Bill Ralston: Curses upon the capital gains tax proposal

by Bill Ralston / 03 March, 2019
Photo/Getty Images

Photo/Getty Images

RelatedArticlesModule - capital gains tax bill ralston

Out here in small-business-cum-saver-land, the proposed capital gains tax is a gloomy prospect.

Curses upon Sir Michael Cullen and his Tax Working Group. They are giving me nightmares, not so much for what they are proposing, but because I cannot accurately assess what my personal liability would be if their recommendations are made law.

I suspect there are, despite the efforts of the media to pick apart and appraise the proposals, many people trying to get to grips with the implications of the working group’s report on the proposed capital gains tax (CGT). I hasten to add I am not a complete cretin in money matters. I did economics as part of my university degree and I handle tax issues for the small company that my wife and I own.

Let’s look at our business and savings and the effect of a CGT on them. We work from home and claim a proportion of the mortgage interest paid on our house as a business expense. Under the Cullen proposal, it would seem that when we sell the family home, it will be liable for CGT. Hang on – a CGT won’t apply to the family home, will it? Yes, it will, if you use the home for business and claim on that.

The answer seems to be to stop claiming on home-related business expenses, although that means our small business will be carrying greater costs and our income will drop.

With a weather eye on our advancing age, we are also renovating the sleep-out on the property with the idea that, if we are reduced to eating cat food when we stop work, we can rent it out as, say, an Airbnb for a little extra cash. But the proposed tax takes the gloss off that plan. Too bad if you have to quit the property because your health requires you to be dragged off to a home for the elderly and bewildered: while you have been paying tax on the Airbnb income, you also lay the family home open to CGT on any increase in its value from when the tax is brought in.

Well, we’ll just have to work harder and pour more cash into the business to generate extra income. The problem there is 33% of any increase in the value of the business when you eventually sell it will go in CGT.

Thank heavens we have some savings. I’m over 65, no longer in KiwiSaver and have money in an investment fund. When we stop work, the investment dividends will provide a small National Super top-up. But hang on, the CGT on shares will inevitably impose a cost on the fund and reduce its value. Sob.

So, when the CGT comes in, should we sell our business, take the cash and run? We could, but the new tax would significantly reduce the proceeds.

My head hurts. Actually, that’s just as well because, somehow, it is suggested that a CGT will apply to intellectual property and it would probably be best if I simply stopped thinking to avoid getting any good ideas that are taxable.

Prime Minister Jacinda Ardern and Finance Minister Grant Robertson say they are looking at making the tax system, which they also admit is working well, fairer. In any case, Robertson says, the Government hasn’t made a decision yet about what happens next. That will happen next month.

All I can say to them is, as a pensioner and small-business owner, don’t make it less fair for me and others when you finally make up your minds.

This article was first published in the March 9, 2019 issue of the New Zealand Listener.


Tech Week: Time to celebrate Aotearoa’s own overlooked moonshot
106359 2019-05-25 00:00:00Z Tech

Tech Week: Time to celebrate Aotearoa’s own overlo…

by Peter Griffin

“We bow down to this idea of Elon Musk or Jeff Bezos going to Mars, when here in our own country, we had the equivalent."

Read more
Kiwi composer John Rimmer: An instrumental figure
106331 2019-05-24 11:09:35Z Music

Kiwi composer John Rimmer: An instrumental figure

by Elizabeth Kerr

Contemporaries and students are paying tribute to composer John Rimmer and his musical legacy.

Read more
Why Caroline Easther is thanking her Lucky stars
106325 2019-05-24 10:39:21Z Music

Why Caroline Easther is thanking her Lucky stars

by James Belfield

Well-known drummer Caroline Easther has stepped out front with a debut solo album.

Read more
Comedian buys Destiny Church's new political party's domain names
106322 2019-05-24 00:00:00Z Politics

Comedian buys Destiny Church's new political party…

by RNZ

Comedian Tim Batt buys up domains for new Brian Tamaki-backed political party.

Read more
Simon Bridges is hobbled in hate-speech debate
106336 2019-05-24 00:00:00Z Politics

Simon Bridges is hobbled in hate-speech debate

by Graham Adams

The National Party is leaving the heavy lifting of defending free expression to Act MP David Seymour.

Read more
When did a damn fine cup of coffee get so complicated?
106251 2019-05-24 00:00:00Z Food

When did a damn fine cup of coffee get so complica…

by Jean Teng

Long-time latte sipper Jean Teng embarks on a journey through the world of soft brews.

Read more
Win a double pass to a special preview of Sometimes Always Never
106301 2019-05-24 00:00:00Z Win

Win a double pass to a special preview of Sometime…

by The Listener

Billy Nighy plays Alan, a stylish tailor with moves as sharp as his suits, who has spent years searching tirelessly for his missing son.

Read more
What we must learn from the Israel Folau controversy
106275 2019-05-23 09:31:01Z Social issues

What we must learn from the Israel Folau controver…

by The Listener

Israel Folau has done us the unintended favour of showing how hard and counterproductive it would be to try to outlaw all comments that ...

Read more