Advisers: Govt made right call on capital gains tax

Financial advisers say the decision not to implement a capital gains tax was the right one – but there may still be tax changes on the horizon for investors.

Thursday, April 18th 2019, 6:00AM

Prime Minister Jacinda Ardern said on Wednesday that the Government had not been able to achieve the consensus necessary to implement a capital gains tax, and Labour would not introduce one while she was leader.

She said, while she supported the prospect of such a tax, many New Zealanders did not.

The Tax Working Group had recommended a broad capital gains tax, on all types of investments, including domestic and Australian shares.

Financial adviser Murray Weatherston said he never expected such a policy to go ahead.

But he said the Government's decision seemed to indicate the "the doors to the last chance saloon [as the opportunity to implement the tax was described by working group chairman Michael Cullen] had slammed shut".

Jordi Garcia, a founding co-director of New Zealand Financial Planning, said he was happy with the decision because it avoided added complication.

“My personal view is that New Zealand has one of the cleanest and simplest tax systems in the world.”

He said for the average person and average business it was a “collective sigh of relief”.

Nick Stewart, chief executive of Stewart Financial Group, said what had been proposed was complex and complex to administer.

But he said he did not get the sense that the investors he dealt with were worried about the prospect.

Most were not heavily invested in domestic shares because of the diversified nature of their portfolios.

Stephen O’Connor, principal at Mitre Wealth Management, said it would have been a hard proposal to get political support for.

But he said it was something of a shame because it was something that probably needed to be addressed at some stage.

It had not been a point of concern for his clients, he said.

While it was the most high-profile, the capital gains tax was not the only change proposed by the Tax Working Group, and the Government has said a number of other recommendations should be considered for inclusion in the tax policy work programme.

Among them are the suggestion to refund the employer superannuation contribution tax credit for KiwiSaver members earning up to $48,000 a year, and apply a claw back up to income of $70,000, a proposal to ensure KiwiSaver members on parental leave receive the maximum member tax credit regardless of how much they contributed, increasing the member tax credit to 75c of every $1 invested up to a total of $521 and reducing the lower PIE rates by five percentage points each for those on low incomes.

Tags: CGT Jordi Garcia Murray Weatherston Stephen O'Connor Stewart Group