recommending a CGT and using the money gained to lower personal tax rates and to target polluters.

The group recommended a CGT that would cover assets such as land, shares, investment properties, business assets and intellectual property.

Any gains on the sale of these assets would be added to the seller's overall yearly income and be taxed normally at realisation – meaning a CGT would only take effect when it becomes law.

Other assets – such as the family home, cars, boats and art – would be exempt from a CGT.

Newstalk ZB political editor, Barry Soper, told Mike Yardley the Government is very aware that this policy is critical to its chances at next year's election.

He said the highly contentious tax is a balancing act for the Government.

Soper said the Tax Working Group agreed that income from capital gains should be taxed from the sale of residential rental properties.

However, he said the group was split over whether that should include things like shares and businesses.

"There wasa split in the group by a margin of eight to three, they supported going further, broadening that approach to include land, buildings, business assets and tangible property and shares. So that is where the balance has to be struck today."

"It's a big one for this Government because what they said was they won't legislate for it in this term of Government, it will be implemented after the next election, which essentially turns tax into a referendum at the next election."

Soper said today's announcement will likely see some tinkering with the system but it's unlikely there will be any big changes.

"What I expect we will happen today, is that you will see residential properties and the bright line test, they increased it from National's two years to five years, that's how long you're allowed to own a rental property before it is taxed under capital gain, so I think they will extend that."

"They will tinker with the system rather than changing it significantly because they know that very few Government's, if any, have gone into an election saying we are going to tax you more, and expect to win the treasury benches again."

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