A capital gains tax (CGT) has recently been recommended by the Tax Working Group. What are the implications likely to be for you?
“My gut reaction is it won’t likely come in,” says Cave. “If it does, it will probably be more of a small step. It’s a really high tax rate and it would discourage Kiwisavers while also making us better off investing overseas.”
The CGT is partly designed to try to rein in property speculators and make the tax system fairer. But Australia and the UK both have existing CGTs and it doesn’t seem to have a steadying effect on prices, Cave points out.
“My feeling is that you shouldn’t panic yet – wait and see. History tells us these taxes often don’t come into force, or are watered down, and when they do they can be very short-lived,” Cave says. “Keep a long-term view. What are your goals? What are your needs? Don’t let a tax stop you pursuing them. Good quality assets will continue to appreciate and you’ll still get income from them.”