Chris Trotter says the Capital Gains Tax recommended by Cullen’s team is of such breadth and bite it can't have been intended seriously

Chris Trotter says the Capital Gains Tax recommended by Cullen’s team is of such breadth and bite it can't have been intended seriously

By Chris Trotter*

A Political cynic might summarise Michael Cullen’s Tax Working Group findings as: “Please stop me, before I’m asked to report again!” The Capital Gains Tax (CGT) recommended by Cullen’s team is of such breadth and bite that it cannot possibly have been intended seriously. Only a government hell-bent on its own destruction would attempt to translate the entire, uncompromising proposition into law.

So why present such a foredoomed report at all? Cullen supplied his own (typically cryptic) answer to journalists locked up with him immediately prior to the Report’s public release. “I had a brief period as finance spokesperson for the Labour Party for some 17 years. You will not find a single comment by me publicly advocating a capital gains tax. You might draw your own conclusions from that fact.”

Properly decoded, Cullen’s comments amount to an admission that what the government has been given is not a modest CGT, sufficiently moderate to win the electorate’s grudging acceptance, but precisely the “big hairy-chested” CGT that Simon Bridges warned us about. Cullen has thereby presented his protégé, Grant Robertson, with a politically invaluable opportunity to take a razor to the Working Group’s hirsute recommendations.

Cullen’s gift-giving does not stop at Robertson. The swingeing GCT proposed by the Working Group is also a princely gift to Winston Peters and NZ First. Languishing two percentage points shy of the 5 percent MMP threshold in the latest polls, Peters and his team are in dire need of at least one extremely ferocious dragon to slay. Cullen’s CGT fits that description perfectly.

Confronted with the intolerable prospect of sending a third of their capital gains to the state, the farmers and small business owners of the heartland are casting about for a champion. Simon Bridges, Amy Adams and their colleagues can blow the trumpets of defiance until their cheeks burst, but rural and provincial New Zealand will not be impressed. Conservative voters know that National, locked-up in the grim prison of Opposition, cannot come riding to their rescue.

But Winston can. Which means that Winston will. With all his flags flying, and all his drums beating, Peters and NZ First will bring the good news of their political protection to the anxious squires and burgers of provincial New Zealand. “Not on my watch!”, will be Winston’s catch-cry. “Grant Robertson and his malicious Green elves can huff and puff as much as they like, but NZ First will not allow them to blow your businesses, farms and/or rented-out houses down!”

And, if they’re wise (or even just vaguely concerned to keep their ministerial limos) Labour’s front benchers will be completely okay with that. Not that they’ll admit to being any such thing. To their supporters in the unions; to all those Gen-X and Millennial renters without so much as a single toe on the property ladder; there will be a great deal of huffing and puffing.

With her winning smile on high-beam and her empathy projector set at full strength, Jacinda will reassure her young supporters that: “It’s all about being fair – as well as kind.” The Finance Minister, by contrast, will emerge from his discussions with NZ First grim-faced and just a little peevish. “You must accept that this is a coalition government”, he will admonish the waiting scribes. “When it comes to a CGT, there are a great many interests, some of them conflicting, that must all be weighed and acknowledged. Negotiations are proceeding … slowly.”

The Greens, meanwhile, will be flailing about frantically on social media. “On this issue we will not compromise!” Their message, as passionate as it is importunate: “If you want to make sure that the next parliament contains at least one party that is unapologetically and uncompromisingly progressive on issues that matter – like the CGT – then you will have to vote Green!”

So many synergies; so many opportunities to consolidate and expand the Labour-NZ First-Green Government’s position. Best of all, from the perspective of Jacinda, Winston and James Shaw – everybody wins!

In particular, Labour and the Greens will be hoping that the extended debate over Cullen’s CGT will mobilise young voters to tear themselves away from their Seedlip mocktails and smashed-avocados on Election Day to ride a Lime scooter to the nearest polling-booth. “How dare those treacherous Baby Boomers allow the palsied hand of the nation’s retirement villages, and the all-too-visible hand of the One Percent, to thwart Jacinda’s gospel of fairness and kindness so completely! Well show them!”

A markedly improved turn-out from the 18-25 year-olds would go a long way to securing the cherished (at least on the Left) dream of an unencumbered Labour-Green coalition. Though why Labour would want to be pulled in only one direction, all the time, is anybody’s guess. If the rapidly intensifying CGT debate teaches Labour anything at all, it’s that, by keeping NZ First inside the tent, the Centre-Left is free to renege on its riskier policy commitments without serious cost.

As small-c conservatives, Peters and NZ First recoil instinctively from any suggestion that the ingrained economic habits and expectations of Kiwi capitalists, large and small, can be overthrown without generating serious and enduring consequences.

The expectation of tax-free capital gain is intrinsic to New Zealand’s small-scale enterprise culture. This country’s bankers are notoriously unwilling to advance capital to fledgling businesses without first securing the entrepreneur’s family home as collateral. They wouldn’t do this if they were not convinced that the real estate being offered as security was certain to retain (and, most likely, increase) its value. Borrowers accept these terms because they, too, are confident that when the time comes to cash-up and exit their business, the tax-free capital gain will put them ahead of the game.

One suspects that the reason Cullen spent 17 years in control of Labour’s economic policy without introducing a CGT is because no one was ever able to convince him that the condition of New Zealand’s tiny economy would be appreciably better after the imposition of such a tax than before it. As it is with doctors, the principal concern of finance ministers should always be: First, do no harm.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. His work may be found at He writes a fortnightly column for

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i think this tax will appeal to younger voters, those that already own and have some investments will vote against the party that tries to bring in

Younger people have a working life of Kiwisaver gains being taxed and missing out on the compounded benefits so that boomers can pay less PAYE on their pensions. It's not as simple as 'young vs old'.

Pay less PAYE on their pensions? You mean so the govt can take less money from its left pocket and put it in its right pocket?

This is such a poor argument. Few people put more than 3% of their salary into Kiwisaver. Assuming you have a 70% shares, 30% fixed income spread, and also when you consider around 60% of returns from shares over the long term are dividends (already taxed). So in effect only 25% (70% * 40%) of returns will be impacted by capital gains tax it might reduce overall returns from 7% to 6.4% ... a lot right? Except that is less than the variance in fees charged by the different providers, which no one pays any attention to.

Now factor in a possible income tax cut. Lets say $500 a year over 40 years. Put that into long term savings (more even better, paying off debt) and it will quickly outweigh or balance out the impact CGT had on Kiwisaver balance.

Again. Compound that 0.6% over your entire working carer. It's a bit rich to call something a poor argument when you're overlooking the thing that makes it a kick in the teeth.

You are not wrong though - there will be far more incentive to dump otherwise-destined Kiwisaver contributions into paying down your own mortgage and then renovating the hell out of your family home, the gains on which won't be taxed at all. Hardly an incentive for investment in 'productive areas' instead of housing.

Plus the boomers who caused this mess get to cash out, walk away and pay even less tax.

I'm saying its a poor argument as the (likely) income tax offset would leave young people better off.

The people who will be worse off are those who earn the majority of their income via capital gains. The majority of these people are not young.

Simplicity has run the numbers. The cut-off point is an income of $68K. After that you are worse off.

Maybe Cullen's strategy is to aim high in order to hit his true target. This way they can concede a lot yet still achieve their objective of screwing the middle-class.


You mean more so than the National party have already done in the last 9 years?

The National Party kept us in the top ten of wealthiest countries.


The National Party did well for their older voters. Not so much the rest of NZ.

@Rick Strauss ...........older voters ? Bollocks........ my 3 offspring are all under 30 and have a way higher standard of living and education and way more opportunity that I have ever had .

Sure they dont own a home , but they are well on their way to saving the deposit, all have substantial assets in Kiwisaver (one has accumulated nearly $100k in Kiwisaver in just 9 years with Fisher funds ) , and all 3 have all manner of other "things" that we did not always have 35 to 40 years ago

And my parents had more than my grandparents, and my grandparents had more than my great grandparents.All that it proves is that things have progressed in material terms. When I started out in IT the internet was accessed by dial up....

Question is has our society progressed in a non material way or regressed.....

I distinctly recall you talking on this forum about how you were going to have to help your kids out to get them into the housing market.

Asset prices have soared in the last decade while wages and productivity have not. How's that benefit young Kiwis? Only the fact they can inherit from you?

Besides, is of much use to your kids having access to endless junk in $2 shops if real necessities such as housing are soaring in cost?

It sounds like his sons/daughters are motivated and doing well. I dont think helping them should mean handing over a large (relatively) sum of cash but at some point that would be appropriate.

"Sure they dont own a home" ...I stopped reading after that line

I am wealthy by buying on CC: have a house, big everything, have a holiday, etc. Someone needs to pay - who cares - kids will pay.....

Rubbish. We're lucky to make the top 20.
The only reason for our recent improvement is the EU throwing the med countries under a bus since the GFC.

You focus on wealth yet there is more to life than just how much you are worth.


Well, They were certainly fiscally prudent,but at what cost? They refused to acknowledge the existence of a housing crisis or the need to spend a great deal more on infrastructure. If you don't maintain your home,you can appear to be better off in the short term,but you,or the next owner,will have to spend a great deal more somewhere down the line.
Of course,if JK had had his way,NZ could have become a proper tax haven like the Caymen Islands and some lawyers and accountants would have been much richer-but for these damn Panama Papers.

This is a rather cynical piece about Dr Cullen the consummate cynic. Yes reaching for the stars and settling for the ceiling are old tactics for sure. But Labour’s position at present is quite a bit stronger than Mr Trotter indicates. And that arises mostly from National’s weakness both now and very likely at the next election. Because without a viable coalition partner, National will not gain power. Even Key in his popular heyday could not carry National through on its own. That is how MMP works and has been working for better or for worse.

Propose something really bad but then present something much more palatable to the electorate - in other words those who have been flailing about recently have been barking at passing cars.

But the barking has to happen.

Yes and no - one way to make people all hot under the collar then there will be less opposition to the more palatable option. Some people have been played nicely. Does show a rabid sense of entitlement with some.....

and there I was thinking NZ was going to get a CGT, it's not going to happen in any form.

Dead right about Winston... he specialises in 'opposing' and never 'does'. What happened to the immigration promises that got him elected?

They changed the way they add up the numbers now Rastus, problem solved didn't ya know ?

Two big long term issues regarding housing and inequality in nz need to be addressed. A capital gains tax may not be the answer, but those opposing would do a lot for their credibility to offer a better solution to these issues.

- houses are becoming too expensive. In two property cycles time the average house price is expected to be over 3 million. Think of how owning your own home has improved your life and happiness. Is it fair to lock more out if ever owning their own home?

- slowly but surely we are becoming a two tiered society again through inheritance, opportunities and education. The wealthy are inherenting wealth & property , increaseing it then passing it on. They are also shifting their families to better areas , better schools and providing their children with better education and future opportunities. This slowly but surly heads us In a very segregated society. Are we all ok with that? And is this in the best interests of us all?

Jamin, you already agree that the cgt is not the solution to the wealth gap
"A capital gains tax may not be the answer..."
So what is? What is your solution if you have one? I'm afraid that my old school answer is not sexy and new and people today want "new" ideas and then someone else, for example the govt, to sort it for them.

Jordan Peterson says it's time to give up on small towns:

It will be interesting watching the regions. The reason they emptied out has not changed. But they are now filling up with new arrivals and big city refugees. This is providing a rush of activity, primarily in building and cafe's. But once this has run it's course what are we left with? Just increasing the population does not create wealth and industry. Something else fundamental has to change - ..i don't see it. Do you?

I'm with Jamin. There is a problem of inequality. As a young low income person I was still able to build a house at the age of 24. Not possible for my children nowdays. By a factor of 4 or 5.
And I have to be honest, I don't have a great solution. Capital Gains tax won't cut so we have to find better ways.
Roger Witherspoon has the great insight, that what the CGT is trying to do is fix a problem afterwards. When we should be looking at the solutions prior to the problem arising. My take on it is that we have to move the actual incomes of both very lowe income people and the working poor.
It's nuts we allowed houses, for example, to cost multiple times what they cost a few decades ago.

Yes, good comment Jamin. If I wanted to live in an unequal society, I could very easily - and enjoy a more lavish lifestyle than I get here. But I don't want to. I want to live in a society with a very healthy middle class majority.

The nation's system of taxation does need to be equitable and treat all kinds of income similarly.

It's just that simple.

Where were all these people desperate to buy a house between 2008 and 2013, when I was going to Auctions and was the only one there? Oh that's right, they hadn't seen other people making money from houses yet so hadn't become jealous and developed FOMO.

Its all a smokescreen. One may have noticed announcement yesterday of the enormous list of new requirements rental landlords will be required to include in their properties from 2020...the tax working group and the cgt bollocks is a strawman for the real intended target, the speculative house flipper and the tinpot swamphouse owning landlords that plague the property market in this country. Its going to make being a property investor quite difficult for those who aren't willing or are unable to pony up with the resources to ensure tenants are living in quality housing and getting good value for their money. It ought to flush out those opportunists who have been causing widespread disruption to tenants by selling up at the first sniff of capital gain. What the government is saying is if you don't like this, don't be here. Fair enough?

Hi the 4th estate, you claim "the real intended target, the speculative house flipper and the tinpot swamphouse owning landlords". If that's true, then it is also true that existing laws and regulations are not working. Do you think the cgt will fix these issues? When I was a kid we heard the story of a woman who swallowed a fly. Well to solve that problem she swallowed something else namely a spider who's job it was to catch the fly. Unfortunately the spider made the problem worse and made her more frustrated. So to solve that she swallowed something else, this time a bird, to catch the spider that wriggled inside her ... And so the story goes until she had tried so many unworkable and failing solutions that in the end she died. Wow.

Isn't the net a bit wider though? The more I think about it, the more I think that a cgt will be a mechanism to capture tax on the 'unpaid' labour that do-er upper-ers put into properties that they then cash out on when they sell. Or business owners who work to build the value of their business before selling. Much like a farmer would forgo a fair chunk of a wage to be realised as a tax free lump sum when they one day sell up?

Not quite Hamish. If a landlord does a repair or small improvement him or herself instead of employing a contractor he saves himself that cost which means that there is more net taxable rent of which the govt receives income tax. Likewise if a business owner works in the business without a wage he obviously will make more net profit in which he pays income tax and acc levy. The govt did not get screwed by the selfless act of a landlord or small proprietor.

Thanks for the explanation.

The new healthy homes standard is the best that could happen to the NZ housing market. Well done Labour! will solve all of the ills in society, and if it doesn't then they can ramp up some more provisions to apply. How about retrofit double glazing, or DVS ventilation systems, maybe gas central heating. All at the same 2019 rental levels after a rent freeze is applied.

Nah mate. Only other thing that New Zealand needs is a deposit insurance scheme and then it can actually be a first-world country lol.

And now go work on your house.

You've got some good ideas for a change.. what happened, hit the turps today?

Guwop - And why does it apply to the other 66% of homes that are not rentals ??

Would be even better if it would apply to every single home in NZ. Just get with the times and have some standards, ffs!

The same reason that your kitchen doesn't have a council food premises rating certificate.. your home is not a business, a rental property is!

And there is nothing stopping you from upgrading your house to meet the standard.. but if you want, I'll be happy to come round and write you a "fine" for failing to meet the standard if you like...payable in cash, direct to me.

Fair enough. We do have our fair share of slumlords.

What's that based on kate? The government landlord is the worst of all and furthermore have granted themselves an exemption :)

The government isn't a normal landlord you munter.

Your name is Kate?! Oh well anything goes

I agree - for many state homes, they are a slum landlord. That's primarily because neoliberal twats decided to make Housing Corporation an SOE with the expectation that it would provide a return on the taxpayers investment in housing our most disadvantaged citizens.

One such twat wrote to all the SOE Chairs suggesting they all leverage up ("increase their gearing" to quote him) so that the dividends they paid to the government would be higher. Example letter below;

So, yes, Housing NZ is a slumlord because past government ministers had a slumlord attitude.

Labour by the way, changed that, and its now back to being a social housing provider and the scrapped the dividend expectation;

I agree with you though that it isn't acceptable that they have been given more time to bring their full portfolio of properties up-to-standard. So, yes, they need to do more - and more quickly. But they are working across the whole of government where proper funding of maintenance and capex replacement was all but totally ignored.


The biggest problem is that the rate is 33% but does not take into account inflation. Take a 3% appreciation in a year, with inflation at 2%. Let's assume the asset is worth $1M. That is $30,000 of gains, BUT only $10,000 of real gains after inflation. Yet the tax rate is 33% on $30,000 = tax of $9900. So you are left with $100 of real profit - i.e. a 99% tax. Sound fair?


Exactly. The objective is the destruction of all private savings in the hands of individuals. It is the standard iron fist in the velvet glove of Leninism. First, inflation. Second, an unfair redistribution of wealth results. Third outrage ensues. Fourth, the Leninists take charge. We thus all end up as supplicants to our betters, Those What Knows Best.

There blood drinking dragons and soul eating demons lie.

Listen carefully and you will hear "Don't cry for me Argentina" wafting on the wind.

Think I'm making this up? Read Keynes from 1919, long before Leninism evolved into Stalin's rule of blood, mass starvation and terror:

Not just Leninism. The Fed (for example) is privately owned, and perpetuates much the same model to the benefit of the financial industry, and the orthodoxy that drives most central banks is much the same.

We end up supplicants to our betters, the FIRE sector, Those What Knows Best. Ever more indebted and paying more and more to the value extractors in society, while savers get penalised.

That is plain wrong. The US Fed is an agency of the US Government, established by The Federal Reserve Act of 1913. All of its officials are appointed by the President and confirmed by the Senate. (And most come from academia rather than the banking industry, although the Trump Admin is changing that - Jay Powell is an example of the shift.)

The twelve subservient regional Federal Reserve Banks were established as the operating arms of the country's central banking system. They are organised much like private companies, possibly leading to some confusion about ownership. The regional Federal Reserve Banks issue shares of stock to member banks (the private banks that are regulated). However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan. Stockholders don't appoint directors of these regional regulators and can't control them. They are all public entities.

Not a company, no, with stock held by member banks as you note, obviously, and is regulated with a mandate:

E.g. its mandate to maintain the purchasing power of the dollar. Since 1913 when it was instituted has lost over 95% of its value.

We remain at the same point - me pointing out that FIRE is now extracting proportionately more rent from the economy, with reserve banks not having kept their mandate but rather having enabled the that situation. That this seems to be in the interests not just of Leninists but of the financial industry that benefits.

Martin Armstrong contends that republics always collapse into oligarchy at some point. It seems this is the root of the current societal collapse we are witnessing.. So, forget capitalism, we have a doom loop between Oligarchy in three different flavours.

Martin is a most unusual fellow, an independent thinker, often provocative as he challenges fashionable beliefs. So much so that a film about him is banned in the US. I've not seen the film, The Forecaster, but getting banned by the authorities suggests it is far too close to the truth for comfort. You may not like what he says.

Yes, just like term deposits

What if there is deflation? Term deposit comes out better off. Fair?

Term deposit earns interest, which is taxed. Investment property earns rental income, which is taxed.

The potential for capital gain on property reflects risk that doesn't exist for a term deposit. Term deposit return is guaranteed for all intents and purposes, but there is a real risk of capital loss on an investment property.

If there is deflation then term deposit returns would be negative. Source: EU after GFC

Return is nornally related to risk so you would expect a lower return on cash than property. Deposits are not guaranteed. Source: OBR

Deflation doesn’t necessarily mean negative term deposit returns. E.g. Saudi Arabia right now. Also, it isn’t always the case that term deposit returns are lower than rental returns. E.g. Auckland, right now, where rental yields are about the same as a term deposit.

Yes, term deposits aren’t guaranteed, which is why I said “guaranteed for all intents and purposes”. You are contracting into an agreement for fixed payment, not chancing the market.

At the end of the day, taxing capital gain unadjusted for inflation is potentially taxing a loss in real terms. You’re be better advocating for tax on term deposit returns to be adjusted for inflation.

Okay, let's see a similar example on a $60k per year wage, using the current PAYE rates:
A hard working kiwi makes $60,000 in Year 1. $48146 after taxes. In year 2, after 2% inflation this translates to $49108.
Year 2, our hard working kiwi just got a 3% raise from his boss and now makes $61800 -> $49381 after taxes. This is a net gain of 0.55%.
In order for gains on your 1M house to get taxed the exact same rate as year's worth of hard work, the CGT should be 15%.
Is it fair to put the same burden on work and non-work? If so, would you be happy with a 15% CGT?


Originally I thought this tax was going to incentivize investing in productive assets (shares, businesses, kiwisaver etc.). Instead it's going to discourage all investment in general, not ideal.

Unless it's in your family home of course. Tradies love this. Flip house every year. Pump out 3 kids. Tax payer gives you working for families, free school and health care, roads etc. 2 e z.

Shouldn't the brightline test be catching these tradies that are flipping houses every year?

they have to hold for 24moths and has to be a family home for tax free otherwise brightline, A lot move in reclad walt 2 years sell

From IRD: "The bright-line test doesn't apply if the property was: your main home..."

"If you're in the property industry (for example you're a builder, developer, a dealer) or associated with someone from within the industry, then you'll be subject to different rules as well. We recommend you get professional advice from a tax advisor."

My take is thus, and in my distant past I had some credibility as a commentator. The big mistake was appointing a Labour grandee to head the working group. The average person, who doesn't read much past the headline, will equate the report with Labour policy and intent. It's effectively preaching to the converted, anybody who will agree with it will almost certainly be a Labour/Green voter. Many more moderate voters, floaters, who sided with Labour in a protest vote against the last National govt's sorry record on housing and foreign ownership will do an about turn. The damage is done, and even if Robertson scales back the recommendations, many, many people will be suspicious and reluctant to trust Labour again. CGT on KiwiSaver, modest lifestyle properties, small businesses, people with a few k in shares, means a hell of a lot more people than just the greedy Auckland landlords/investors that gave rise to this in the first place will be affected. Huge, huge error, even if it is just a stalking horse, so to speak.

Pietro. 'The big "mistake" was appointing a Labour grandee to head the working group.' ..... Twas no mistake, the committee was deliberately made up of mostly party hacks and flunkeys, the required outcome pre-determined. It's comical watching the attempts by Ardern, Robertson and co to con the electorate that this was somehow a committee of independent 'experts'. We are being stitched up by a deliberately thought through and carefully managed political stunt.

We have to take Cullen seriously, he's a serious risk.

I don't think he is - I think people are being played. See my comments above.

by Yvil | Sat, 23/02/2019 - 16:35
I wonder if taxing only property investment wasn't the government's plan form the get go. The TGW then comes up with a host of other items to be taxed only for the government to remove these and say "see we're very understanding", also it would help NZF accept CGT on housing if Labour concedes, farms etc.

Yvil. Peters has already stated he will not support CGT applying to family farms. Who knows what that means - rollover relief only or exemption but if the latter, the whole CGT is doomed. Imagine the outcry if farming businesses were were exempt but all others included. Listed and private equity shareholders in land based businesses pay CGT but if your farm looks like it is owned by a 'family' you don't. In the next phase of this grand 'appease labours union paymasters and hard left party faction' CGT sham exercise we'll shortly have Cindys serious face number two on the telly revealing the hitherto unknown reality that 'this is very complicated'.

How on earth are all the start up valuations for the subject assets going to be validated. What is to stop these valuations being deliberately overstated so there is no gain in theory on sale for instance. OK there may be mechanisms in place but there are going to be thousands on thousands of cases each year to be checked and assessed. Have to create a whole new division of the brown cardigan brigade to cope. Northcote Parkinson, can you hear our prayers?

The 'overstatement' is already happening. I was on the piss recently with a no bullshit mate who is a multiple business owner, when he let slip that they already had an independent valuation process underway in anticipation of the comrades hitting business with a CGT. He shared some of the numbers with me and the variation in valuation outcomes are staggering, depending on which valuation methodology is applied.

Aye Aye Middleman. And there is the rub. Only have to journey back as far as the like of RSL to “appreciate” just how “fickle” valuations can be. In a similar vein, imagine you could recount as I can, just how “fickle” registered quantity surveyors have been in their estimitates relative to the Canterbury EQ repairs/rebuilds. It all seemed to depend on which party was paying them.

Ha, yes. And how well we got to know which QS to engage depending on the result we wanted !

"The biggest problem is that the rate is 33% but does not take into account inflation. Take a 3% appreciation in a year, with inflation at 2%. Let's assume the asset is worth $1M. That is $30,000 of gains, BUT only $10,000 of real gains after inflation. Yet the tax rate is 33% on $30,000 = tax of $9900. So you are left with $100 of real profit - i.e. a 99% tax. Sound fair? " economics 101. inefficiency requires more tax dollars.
How else do you get more tax? yeah right.

The writer's opinion is quite logical, but I think it could play out differently with Winston. He has already lost half of his voters going with Labour, and supporting the oil and gas ban and migration pact. Could it be as simple as the government drops the MMP threshold to 3% and Winston supports a watered down CGT? That way NZ First can be back in parliament and carry on once Winston leaves.

I would not put anything past Winston Peters

I'm in the top income tax bracket and so is my partner. We both work our asses off and in return get raped in the wallet. In comparison some of my neighbours are tradesmen. They sell a property every couple of years and so earn all their income as capital gains or sometimes take cash under the table. In addition they have many kids so they win big on working for families credits. I doubt they pay GST on their work either. Their overall income tax must be about zero %.
Meanwhile our total income is taxed at about 25%.
However this CGT is not a very good one. It hits my shares & kiwisaver. It does not hit the tax avoiding tradesmen because every sale goes under the "it wuz muh family home" loop hole. It doesn't hit the property problem either because it's a tax on profit - like taxing a pie thief 30% it's not going to deter the theft. There are the problems with small lifestyle blocks being taxed more than John Key's old house. This country is still a productivity joke if they want to raise living standards cut the red tape around construction, implement land taxes and break up duopolies.

My heart bleeds for you . Just of out interest - why don't you become a tradesman ? - they have it made , apparently ...

Its understandable that the prop bulls will be dead against this, as it will hurt their primary reason for investment - tax free gain on sale. A slimmed version of this will absolutely be an election issue, and if the under 35 population actually gets off their Ipad's and phones and votes, the Labour COL govt will be reelected and this will happen.

The over leveraged debt farmers on interest only fixed mortgages are now in a corner. Break fees and sell in the next eighteen months or hold and run the very real risk of facing the tax bill they should have always paid. Will be interesting to see what bank lending policy makes of this in the run up to the election. Their terms allows them to do anything they see fit, even if your sitting comfy on five year fix term.

Averageman. Won't apply to farms according to Peters. Good time to buy one given the flood of cash that will be withdrawn from CGT subject businesses to CGT excluded rural property.


This is exactly my household position ..we paid more tax in NZ last FY than Facebook did...its insanity that someone can leverage themselves up to the eyeballs on cheap debt and earn massive cap gains on a non-productive asset and then pay nothing towards the upkeep of this country.

Also agree the proposed CG is insane...we need to be encouraging investment in non-property assets like SME, Equities and Kiwisaver.

Whatever actually gets proposed before next election will be very watered down...this is classic conditioning..

Baby farmer netting working for families and bennies
Dysfunctional solo parent
Tradie benefiting from cash jobs and capital gains
Property speculator
Grey-power boomer on super
Overweight binge eater diabetic on costly dialysis
Real estate agent
Conveyancing lawyer
Owner of a price gouging business like a supermarket or building materials merchant
Council employee
Restaurant owner selling more illegal visas than food
Student getting free election bribes to do some toilet paper degree in arts/language/commerce etc
Farmer benefiting from govt funded irrigation schemes
Land banker

Did I miss any bludgers? If you're not at least one of these roles you are the one paying for them. Unfortunately all the viable MMP parties represent at least one of these groups thanks to the undemocratic 5% hoop. We've got one party called National that could not be less nationalist. The other part is called Labour that wants to tax hard work.

@mvgsmf I feel you. The worst part is when you actually try to get something in return for your tax. The health care is third world. We have doctors who cannot diagnose problems, practices ripping off ACC, ACC ripping off tax payers, waiting lists etc etc etc. The swimming pools are full of people, especially boomers and immigrants. The roads are clogged. I could go on.

Prepare for a swing to the left - it is happening globally. Inevitable too one would add, as the masses are waking up to corporate socialism. eg Wall Street bail out of the banks and CEO bonuses, whilst the mortgage holders lost their home. Back her in NZ we have our own examples, Sth Cant Finance, Big Irrigation, Water and so on. We also have the nonsense of tax havens which could be dealt with in an instant - but left alone so the elite can plunder.

So don't blame the sheeples for the swing to socialism...the big boys started it.

@ rastus , last week the media was telling us that the West was swinging to the right , esp Europe

Poll ratings
Macron 23% approval
Trudeau 35%
Trump 43%
Pretty odd looking swing from where I sit.

You forgot to include the approval rates of their opponents.

CourtJ. Irrelevant. The assertion was that there is a swing to the left. The sagging poll trends of these two darlings of the left don't support that. The result probably reflecting a more sophisticated media than our widely sycophantic 4th estate.

It does matter.. are these approval ratings low because the left is out of favour.. or just because the public is starting to dislike politicians or all flavours (and rightly so!)

45% of yanks approve of the buffoon Trump. Doesn't look much like a general disaffection with politicians of all stripes, to me.

Look at the second green box down.. by US standards he's doing pretty badly.

The same polls that picked (didn't) brexit and trump perhaps?

I think the eventual adopted outcome is pretty clear. They will bring the CGT in around property, but leave business alone. Farmers crying foul is pretty rich, from what I have read plenty of their business is modelled around CGs on their land.
Then the government needs to convince banks the SMEs are a safer bet than houses. It's all fine and dandy making property an unattractive investment, which is the point of all this, but someone needs to start talking SME funding that doesnt require property as its primary security.

Absolutely farmers business plan rests on capital gain. But their problem is that capital gains have just about exhausted themselves. You might put a CGT on, but no gains no tax, and no income to the government.

With 2% inflation and no inflation indexing 33% CGT is in effect a long term 0.5-1% land tax on dirty Kulaks and rural areas to subsidise the left's rich public servant and poor urban voter base. So actually there will be huge income to the govt.

Yes farmers factor in CG because there's no cash flow in it - average 3% return on investment. And when you spend 40 years getting up at 5am, working 7 days a weeks doing 12 - 14 hour days in mud, rain, crap, piss, blood and every other grotty substance you expect to get some pay off.

You might see a 50y/o farmer driving a nice ute with boat but that's cause he's crammed a life's worth of working hours into 35 years, and more than likely the ute etc is tucked up against capital gains as he wouldn't have the cash to buy it.


The narrative that Auckland house prices have gone up due to the Capital gains NOT being taxed is the biggest con story in my lifetime ..............Its simply not true

Nor is it true that somehow a new tax will somehow makes houses cheaper

Quite simply there are no less that 7 factors which have sent Auckland house prices through the roof

1) Massive inward migration
2) The lack of foresight by the city''s town planners to allow orderly development ( esp with the old 4 cities and 3 rural districts model )
3) Low interest rates , the lowest in our lifetime
4) Government policies including tax breaks specifically targeted to encourage the private sector to provide housing rental stock
5) The RMA pushing subdivision costs off the radar not to mention the other red tape
6) Council rorting the system with massive DC levies and charging $20,000 for a $300 water meter
7) Our open economy which has allowed Asian speculators to buy up our assets

Now by sleight of hand this bunch of lefties are trying to suggest that its all due to middle aged New Zealanders doing what Helen Clark wanted by buying a rental home.

They must think we are really stupid

I mostly agree with you..

Except #6.. You aren't just paying for the meter.. you are paying for everything the other side of it too. Water treatment plants (pipeline from the Waikato etc) , wastewater plants, the western interceptor etc.. these things don't just appear for free.

Fair enough , by the head of Watercare earns more than the PM by almost twice , and for the life of me I cannot understand how any public servant could be paid so much

Yeah, that does seem a bit excessive.

8) The building code / BRANZ effectively blocking any "not invented here" methods and materials from becoming mainstream.

But we make the best of everything here. Why would we want to import inferior products that don’t have strong third party accreditation behind it?

The single biggest reason is all the near free money that was pumped into the world economy after GFC.

The plan evidence that no CGT wasn't the cause of NZ house price inflation is the fact that countries like Australia and Canada who have a CGT had just as much house price inflation - if not more.

Man on RNZ this morning says New Zealanders holding shares will pay Capital Gains Tax, but if an American holds those exact same shares, no tax. ! ! ! ! A position reinforced by various treaties.
Not pleased with that idea - why are we not looking after New Zealanders first and foremost ?

KH. Offshore investors will pay CGT on NZ equities in their own tax jurisdictions.

The trick here is that you move countries every 3 months and in each tax jurisdiction you claim that you pay tax in another tax jurisdiction. Given that IRD and many other tax departments don't have the resources to check or enforce the claim.

Of course if someone does this and IRD or equivalent catches up with someone they will be in a lot of trouble if they cannot produce documentation proving they have paid tax.

dictator. Or if until now you have been steadily building an investment portfolio to pass onto your kids when you croak, liquidate it and apart from the capital needed for your living expenses until you shuffle off, use the rest to become their low or no interest mortgagees. That way they get CG tax free capital gains, you don't pay income tax on dividends (also lowering your effective tax rate) and being the generous kids they are they will shout you periodic holidays to warmer climes during winter.

good plan .. I might just do that ..

Thank you middleman, but that varies. Singapore, Switzerland, Malaysia for example have no CGT. And the first and last are significant players in New Zealand business.
One factor is that it gives foreign owners significant advantages over the ownership of New Zealand business shares, in comparison to locals. Why would we do that to our citizens ?

KH. Ideology is the answer. Cullen misleads in implying CGTs are universal when, as you point out, some don't and those that do often apply significant discounts eg Australia -50%. He is duplicitous when claiming parallels between the economies of NZ and other developed countries in justification of a CGT, being well aware of the fragility of of our capital markets due to geographic isolation and our limited economic activity diversity. We are only partly comparable but in his desire to convince a populace that is relatively unsophisticated in economic and investment matters he pretends otherwise, downplaying NZ's significant vulnerability to capital flight.

Disingenuous, specious and a whole lot of other similes to complement duplicitous I would suggest. This is the same old line as our other great tax event, GST. Bring it in, reduce some income tax to smooth it over.Down the track, as soon as opportune, bang up the income tax again. In other words, a replay of the administration of the Lange/Douglas & Clark/Cullen governments, respectively.

With interest rates so low, what is the near future for more capital gain. We have ramped up our borrowings such that every man and woman must work fulltime. We have lowered our interest rates to our lowest levels for over 50 years. We have declining incomes. How does further house inflation in the next 10 years happen? To pay a capital gains tax you need capital gain. Even farm prices are dropping. The govt missed the boat. For a good while at least.

Yes, have to agree with you - what I find quite funny is that those arguing so vehemently against a CGT obviously think the party will continue. How wrong I suspect they will all be.

The elephant in the room which the government is effectively ignoring is where is all the ( non social housing) rental housing going to come from? Especially as a cgt will likely make property investment less attractive ( for some good reasons). I think this is a major policy question.

I think, Fritz, if first homeowners don't re-enter the market and purchase all the rentals that come on the market - the Government would be well placed to purchase them instead as social housing, as I suspect the backlog will keep growing for quite some time. Alternately, the Government could purchase them and on-sell in a shared-equity type scheme. The Salvation Army have researched the latter and are in favour of it.

Shared equity and rent to own are no-brainers but mysteriously absent from the government’s policy.
I also think the government should extend it’s landlord role to include market rentals.
The market has failed and save a big crash some radically different approaches are needed.
Like most governments this one is only seeing half the picture.

Keep building state housing as fast as they can manage, and once the waiting lists are gone, they can keep building a bit more, buying properties that come on the market as the demand for shitebox rentals evaporates, demolishing, and constructing higher density housing to replace it, then either sell those extra properties off to owner occupiers, or provide basic but decent market rentals.

We desperately need a land (or asset) tax. Our major cities are now surrounded by land bankers, many of them foreign. Just sitting and waiting for the next bit of boundary change and then cashing in by doing nothing. Tax the land on its value x current term deposit rates. then watch values drop and some reasonably priced land appearing. Holding costs are just too low in this low interest environment.

Yes, it is the recommendation of the tax expert group that Key's government put forward to him (and he and Bill promptly ignored).

You gotta laugh - JK made his easiest millions of a lifetime cashing in on the tax free gain in Parnell. He's not stupid and he never was on the side of the average NZer.

I just read the piece by Dominic Stephens in the Herald who says house prices will fall with CGT

Well in the short -term they will fall as investors leave the housing market , but the overhang in supply will soon dry up as those houses are sold ( I need 3 houses for each of my adult kids 2 of whom still live at home for example )

What Stephens fail to consider is that the costs of building houses will not fall , it is what it is , and with that in mind , old houses will simply track the costs of new builds , which is upwards at worst of or sideways at best

Nor will it help people who will NEVER afford home ownership in Auckland , simply because they dont earn enough or are unable to save a sum for the deposit

Well spotted

Two biggest costs are land and build cost, not mention council red tape and GST thats a tax on new builds....
everything is structured against more supply at a lower price... I am not saying prices cant fall

They are falling fast in Aussie and employment is doing well over there

I dont buy your old houses tracking new build costs. In my experience the two have been totally disjointed. New builds were traditionally always more expensive than existing, until recently.

In all seriousness, as a landlord, I would happily pay a modest CGT (15%?) if it went directly to making the lives of your average Kiwi better. For example let's take GST off food staples, or have a tax-free salary component. I am aware CGT is intended to be tax neutral but I really don't trust either party not to fritter it away and I trust them even less to maintain the value of a $.

Whether GST has an effect on consumer prices depends on whether the prices are set competitively. Duopoly Foodstuffs and Countdown are not going to pass on the GST savings. If fat cat Pak'n'Save know people will pay $6/kg for a lemon that costs them $2/kg to buy from the orchard then the consumer will damn well pay $6 GST or no GST. What you're actually advocating is that supermarkets pay less tax.

Haha, $2 for lemon to sell for $6. 20cents more like.

The farmers market (not organic) rockmelon was 5 bucks each yesterday. Today at the fruit shop I see 3 for $7 or $2.33 each

I think this is just a wonderful bit of writing:
With her winning smile on high-beam and her empathy projector set at full strength, Jacinda will reassure her young supporters that: “It’s all about being fair – as well as kind.” The Finance Minister, by contrast, will emerge from his discussions with NZ First grim-faced and just a little peevish. “You must accept that this is a coalition government”, he will admonish the waiting scribes. “When it comes to a CGT, there are a great many interests, some of them conflicting, that must all be weighed and acknowledged. Negotiations are proceeding … slowly.”

@Roger , Jacinda reassuring her young voters that she will lead them to the land of milk and honey .

Slapping a tax on those pesky or evil landlords will bring their rent down ?

Or introducing a new tax will miraculously make housing cheaper ?

Taxing the gains on their retirement nest egg ?

Are these young -uns in for a reality jolt ...... or what ?

Everyone in NZ will be worse off financially whether you are a property investor, renter, worker or share investor if a CGT was brought in by this so-called Government!
Reality is that it won’t be coming in anytime soon, you only need to read the look on Robertsons face when he is asked questions on the topic!
Absolutely no idea like his cohorts!
The shares should be heavily taxed as according to some on here they are a better investment than houses, so it only FAIR that shareholders get hammmered!
Not that it will come in, but if it did then there are going to be many investors including myself that will start trading property for profit, and there will be plenty to be made if you are astute!,

I think it's quite simple, Labour wants a CGT on investment houses (well they'd like a CGT on all houses but they know it's political suicide to tax the home, so that may only come at a much later date), so they will be happy to concede CGT on, farms, businesses etc to make the CGT on houses happen

I'd say polling will tell them it's open season on landlords and specuvestors, so this cgt on investment housing is gonna happen. As for the rest...I'd suspect no...Winston will take credit for saving the farms. But given time.....

ha ha

Voted #Winston at the last election hoping he would drain the #swamp. Hasn't happened. So no vote next time. If Labour Index #CGT will vote for CGT. If they don't index for inflation I won't.

Bugger - back to Winston - unwillingly

Can not see It coming in at all, as Winston will be a hypocrite if he allows it!
If it did come in, then I will trade property!
This COL will be gone if they campaign on CGT!!

"Can not see It coming in at all, as Winston will be a hypocrite"

Hasn't stopped him before.. why would it now?

You know what would solve the problem ?

Make ALL trades in property subject to GST

It is simple , paid on settlement, easy to administer, transparent, east to collect

Trotter has no PR imagination.

The best thing Labour could do is to scrap the Cullen report given the noise National are making and instead implement the recommendations of the National government's tax review - the ones that National chose to ignore.

Then blame everything on National's expert group.

Too easy!!!!!!! (And far better tax proposals to boot).


Bring on the transaction tax!

"instead implement the recommendations of the National government's tax review" - which particular ones ? there are a few options there ...

Land tax - and subsequently lower both income and corporate tax rates.

Yes Kate a land tax is the simplest way to target the wealthy and its hard to avoid. It encourages the most efficient use of land and reduces it's value.

A useful start would be a return to the old form of unimproved value council rates - a superior system to the improved value system which is of course preferred by the wealthy house owner.

Yes, land (unimproved) value rates were always the more equitable option. We used to live in Kapiti on the beachfront. It was a postage stamp size section and attracted the highest per m2 LV rating in the district :-). And fair enough - we wouldn't have bought the place if we couldn't afford the rates.

It would also change the proportion of money that stays in and recirculates through the NZ economy rather than being extracted out to Australia's banks. Lower land values would mean less rent extraction to Australia, and the land tax would be used inside NZ's economy instead. A double win.

There are 497000 small business owners in NZ who probably wont think this is a good idea.

The tax is portrayed as targeting the 135,000 people who own more than one house - generally not Labour/Green voters so a fair target - but if the Govt perseveres with this it will be the small business owners will become the problem due to their sheer numbers.

Michael Reddell at Croaking Cassandra disagrees with you - he reckons most small businesses tend to stand still and don't have a big asset to sell at age 65

"On other businesses, there are always issues around the tax treatment of closely-held companies. Most just never make that much money (there isn’t a big asset to sell at 65"

Do you have any better data?

National is doing what is best at.... Fear psychology.

Trying to scare farmers and small businessmen but reality is that are more worried about their investment and tax free reward as many own two or more properties.

What will happen, can forcast now : Labour will bring CG defeinetly for Residential property (Except first house) and may be something on business but with some exceptions/relief to small businessmen and definately farmers will be off the CG and this way Winston Peter will also have no problem and also Simon Bridge and party will not be able to provoke farmers and small bussinessmen.

Though National and many with vested interest will go all out supported by media as many in media too have two or more properties to try and prevent Tax on speculation.

In short CG main target will be house and fair enough as everyone has to pay tax and if national says that we already have brightline test so why CG for that the argument is we already have a CG by different name than why opposed as what's in a name :)


Thanks Andrew.

Pretty big and obvious PR tirade against cgt by the corporate media. But I don't buy it as the feeling at grass roots level. Many are not happy that these super gains on pprty are not taxed.

National radio host yesterday made a fool out of Simon Bridges on it, as he really couldn't respond rationally to any of her questions. He said it would hurt middle NZers - and she asked are you sure the majority of middle NZers own more than one property? He said, well no... It just went on and on with bluster and excuses and he kept repeating the ridiculous line that CGT is an "attack on the Kiwi lifestyle" line. And she kept saying, what "lifestyle" are you referring to? He just couldn't clarify it - because of course the "lifestyle" he refers to is the "tax free" earnings one.

So, feeling it was all too painful to listen to, I switched over to 2ZB and the interviewer was espousing all the same Bridges arguments herself.

Exactly. The idea that the "average New Zealander" will be the ones hit by a CGT is so laughable. 65% of the housing assets (non owner occupier) are held by the wealthiest 20%.

Whereas 58% of owner occupier property is held by the middle 60% of new Zealanders, which is exempt from a CGT. Yet, somehow National are still able to claim its an attack on middle NZ. Its not only embarrassing that they are claiming this, but its just as embarrassing so few commentators are calling them out on it.


National need to wake up to the fact that you don't get to vote multiple times because you have multiple properties!

Now that's a great line for Grant Robertson!!!!

Maybe this is also part of the Kiwi lifestyle he means?

MPs' property loophole 'stings taxpayers'

Private super schemes are MPs' bridges to wealth.

Kiwi lifestyle, where other working plebs pay the taxes and you get tax-free unearned income.

Glad to know the readers on here are just as smart as the interviewer on National radio :-)!