As an accountant a capital gains tax should be manna from heaven. Xero and the IRD have contrived against accountants to limit the amount of compliance work we do… But don’t get me wrong I think that’s been great! It’s hard to find good accountants and I want the ones I have doing valuable work, not tasks that don’t add value to clients.

But a capital gains tax risks pushing things in the other direction – more work for us.

Why is this? Well we’re all entitled to do our utmost to be tax efficient. Now tax evasion is right out. Can’t help you there. But there’s lots that can be done to make sure you and I don’t pay too much. Add a whole bunch of new rules in the mix and accountants generally will be like pigs in muck.

I’m not excited about more potential work with a capital gains tax coming in because the last thing NZ needs is less people thinking about taking a punt on a new business, or investing in a NZ company’s shares, or say helping to fund that residential development.

NZ has a shortage of capital and so we need to do whatever we can to help the money we have on these shores move around and be useful.

I know it is a government focus to improve equality – and that equality has worsened in NZ in recent times. However if we really want to improve equality, we have to improve the average quality of jobs in the country and improve access to property ownership. Nobody ever taxed their way to prosperity.

An important rule in tax is that if you buy something with the intention of selling it you pay tax on any gains. That’s already a rule. It’s designed to stop tax free speculation on all asset classes.

I would support an increase in the current capital gains tax we have on residential property (the bright-line test). The current 5 year period could easily go to 10 years and I don’t think many would bat an eye. It’s hard to argue that someone who makes $100k profit on selling a bach they only held for 6 years shouldn’t be taxed as they have gained without contributing any effort to earn that profit. I can live with that.

However, I think it is patently unfair that my clients, many of whom have run businesses for 20+ years, will have to pay tax when they sell on any increase in value made after April 2021. They didn’t get into business to speculate. They paid their taxes every year on their earnings.

It feels like double dipping and penalizing hard working kiwis who are prepared to take a risk to be in business and provide jobs.

If capital gains only hit asset and business sales say within 10 years of purchase (extenuating circumstances aside) I think it would do more to address inequality then the current plan. It would also avoid kicking hard working small business owners who are in it for the long haul. Nobody holds anything for 10 years if they bought it with the intention of selling it.

So is capital gains a monster? Well it depends on what it looks by the time it comes in. I disagree with the current recommendations of the Tax Working Group and think it would have a dragging effect on the economy by reducing available capital for investment. It will be interesting to see what happens to the recommendations once they are put through the political wringer.

One positive takeaway is it gives me a new topic for around the BBQ - always handy as my weather chat runs dry after a while!

Tom Beswick