Finance Minister Grant Robertson on the effectiveness of taxing land bankers, why the bright-line test won't be extended and whether his tax review was doomed to fail from the start

Finance Minister Grant Robertson on the effectiveness of taxing land bankers, why the bright-line test won't be extended and whether his tax review was doomed to fail from the start

A Capital Gains Tax (CGT) is dead and gone for as long as Jacinda Ardern is Prime Minister. 

A tax on land bankers is the only new tax the Government is considering to make the system fairer – having particular regard for housing affordability.

Finance Minister Grant Robertson told Jenée Tibshraeny the Government now needed to figure out how far a vacant land tax would go in levelling the playing field for those who invest in different types of assets.  

“The land banking issue is partly fairness but also partly to do with the housing market,” Robertson said.

The Tax Working Group (TWG) recommended the Productivity Commission consider a tax on vacant land in a review of local government funding and financing it’s undertaking, as its view was that such a tax was best levied at the local rather than the national level.

Robertson didn’t believe action on this was being dragged out, with the Commission only expected to report back to the Government in November. He said the Inland Revenue was also looking at it.

Question mark over possible rule changes targeting land speculators 

Robertson denied the CGT flop meant the Government wasn’t doing enough on the demand-side to address housing affordability.

He said its foreigner home buyer ban was starting to have an effect, while the impact of it extending the bright-line test from two to five years would take some time to show.

The Government is also in the process of passing legislation to ring-fence rental losses (IE prevent investors from offsetting losses from their rental properties against their other income).

Robertson committed to seeking a review of the “current rules of taxing land speculators,” but wouldn’t elaborate on exactly what this meant.

“There are current rules in place around how people manage and deal with land. What we want to do is make sure those rules are enforced properly…

“We look at other jurisdictions around the world and we can see that there are different rules in place, but it’s too early for me to speculate on what exactly those changes would be.”

Labour to consider changes to income tax settings going into the 2020 election; extending bright-line test 'unlikely'  

Without a CGT, the Government didn’t see need to change income tax settings.

While the TWG said increasing the threshold for the lowest marginal tax rate (currently at $14,000) would reduce inequality, Robertson pointed out its first point of call was using the welfare system to address inequality.

Quizzed on whether the limited scope of the TWG’s terms of reference, which ruled out applying a CGT to the family home or increasing the threshold of the top marginal tax rate for example, meant the outcome was always going to be half-baked, Robertson noted tax purists always wanted the family home to be included.  

“We wanted to set the TWG a realistic mandate. We were not prepared to consider a CGT on the family home…

“We also campaigned on not increasing the top rate. There was no point in having the TWG consider things that simply were not going to happen.”

Robertson said considering a change to income tax thresholds was something the Labour Party would consider, as it always does, when it forms its tax policy going into the 2020 election.

He said it was “unlikely” this policy would include a further extension of the bright-line test as: “We’ve taken a CGT off the table and the bright-line test represents a form of that.”

 NZ First silences conversations around potential polluter-pays schemes

Robertson said the Government wouldn’t advance new environmental tax proposals beyond its current work programme, and ruled out both resource rentals for water and the introduction of input-based instruments such as a fertiliser tax in this term of Parliament, largely due to its Coalition Agreement with New Zealand First.

He said the Government was already addressing most of the environmental issues the TWG mentioned. For example, work around water, the Emissions Trading Scheme, congestion charging in Auckland and a waste levy are underway.

The TWG said NZ ranked 30th out of 33 OECD countries in terms of environmental tax revenue collected as a share of total tax revenue. Environmental tax revenue made up 6.2% of all tax revenue collected in 2016 – a small increase from 4.8% in 1999. The vast bulk of this came from fuel taxes, road user chargers and vehicle registrations.

Put to Robertson, he acknowledged: “There is some room to move there and clearly the work we’re doing on the Emissions Trading Scheme is really important in that regard.”

Another TWG recommendation Robertson saw potential in was a NZ Superannuation Fund suggestion to let investors pay a concessionary rate of 14% (half the current company rate of 28%) on profits made in New Zealand from “qualifying” infrastructure projects.

The IRD has been instructed to prioritise work around this.

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Trying to address the demand side is a hiding to nowhere except maybe higher rents. Don't encourage him please Jenée. Immigration maybe, but trying to tax property until it is cheap is just going to stuff things up.

Edit: I can post comments again without them being screened for approval! Hooraa!

Great about instant approval - would like to see the 'new' flag reintroduced.


What new flag?

Laser Kiwi, of course.

There can be only one.

Tccch, silly me

well done you

I'm really surprised no one has picked up on Jacinda's very specific wording. "No CGT whilst I'm PM' opens the doors wide open for her to step back at the next election.

Doing nothing on CGT now provides clear water (and takes the wind out of Nationals sails) to head into the next term with a Labour/Greens coalition - with a new PM and no NZ First to block CGT changes.

Attempting full on CGT or even something watered down would have the opposite effect - the waters would get choppy, National would be firing on all guns and the next election would be hard.

This was a political decision - the ideologies and goals of Labour and the Greens have not changed.

I agree it was specifically worded but regardless of who is leader, CGT will be certain death for a long time to come. I'd be surprised if someone else tries to pick it up and run with it.

I don't think Jacinda wants a CGT enough to give up as PM after a single term. The door she has left open is one that she has no real ability to close - she cannot guarantee future party policy after the end of her leadership.

I doubt Labour would be devious enough to sneak a CGT in through the back door. Their name would be "mud" for decades.

"I'm really surprised no one has picked up on Jacinda's very specific wording. "No CGT whilst I'm PM' opens the doors wide open for her to step back at the next election."

You're reading way too much into this.

This is the line created by John Key to rule out changing the pension age. Jacinda is simply repeating that phrase and it's now taken on a position of its own in NZ political parlance.

Furthermore, a leader can of course only rule things in or out so long as they are actually leader. All bets are off after that.

The only interesting aspect here is that John Key did rule out superannuation changes as long as he was leader - and once Bill English became leader he did in fact campaign in the 2017 election to raising the superannuation change. Which IIRC Jacinda has also ruled out changing "as long as she is leader".

She has no intention of standing down at the next election and with her popularity where it is, would never do that. 2023 could be an entirely different kettle of fish however.

PM is trying to win 2020 election without New Zealand First. Once she does, her first child will be 3 in 2021, and she is properly going to have another child. Perfect timing for her to step down from PM and Labour Party leader for “family reasons”.

Might have been a Freudian Slip or a Senior Moment, but I'm sure I heard GR refer to 'our Coalition Partner'.



NZ first is Labour's only coalition partner - the Greens have a confidence and supply arrangement.

You know, if you were more cynical than even me, you might conclude that this was a dastardly straw man plot to take the wind out of Bridges sails and give WP’s status more than a little helpful puff. Chris Trotter alluded to such an end game on site here, some weeks back.Don’t think, or certainly hope not, that there is any identity in government ranks of such machiavellian prowess, but as a side affect, the coalition, leaving aside the wailing and gnashing of teeth of the Greens, have created a bit of an upside out of the downside.

I think you are right. Winnie provided the 'out'. jac had to look crestfallen for the sake of the unions etc, but may have concluded herself that a cgt move would not deliver on the purported outcomes - and likely mean another coalition at next election. But maybe not.

Interesting to track the course of one Dr Cullen on all of this. Firstly as a capable enough Minister of Finance, he told us to remember that nobody had ever heard him mention CGT as an option. Secondly, supposedly, his TWG did not recommend a CGT. Thirdly, again supposedly, the current Minister of Finance requested that GCT, somehow or other, should be put forward. Fourthly Dr Cullen is employed to promote the TWG report, with an emphasis on CGT being made acceptable, one would think. Finally Dr Cullen decries Mr Peters for harpooning CGT You want to go back to the Wine Box enquiry and see how many times the good Dr Cullen changed sides and opinions as events unfolded. Even a leopard in polka dot pyjamas would be proud.

What mfd said

Just because you could borrow doesn't mean that it's smart. Making future generations pay for our lifestyle today is just irresponsible.

Future generations are already on the hook for the housing debacle! Now I don't think a lack of capital is the reason the lack of housing supply, inefficient supply chains, lack of skilled workers, land banking and the consent process are far more important. In saying that, if the government wanted to write a cheque I'm sure china would deliver 100,000 prefab houses for a fraction of the cost of a locally built one and save the younger generation from a lifetime of servitude to the Aussie banks.

I wonder why Ardern stated that the CGT is dead forever under her leadership? She still stated she's in favour of it and it seems fairly clear Peters is the one who vetoed it. So why couldn't Ardern stop at "the CGT is dead for now"? Peters could well be out of government at the next election and there is a reasonable chance Labour could govern with the Greens, then they would have the numbers to pass a CGT, so why did she say no CGT ever under her leadership?

Officially, I think she has realised that the public doesn't agree and doesn't want the knock to her popularity by forcing it through, even in the next term. Possibly she's listened to the frequent voices for the government to provide stability and clarity on policy from the business community (and various housing lobby groups).

A hopeful final option - maybe the government has decided to go down a land tax approach instead.

Yvil, it might be that even if Labour win in 2020, doesn't mean Ardern will be the Prime Minister. A replacement leader can introduce CGT under the Labour Government instead. Especially if the can Govern with a majority. Anyway, you need capital gains to be subject to CGT. Slimmer chances of that happening for quite a while.

I think labour would want a nice carrot to go with that stick - probably in the form of lowering income tax or increasing welfare. But with property prices likely to go sideways for a long time to come, there wouldn’t be the income from CGT to provide a carrot. Bad timing I guess.

Because a CGT is a dog. Enforcement of existing Tax law should be a first priority

Sorry, but what's actually wrong with being a speculator in housing? Can someone explain?

You don't have to think there's anything wrong with it to support a CGT - it's just asking speculators to pay tax in the same way normal people working for a living do. I appreciate some already do under existing laws, but there are definitely ways around it at present.

mfd, how would you go around paying tax if you sold an investment property for a gain ?

If you have held for more than 5 years and can convince the IRD that you didn't originally plan to sell for a gain, job done.

The Brightine is only two years and that has not changed re paying tax. Personally would have liked to see that extended to at least three.

Retired-poppy, is that you?

Houseworks - Nope not me :) Brightline is five years anyway. Under IRD's intent provision, nearly all Speculords should ring IRD or complete their online questionnaire before erecting their for sale signs. Yields are so low, risk is high so it's all about the capital gains. IRD know this and there's no time limit for retrospective assessments to be performed. Then there's the jealous friend or relative that can nark on you too - lol!

There is a four year limit for audits from when the return is filed. Are yours up to date? Speculords they are delicious aren't they, no maybe that's Speculaas?

Houseworks, are you suggesting that after the four year time limit, the IRD cannot impose penalties for unpaid CGT if the capital gain made was never declared on the books to begin with???????

You will have to check with your "accountant" on google.... But, given that you are always handing out tax warnings and red flags to property investors, I thought you were right up with tax law? Because we really need your two cents

...thought you'd be found out of your depth on that one - lol! It's amazing the data matching resources IRD have at their disposal. Even your bank Manager/mortgage brokers file notes are within easy reach. Anyway, a seasoned investor should be up with the tax law and not telling others to check Google - right?

Out of my depth, Is that right? So come on mr smarty pants how long... How far back can the commissioner of inland revenue go to audit a taxpayers returns?

Chirp chirp, sound of crickets :)

If you purchased the property after the 29 March 2018 brightline is 5 years.

If you purchased the property with the intention of speculative gains, you should pay tax on profits irrespective of how long you hold it for.

Anyone who has bought an investment property after 29 March 2018 and sells within 5 years will see any capital gains sucked dry.
Say that you sell the property for 80K more than you bought it. By the time you pay tax, and agent's fees to resell, you will come away with almost nothing.

Frtitz, are you sure the bright line tax doesn't apply on the net profit, i.e. after agents fees? Honest question, I'd love to know

Coming soon, agent cash back offers....

Do you mean How would you, or why would you? If it is an investment property that is kept longterm primarily for rental income then the holder would not normally be subject to income tax and gst. So why declare the gain (or loss)

It allows banks to perpetuate their love of lending unproductively instead of productivity. Central banks then have to lower interest rates to bail out bad decisions. Capital is misallocated which is anticapitalist in it’s nature. It drains the fabric of society as socialism would.

Because that is not the purpose of housing, it should have been kneecapped years ago

A bit late, but here goes anyway.

Rather than speculating on houses, I plan to get down to my towns only supermarket at 7am, buy up all the $2 bread, and then sell it outside for $2.50.

The point being that every extra buyer forces up the price. Is it ethical to speculate on the necessities of life, ie food, water, shelter, good wine...

Oh wait. Let's NOT do this.

Great little interview Jenèe, at times quite revealing and at times hilarious as Robertson dodged and danced. On taxing landbankers "You must have some idea because you have said it" followed by "we have only just started to look at it". Basically they havent got a clue but want their supporters and others to hear them roar

I'm for taxing vacant land that is being speculated on. however, I'm not sure it will achieve that much.
When you think about it, there is very little urban land that is vacant.
Sure, it may have some impact on peri-urban land.
I understand there is vacant land in Scotts Point that has been horse traded among Chinese interests, and has gone to stupid values.

So, yes I do support it, but I don't think it will have much revenue value. But if it helps discourage land banking, then good.

Let's see if Labour have the guts to raise the top tax rate. Somehow, I doubt it.

I'm picking that you would be affected if the top tax rate was raised fritzy. Would you call land running sheep or cattle, vacant. If yes then a lot of farmers will disagree with you.

Yep I would be affected. But provided I could see clearly the tax revenue going into things that ALL society benefitted from, I can live with.
Land tax - apply to any land zoned for urban purpose, or future urban. That will rarely affect farmers.

Extending the bright-line test to ten years would have been something at least

It may still happen. Personally I believe the cgt was never intended to go through, the twg was simply designed to scare us in the direction of whats now being discussed, landbankers particularly should take notice...

Yeah, although I think at 5 years it's hitting it's purpose of whacking true speculators (buy and sell in quick succession).
PS as a Smiths fan, like your name.

I think Labour will and should lose next year. Trying to please national supporters but will only lose its base.

How true

Jacinda Arden has lost and from here on her downfall starts.

Honeymoon is over.

Don’t agree.
Bridges’ leadership is on shaky ground, and the nats at least at this stage have little compelling policy.
I contacted Collins several weeks ago with what I thought are some compelling ways to address the RMA’s problems, haven’t heard back.
I bet you they will propose to ‘amend’ the RMA. But they need to go much bolder and look at new legislation

Bridges leadership is only on shakey ground because the Herald et al keep repeating that it's on shakey ground.

If he got anywhere near the same level of goodwill in terms of coverage as St Jacinda then National would be out-polling Labour.

It's not a coincidence we keep hearing about Simon Bridges when Labour drops the ball, because they don't want to talk about Labour dropping the ball.

Kind of like the Teflon John days I guess. To be fair Jacinda is pretty likeable and hasn’t done a lot wrong. I don’t think it is media bias as such.

May not have done a lot wrong? She is failing to deliver on any of her key campaign policy platforms in her year of delivery.

10 years ago Key campaigned to lower house prices...

Yes, he did. And Jacinda campaigned on tax reform, Kiwibuild, tree planting and immigration reform, under the pretense of 'transformational, generational change'.

For permanent residency Labour has reformed immigration. Numbers down; not as far as I would like but it is a change. Numbers of care-nurses has stayed the same but so called chefs and retail managers have been reduced drastically. It is reform and it is under labour. Just rather sad they will not permit a public discussion.

For an investment property, if the annual rental results in negative gearing, then what was the original intention behind the purchase ?? The presumed intention to profit from capital gain is quite obvious.

Unless of course the investor is endowed with charitable motives to provide a home for the needy in a benevolent way!!!!

Gain is activated on sale and treated as taxable income.And there is no time bar.

If in the past IRD has been somewhat lackadaisical, it may be due in some way to the lack of political will.The previous government was rather "shy" in doing anything to rock the property market.

But, the present government's commitment to curb property speculation is mirrored in the raft of legislative changes. Expect the IRD to adopt a more robust treatment of the "presumed intention".

There could be many reasons why an additional property could start off negatively geared:

1. The property was a family home that you kept when you bought the next one because it wasn't ready to sell at the time. Moving from one property to another can be tricky to organise and it is often easier to keep the existing one and rent it out. Your new property may be bought at auction or bought quickly because it is desirable and a quick cash purchase was necessary. You weren't game to sell your house first and rent or the vendor wouldn't accept such a contract.

2. You buy a rental with the intention that your children will live in it when they leave home.

3. You buy a property that you intend to downsize to when you retire.

4. You anticipate rents will rise over the years and you can see that the property is a good buy. You are willing to be negatively geared for a few years as both you and your wife work and you have plenty of cash flow. You intend to pay the mortgage down and move to a positively geared situation eventually.

5. You have other investments that are waiting to mature which you will eventually use to pay down the mortgage.

6. You are waiting for an inheritance which will be used to pay down the mortgage.

I'm sure there are more.

As Zach says, initially negative gearing doesn't mean permanent negative gearing.. eventually it become positively geared. Many people are willing to make a short term loss if things are going to turn the otherway in future, otherwise we would have next to no businesses created.

You've conflated gearing with cashflow and ignoring that you build up equity in a property as you pay down a mortgage, even if the initial mortgage interest component is the bulk of the repayment at the outset.

Now if you to try and infer intent from having an interest-only mortgage, that I can get on board with.

I think a better argument would be if the yield after all expenses is less than other similar risk investments then you are obviously expecting a capital gain and therefore one of your reasons for buying must be resale and you should pay tax. However you could argue that you were originally planning on holding the property forever with inflation increasing rent and the yield over time.
Realistically I think it would be difficult for IRD to prove your intentions unless you have a history of buying and on selling. Interesting page here:
I think it would make everyone’s lives easier if they got rid of the intentions law and maybe extended brightline to 7 or 10 years.

Here's one of those rare things - a very good Herald article on the CGT. Quite right in its questions around Ardern's political management

Somewhat related to CGT. Humorous anti-neoliberal content from Australia. Happy Easter. Enjoy.

that is gold!

Wow,.. cheeky and bold

Almost all comment about property.
Graph shows the benefit comparison to most other investments.
I would contend that high gearing using borrowing at historically low interest rates is a benefit that that should attract extra tax.
So how about stopping allowing tax deductions for interest costs in excess of 40% gearing (example value only)
Many borrowers would be unaffected and LVRs become unnecessary. Another benefit is that such a deal would encourage already over geared landlords to release property to the market and help lower the general values steadily over time.