If the Government extends Capital Gains Tax, people abandoning investment properties in favour of doing up the family home may not be as common as some CGT opponents suggest

If the Government extends Capital Gains Tax, people abandoning investment properties in favour of doing up the family home may not be as common as some CGT opponents suggest

By Greg Ninness

One of the arguments put about in the debate over extending Capital Gains Tax is that it would discourage people from buying investment properties and encourage them to “invest” their money in their own home – the so-called Mansion Effect.

It’s one of those neat little theories that on the face of it seems quite logical.

After all, why would someone put their money into an investment property, or any other type of investment for that matter, if any capital gains from that investment are going to be taxed?

Surely they would be better off doing up their own home and increasing its value, because the capital gain on that would be tax free.

However it may not be that simple.

There is no doubt that New Zealanders are great doer-uppers.

According to Statistics NZ, the value of building consents issued for structural alterations to residential dwellings hit a record $1.8 billion in 2018.

That is for major alteration work that requires structural alterations to a building, such as removing walls or adding space by building up or out.

And it’s on top of mere redecorating work such as painting or installing new cupboards and benches, which does not require a consent.

But there’s a clue to what motivates people to do up a property if you separate out the Auckland figures from those for the rest of the country.

Over the last couple of years Auckland’s residential property market has plateaued, with prices remaining within a fairly narrow band and there has also been a significant reduction of investor activity in the region.

But in the rest of the country the reverse has been true.

Outside Auckland, particularly in provincial centres, markets have been more buoyant and prices have continued to rise. And investor activity has remained robust.

So if you subscribe to the Mansion Effect theory, you might expect dwelling alteration consents in Auckland to have increased over the last couple of years, as people shied away from putting their money into investment properties and put their cash into doing up their home instead.

But that does not appear to be the case.

The Statistics NZ figures show there was strong growth in the number of dwelling alteration consents issued in Auckland from 2009 when 4150 were issued, to 2014 when 5517 were issued, an increase of 33%.

But from 2015 onwards, the number of alteration consents issued in Auckland has plateaued, with 5438 issued in 2018.

That corresponds with the peaking of the Auckland housing market in 2015-2016 and its subsequent easing in 2017-2018.

It is also significant that the flattening in alteration consent numbers occurred at a time when mortgage interest rates were heading down, because it’s likely that most of the people undertaking significant alteration work on their homes would have financed it by increasing their mortgage debt.

What all of this suggests is that the primary driver for people undertaking substantial alteration work is the buoyancy of the residential property market.

If the housing market is booming and prices are rising strongly, people will add the extra bedroom/ensuite/study or excavate and put in a rumpus room and double garage downstairs or whatever.

But they are less likely to do so when the market is flat or easing because they run the risk of over capitalising.

Assuming that a Capital Gains Tax is introduced and the housing market is experiencing reasonable price growth, the two options facing homeowners with spare equity under the Mansion Effect theory are:

  • Buy an investment property that provides ongoing rental income and a potential capital gain, with both being taxed, or
  • Put the money into the family home, either by improving the existing dwelling or buying a more expensive one. This wouldn’t provide any rental income, but it would potentially provide a capital gain which would be tax free.

There is also one other factor to consider if the homeowner uses debt to fund the upgrade of their home or purchase the investment property, and that is that the interest portion of their mortgage payments will be tax deductible for the investment property but not for the family home.

When all of those factors are weighed up, the attractiveness of putting all of your eggs into the family home basket are considerably diminished, because there’s good chance that the benefits of rental income and mortgage interest deductibility provided by an investment property will outweigh the cost of tax on any capital gain.

That will be especially true during periods of low house price inflation.

So while there have always been and always will be people who put all of their spare money into their home and rely on it as their main store of wealth, introducing a Capital Gains Tax will not necessarily see a wholesale movement of people away from residential property investment and a corresponding increase in home improvements.

So the Mansion Effect may prove to be little more than scaremongering by those opposed to a Capital Gains Tax, for whatever reason.

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Logic would suggest money finds it's way to untaxed gains. Since 1985 the Australian experience since their CGT was introduced has produced some exceptionally expensive upmarket suburbs in Sydney. Not 'all of your eggs into the family home basket' but alot more will go into the family home.

As the saying goes, "money will move to where its best treated". If one only buys property for the capital appreciation and not the yield (after all, you can get a better net yield on a term deposit these days) then living in a mansion while it appreciates tax free is a far better deal than living in a cheap house while owning other cheap rental properties and having to deal with the tenants who rent them. I know where my money is going!

The CGT and the obvious exemption of the family home is bound to shift the focus onto the home as a sort of tax avoidance. I cant say that's what I would do but someone younger probably would and then leapfrog to the next do-up. Great report thank you.

It would have a net beneficial effect of improving the quality of older houses, while allowing the younger set the stepping stones to good quality housing. Something that many did for years.

Eh, you look at historic behaviour in a market without CGT to form your conclusion. Why not elaborate on experience in other countries what happened when CGT was introduced?

As the owner of a single house on a full site in a leafy Auckland suburb, I would rather invest spare funds in my home and have the gain untaxed rather than have it taxed in an investment property. I get to enjoy the enhancements, don’t have to deal with tenants and it’s the same asset class.

Ex Ex,

Are you really saying that if you had a rental property,you would sell it and either put up a large extension to your home,or sell it and buy something larger? If so,the logic escapes me. Either action would involve you in significant costs;agents fees,legal fees,construction costs,etc and not forgetting a loss of income from the rental property. And you would go to all that trouble just to avoid a CGT bill sometime in the future. That seems like a very bizarre logic to me.

Based on the proposed TWG CGT, Kiwisaver is the only asset I own that's likely subject to CGT. Everything else I have is in my Home, Term Deposits, vehicles and household effects, which are all CGT exempt. Owners of rental properties may not sell up to invest in their homes, but there must be others like me out there. At the margin, I would not invest in an asset class if the post CGT return wasn't sufficient and I would certainly favour my own home over rental in the property asset class as it has no CGT at all. The immediate problem is keeping up with inflation (2.31% after tax on TDs now), I'm not going to add a tax burden to that problem unless the return outlook is impressive. .

Absolute no brainer. Since profits on housing only come via capital appreciation, not yield (as rents barely or in many cases, don't cover the cost of interest, rates, insurance, maintenance, legal compliance, etc) then it makes sense to invest in your own home over that of someone else's.

Really? Then you're in the situation of paying the interest, rates, insurance, maintenance etc without any income to offset it. Even if you don't make a big profit from the rental income alone, that fact that it covers your expenses makes it very valuable.

Invest? Invest implies an expected return. If you mean your personal enjoyment then fair enough. If you mean a financial return.. I can't see it in the short-medium term.

There seems to be an over reaction to a potential CGT on rental properties.
We seem to have this real aversion to having to pay a tax on profit and the attitude seems to be one of taking a short-term spiteful view and throwing their toys out of the cot.
Get over it! One will still retain the greater proportion of a capital gain on top of rental income. People still invest in term deposits and are taxed on their interest / capital gain.
Over the long term, profit from rental income and capital gain - whether or not subject to a CGT - has in the past and most likely in the future provide a far better return than other common investment.

Cgt will not hard. One-third of the gain is a very very high percentage let's be honest. Worse still, in absolute terms because it will mean massive amounts of tax suddenly payable. Or payable down the track on terminal tax date, long after the gain has been spent and with no means to pay the bill.

If CGT is introduced the most likely scenario is that it would be payable when the property is sold. Hopefully you would set the amount of tax aside from the proceeds until its due date rather than rush out and spend it all and find yoursef short on tax day.

Yipe, Houseworks; your comment is bleater-nonsense. I hope that this is not the best you can do!
Next you will be telling me that one cant afford to pay the rates on due date as one has already spent the money.
There is a thing called money management you may not have heard about. Penalties payments on late rate and tax payments are a great educator.

One third of working folks' wages is a very high percentage when other income gets off scott-free, let's be honest. Others need to pick up their share too.

It is quite different if payable in one lump sum

You only owe a proportion of the gain you receive at the same time. No problem unless you have continued to re-mortgage the property as your equity increased without any thought for future cash demands. All you have to do is keep 1/3 of the capital gains as equity, is that impossible to manage?

But but but.... you sold it in one lump sum also. Shortly before the tax became due. You need a stronger argument, really!

How else do you pay tax from a company. I put money aside for tax, but don't pay tax until my returns are done, that is one lump sum every year. Don't all companies do that, or are property companies special.

If your not fiscally responsible enough to put money aside for tax and you spend all the money from your income, then how do you run a company.

This isnt just about me mr swapcrate so no need to personalise the question. Cheers

printer 8 We seem to have this real aversion to having to pay a tax on profit

It wouldnt be such a big deal if we were paying tax on profit. As proposed 3% appreciation per year over 10 years is 30% appreciation. On 150k appreciation that is roughly 50k tax,. The problem is 2% was inflation not appreciation not income. Your real profit was only 10% appreciation roughly 50k meaning you should have paid about 16.5k tax. So you have actually lost 33.5k , I dont believe the government has any right to apply a CGT in this form on inflation. If it goes ahead the same should apply to the 'family home'.

We’ll see a very diluted CGT, at most......

Labour is doing ok right now - and won’t want to risk squandering it all at next year’s General Election. (CGT is high-risk for any NZ Govt.)

TTP

A CGT with family home exemption will obviously cause some amount of "Mansion Effect" but the more interesting question is how much. I think Greg is saying not as much as many are suggesting and he might be right.

From my perspective anything that improves the quality of NZ housing is likely to be a good thing, so wouldn't mind seeing a bit of Mansion Effect! The trick is getting people to invest in quality, not short sighted distasteful cash grabs.

Improved quality of housing is a good thing. If happens the mansion effect will also increase the price and value of those same homes which seems ironical as its the opposite result from what some think the CGT will do of making homes cheaper. The bulk of homes are owner occupied.

There's not going to a "Mansion Effect" due to CGT exemption if there is no real capital gain on offer in a weak market like Auckland. Doer-upperers may be idly wondering if they will even recoup their costs.

... exactly right ... the time to introduce the stupid CGT was 1999 or 2001 ... back when the property bubble was just beginning ... not 20 years later when its on the cusp of either deflating or bursting ....

Whereas a simple ( and across the board ) land tax would take a little bit off all land owners each and every year immediately , and forever , regardless of where the market sits ... and it would hit the rich the hardest ... they can most afford to pay it ...

... sigh .. .. never gonna happen , is it ...

Other than capital gain, Its hard to imagine any motivation that would prompt someone to hold a negatively geared housing investment.

Lets cut the rubbish.
The reality is that virtually ever since Adam and Eve moved into their first cave, properties have tended increase in value over the medium term (and due to other factors this has tended to be at a higher rate than inflation). Apart from one group of property investors, the potential for capital gains have been a consideration in their investment decision. So just like my mum who puts her money in term deposits and is taxed on the gain, so too should capital gains on property be taxed.
Oh, that group who don't invest on the expectation of a capital gains - well, they are called liars.

Okay, by your definition I am a liar... although your definition appears to lack a basis in reality.

I invested in the NZ utility IPO stocks on the basis of their outsized dividends (initially at or above 10% dividend return). Well, it turns out that a bunch of other investors have also decided that those dividends were rather outsized, and have bid up the share price until the dividend returns are more appropriate to the current low interest rate climate. I would have been happy if the share price hadn't changed. I am more than happy that the dividends are still around double digit annual payout as based on the purchase price...

Of course you conveniently ignore the fact that landlords already pay tax on the income earnt from the property.. just as your Mum does on term deposits. You are confusing income vs capital.

Lets say instead of investing in a term deposit, you buy an inflation linked bond. Your income is linked to inflation but your sum upon maturity (being adjusted for inflation) would be deemed to be a capital gain. It wasn't your purpose to seek a capital gain (its questionable it is)... but you would have to pay for that.

Concluding at the sale of an asset that it was an investors original view to make a capital gain is dangerous, not to mention completely ignoring the tax paid on any income earnt from that asset.

Actually, landlords don't pay on income earned. They pay on profit. Thanks to interest only loans, tax writeoffs and other deductions (that are progressively being closed mind you), that profit can be less than nil.

Now, in most investment classes, a profit of less than nil is seen as less than ideal and market forces would generally correct that. But in terms of property, it's not been a concern as the market prices for untaxed capital gains. Surely, anything that equalizes that is a reasonably equitable starting point.

Imagine if Term Depositors could deduct cost of fuel to get to the bank, or cost of internet. Or the insurance on the house they used while logging on to the internet. Tax liability would be lower. I guess a similar dynamic to all the people who lose out on PAYE vs the tax gravy train of self employment.

MisterB. Using the words 'gravy train' demonstrates your lack of insight into the realities of self employment. Yes, there are some tax 'advantages' compared with the waged and salaried but these are insignificant alongside the risks and personal effort invested in a business. A large number of private business owners make little more than the hourly net of tax wage rate for that sector if profits are divided by hours put in.

What have risk and personal effort got to do with equitable tax? Why should a cleaner on minimum wage subsidise their lifestyle choice by having to pay more tax? Especially given that currently, if they sell their business, as Sam Morgan did, zilch capital gains tax.

The rental income I receive from my property I consider income and pay tax on. I offset rates and insurance.. and that's it. I pay tax because that is the law.

I temporarily live outside of NZ so do not benefit from any of the income tax I pay in terms of services (roads, healthcare, education).

You seem extremely keen to accuse all landlords of being manipulating unscrupulous tax dodgers and I take great exception to that sweeping generalisation.

I didn’t say they avoid tax. I was pointing out the error of your comment that you pay tax on income. You do not. You pay it on any profit. If you don’t understand the difference, perhaps that’s part of the problem.

Waged employees pay on income as to term depositors, etc.

If you’re going to only pay on profit, then why should the increased asset value not also be taxed?

AndyB

Is your house owned by a company or yourself, it sounds a little strange when you talk about tax on income, or rental.

Im no Accountant by any stretch of imagination.

But dont you have something like below, its an oversimplification. But you will get the gyst. Once again Im no accountant.

Rent Income
less Expenses
Gross Profit
Tax
Net Profit (Your Money)

Rent
Cap Gain
less Expenses
Gross Profit
Tax
Net Profit (Your Money)

If you were paying tax on income you would tax the salary you paid yourself from your company and the tax dividends you pay yourself. But not from Rent.

Also it doesn't matter where you live, and what you use in that country. You have your company in a country, your company pays tax in that country. I'm not sure how the personal tax bit works on Salary and Dividends when your not in that country, but much smarter people on here will correct me.

The figure of $1.8 billion will also be including a lot of the still ongoing Christchurch remedial's, but given that the $ amount of deferred maintenance on NZ housing is in the order of $15 plus billion. not enough is being spent.

There is a phenomena that the housing market is starting to you through, I'll call it the 'headcasket' effect.

That is much of the NZ housing stock is well under best practice on international standards for being warm, dry and healthy, and the market are starting to wake up to this.

As the name suggests, it is like the owner of a car knowing that the age of the car suggests the head casket might go soon, and decides to sell it to onto a 'greater fool,' before that happens. Hopefully taken maximum profit after having taken maximum usage.

If you decide not to sell, then you either drive it until stops or you take preventive action and spend the money before, but knowing that having done so, you have not added to the cars value my much or at all.

Increasing renovations for housing in NZ will be, not to add value per se, but to stop the value falling into a secondary market only good for low end renters/student accommodation, and then onto demolition. And with the stricter rental requirements, then the bottom of what is allowable is being lifted.

Of course the trouble with this, as has already been pointed out, is that this is easier with high capital growth which covers the fact the price won't increase even though you have added value.

Increased supply of housing will further exacerbate this, as when purchasers have more of a choice, assume they know and given all else being equal, they will choose even, if prices have not fallen, the warmer, drier, more healthy house.

I have a couple of points I would like clarification on.
If somebody bought a rental now for say $1m. Then on the day the clock starts on CGT the value drops (as many on here predict) to say $800k. They sell the property 2 years later when the value increases back to $1m, Do they Pay CGT on $200k?
If I have a rental and I want to sell, how long do I have to live in it before it stops being a rental?

For you first question, I'd think that yes they would pay CGT on 200k. Why not?

Question 2 is already covered by current bright line rule. You have to have used the property as your main home for at least 50% of the time you've owned it for to get the family home exemption. I imagine they'd keep that rule for CGT.

Damn sure we will in a CGT world be diverting a chunky sum from our NZ equities investment portfolio to build a bigger more expensive home every few years.

So hiring buiulders, plumbers and other tradies to do productive work? Good outcome (although, be aware that 4+ bedroom mcmansions seem to be the slowest moving market at the moment.. not many people need 4+ bedrooms these days.

And if CGT didn't exclude the family home?

Sums up the kiwis attitude to investments ie no real difference between investment in housing vs the productive economy. Our predilection for speculating in housing is a key driver of our thin capital markets and the multiple negative consequences of this.

I think historically NZ’rs have simply come to trust in land and building as being a secure investment. There have been a lot of equity investment failures, JBL, Securitibank, Broadbank & all the 2008 collapses. Then you have the political contradictions. For instance the good Dr Cullen bemoaning NZrs’ investing into property rather than the sharemarket. And then only a few days later Cunliffe moves on Telecom and knocks the guts out of the probably blue chip share of the time. Best investment return on capital is the return of capital. As you say too many failures have hollowed out market confidence on equities.

Foxglove. You correctly identify the root causes of NZrs aversion to equities as being sharemarket routs but the causes of the three collapses you cite were ,to use the kindest description, corporate governance failures rather than systemic market corrections such as occurred later in 10/1987. I sound a pedantic nitpicker but believe it's a good example of how susceptible the investment thinking of current generations of Kiwis still is today, to legends and fokelore about the great 1987 crash as told to them by their parents. You'd not think this event that is indelibly seared into their consciousness was 32 long years ago. The memory of long dead uncle Gustav who lost his cash remains vitally alive and informs their investment decisions. That a good number of the corporates listed on the NZX back then were run by cowboys, that most investors had little understanding of basic investment principles and were so gripped by gold fever they didn't care about risk and that todays markets bear little resemblance to those unregulated wild west days is swept aside by the spectre of uncle Gustav wagging his warning finger.

MM yes concur.It is as strange as it is ironic how history repeats. If investors had taken only a little bit of notice of the RSL collapse 1988 I think, then all the Hanovers, Lombards, Mascots, etc etc would never ever have got off the ground sufficiently to cause the mayhem 2008, only some ten years later. The public, myself included, had thought that financial safeguards had been put in place. And the irony is, more than anything else, if the government(s) had enforced those safeguards, then the bail outs of the above plus the like of Sth Canterbury, Strategic, St Laurence would not have cost our country’s taxpayers $ billions. When people try and tell me that history is gone, past tense and irrelevant, I just look and wonder.

I'm already doing it. Dumping two properties I can't be bothered spending money on upgrading to the new rental standards and putting the money into a large and expensive family home that will be forever tax free. Even better, I get to live in it and enjoy my wealth, rather than putting up with the hassle of bad tenants. What's not to like?

Excellent news. More supply of housing available for Owner occupiers. Not sure about how smart its going to be tying your cash up in your own home tho, it wont generate an income, and future capital gains (in the next decade at least) are looking unlikely.

And all because of a CGT policy thats likely to never happen.

I think that K.W. is likely to be selling to the greater fool at this point... It will be sad if these greater fools are FHBs, but that is how it goes sometimes.

Many kiwis tie up their cash in "investment" in the property ladder whether it is in the personal home or investment homes. From what I've seen, the income aspect has been a negligible consideration in regards to the rationale for "investment" in either case. I would be rather surprised if the imposition of a CGT doesn't affect decisions about where monies are invested. Some will emphasize home improvements, others will emphasize investment in more productive assets. Anyone notice how the share market has been doing in recent times??? :)

I’m not concerned about it. Just wait for the next political opinion poll and watch Labour rapidly back pedal on CGT.

Tax free capital gain on property is a fundamental right enjoyed in this country for over 100 years and no Govt in their right mind will change that.

delboy. Not convinced the next opinion poll will see labour dropping. The media members of the cult of Jacinda have been hard out promoting her personal brand since christchurch and while political tragics like us know who these journalist are and skip over their stuff, a majority don't possess the same level of discernment. On Ardern backpedaling; I'm also not sure. She wouldn't be the first political figure in history to be deluded by hubris into launching a doomed enterprise.

Buy a larger property and renovate the downstairs, garage or granny flat. Then bang in a couple of 'borders' (don't call it rent) - tax free income and tax free cap gains on improvements. Such is the folly of exempting the family home..loop holes for Africa...

I'm no fan of the CGT approach, but this answer does seem to indicate it would achieve a lot of what people want.. less investor buying of standalone housing (= more owner occupiers), improvement of the dire state of a lot of existing NZ housing stock, and more available rental accommodation (but as boarders, so only useful for singles and some couples).

PS: The IRD will likely disagree with your statement that people that live downstairs in a self-contained unit / granny flat and pay rent to you and don't receive other services (laundry or meals etc) are boarders, and therefore you will likely end up paying tax.. and penalties.

As an accountant in the regions, I believe CGT exempting the family home is a kick in the teeth to rural investors. They are the people who might have 20% of their wealth in a family home, and the bulk in other investments, such as businesses, farms, commercial buildings. They had to invest outside of housing, to grow their wealth, which is good for growing the productive economy. But under the proposed CGT, they would have been better off, by buying one family house in Auckland or Queenstown, and not diversifying.

This is a good post, thank you.

What happens if the farm is in a trust? Or how are trust assets treated if they include "the family home"

Yes people tend to move up the housing ladder , but CTG really is not the big deal some think it is .
The Duke of Westminster is the richest person in the UK his business is property investment

Yes, the son of the Previous Duke of Westminster (the richest man in the Uk in the 1970s), who was the grandson of the original duke of Westminster( also the richest man in Britain at his death. Who happened to inherit a huge amount of land). None of these gentlemen started from nothing and got rich from investing in land.. they were born to landed aristocracy and simply avoided drinking and gambling their way down the ladder.

https://www.itv.com/news/granada/2016-08-10/duke-of-westminsters-extensi...
133,000 acres of land in England including 300 acres of prime central London land in Mayfair and Belgravia - two of the capital's most expensive areas. Addresses include Eaton Square, Eccleston Place, Grosvenor Square, Mount Street and Elizabeth Street - plus others.

It's common dogma from promoters of CGT that because other jurisdictions have a CGT, we should follow suit. Ardern and Roberston are two who chant this mantra in an attempt to brainwash the electorate. The issue I have with Roberston is that as someone competent in economics, he knows these two tiny islands with a highly vulnerable economy and thin capital markets are not comparable to other hugely more powerful economies and yet continues to peddle the line that we are.

Exactly. Singapore did not become the financial capital of Asia by taxing residents to death.

... it's the old lemming theory ... if all the other lemmings are happily leaping off the cliff , who are we to say they're wrong , we ought to join the rush ...

Taxcinda's gumnut seems to be riddled with lemons ...

... they need another working group to give them a little lemming aid ...

not entirely sure I would say Robertson is competent in Economics.

CGT may not be a big deal if properly implemented, which would involve an allowance for inflation like in Australia (50% to individuals to avoid complicated rules) and maybe a tax free threshold for the family home or some such. Exempting the family home will just create other inequities for investors. But I believe it is a stupid tax because it is lumpy, cyclical and unwieldy with huge compliance costs. Governments get used to the cash rolling in at the top of an asset cycle from CGT, and then can't claw back spending in the downturn. We are taxed enough with our income tax, GST, ACC and fuel and excise levies.

2 points:
1) "we are taxed enough.." you do realise it is supposed to be revenue neutral with a reduction/adjustment in income tax levels/thresholds?
2) Is there any institution that should be more able to deal with lumpy cashflows than the govt? Given that they can run a deficit with (for quite a whilel at least) very little real impact.

interesting points.

Perhaps now is a good time to implement then, potentially on the down swing

Rural people are the backbone of NZ, a cliche to be sure but true. I am one such, have an acre or two, solar, tank water, efficient septic system, lots of trees, and grow much of my own food. You'd think the Greens would love me, but I strongly suspect they would rather see us rural folk relocated to concrete gulags adjacent to cycle lanes and working, flexitime, in a nearby office building, with Lego and swings and decent coffee, of course. The proposal to include properties of over 4500 sq m in the CGT net is a discriminatory, ill judged kick in the teeth. You can own a 5ha block in some remote region and pay a chunk of CGT when you sell, meaning it's hard to move up the property ladder, yet a Remuera stockbroker with a $5 million home gets off scot free (hope that's not racist BTW).

Pietro. I doubt you've too much to worry about given the 400,000 kiwis in your +4500sqm land position. It'd be political suicide to include your house in the CGT net but not those owned by the leafy suburbanites. Peters survival depends on him achieving multiple CGT exemptions and modifications, assuming he doesn't fall asleep during the negotiations.

Middleman. Thank you for your comforting words and I suspect you are right. But what an idiot Cullen was to even suggest that. And my sentiments re the Greens' attitude towards us rural folk was the real point of my vitriol.

Indeed, if they go ahead with this stupid plan it needs to be universal, no carve out for residential property. Hopefully it dies a quiet death.

If we are to tax capital, then surely what needs to be considered is the amount of capital not how the capital was used prior to its gain being realized. Any exemption should be in accordance to the amount of capital one owns and the amount of capital gain earned. If you bough your rental property for $200K and now selling it for $400K, and you live in a unit worth $200k, you are still pretty low in capital owning ladder, even though you have made a significant gain. You being taxed on the same level and basis as someone who has $100m capital is unfair. The more wealth you own, the greater percentage of the gain (up to a reasonable limit off course) you pay in tax. All it matters is your net wealth.
Determining the wealth tax scale requires a measure of personal wealth in NZ and determining things like average and median wealth.

Best to have a really complicated system with lots of exceptions and levels and rates. Will provide maximum employment for measurers, assessors, valuers, agents, accountants, lawyers, local and central government, trade unionists, lobby groups, politicians and so forth. If we can develop some really complicated software to cope with, and ideally to enhance, the complexity, we can have a world class industry as all governments need added complexity these days.

Artificial intelligence aided complexity generation is the science of the present and of the future, the possibilities are endless.

Words of the infidel. The Brown Cardigan Brigade will rise and smite you. The sad part is though, it would be funny if it wasn’t true.