By Amanda Morrall
KiwiSaver payouts will be spared from Labour's proposed 15% Capital Gains Tax, according to documents released today detailing how the tax would work.
Other exemptions will include the family home, personal assets, collectables, small business assets sold for retirement and payouts from retirement savings schemes.
Labour's Finance spokesman David Cunliffe dismissed concerns that KiwiSaver, a regular savings vehicle, could possibly face an extra layer of taxation along the way. .
Labour, in its policy document, notes that CGT will be calculated on a net gain basis; "the gross gain after the costs associated with buying and selling assets are deducted," it says.
Those costs include stockbrokers' fees, legal fees, valuation fees, advertising costs to find a buyer or costs associated with improving the value of the asset.
"When it describes the scope, it talks about shares, foreign currency, both of which are integral parts of any superannuation scheme, including KiwiSaver but it doesn't talk about taxation on the investment. This could lead you to think that they intend to repeal the collective tax rules but it looks to be silent, so it's hard to know what the answer is," Kerr said.
KiwiSaver investment earnings are currently taxed along the way with providers forwarding the tax onto Inland Revenue. (See Inland Revenue's KiwiSaver section on tax here).
There are two ways KiwiSaver is taxed: as a "widely-held superannuation fund" or a "portfolio investment entity.'' The amount of tax you pay in a PIE is determined by what's called a Prescribed Investor Rate (PIR). (To work out your prescribed investor rate, click here).
All KiwiSaver defaults schemes are classified as PIEs.
Starting next April, employer contributions toward KiwiSaver will also be taxed, with the rate determined by the employer superannuation contribution tax (ESCT.)
ESCT will be applied at a rate equivalent to an employee's marginal tax rate. (See Budget 2011 tax changes for more details on other changes affecting KiwiSaver pending Government's re-election.)
No changes for KiwiSaver
Labour's finance spokesman David Cunliffe said nothing would change in relation to what tax KiwiSaver providers paid.
“At the moment, KiwiSaver accounts should pay tax because they’re trading shares. They’re either paying a KiwiSaver corporate tax rate, or they’re paying a PIE rate, which is look-through to the marginal rate," Cunliffe told interest.co.nz.
"Either way they’re counted as income, and they’re not affected by capital gains tax because capital gains tax doesn’t apply to income, it only applies to capital gains," he said.
Likewise, there would be no change for professional share traders.
“Professional share traders are traders, they get their income counted as income, and they’re taxed accordingly. They don’t pay capital gains as well. It’s only if they’re not traders that they’re exposed to capital gains," Cunliffe said.
Whether someone was a trader or not was a matter for the IRD, which already carries out that function.
Meanwhile, 'Joe Blogs', who had a few shares in say ANZ, would be subject to the capital gains tax.
“But only 15% on the future gain after the valuation date, when tax is [put] in, zero per cent on any previous gains,” Cunliffe said.
(Updates with comments from Cunliffe.)
3 Comments
Good on Labour for having the guts to bring it in if elected.
The current guys are too scarred to do anything about a problem that up until recently according to them needed addressing.
National are also too scared to do anything else about overseas land sales ramping up, at least CGT addresses that to some extent.
It's definitely preferred to selling of high performing assets that return 15% pa, that aren't even Nationals to sell off.
Here we go, there will be exemption for this and that, until it becomes an administrative nightmare; and then they'll have to change it in the future when they see how little revenue is attained. The brave new world, not.
A land tax would have been so much simpler.
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