To Capital Gains Tax or not to Capital Gains Tax? That is the question

A tax working group has recommended the government introduce capital gains tax (CGT) from 2021; meaning profit from selling an investment property— not the family home— will be taxed. Are you thinking investors will flee the market to avoid paying or that there’ll be too many houses, not enough demand and prices will crash?

Um, not necessarily… It depends who you listen to. Some believe, since CGT isn’t retrospective, investors won’t run for the door. But, if they stay put, CGT won’t get to star as the grand elixir for lowering property prices. Why then?

The tax working group expects "small upward pressure on rents and downward pressure on house prices". The government will respond formally in April, but its finance spokeswoman, Amy Adams, has claimed the number of homes affected by CGT won’t be high enough to move the market much. In other countries, like Australia, CGT hasn’t had a significant impact. Except… at lowering entry level prices. Will New Zealand’s long-suffering first home desirers finally get a leg up?

I’m aiming to keep you across any developments in this area but if you, or your clients, want to learn more about what CGT could mean, please get in touch.