Property investors face capital gains tax under Labour

Property investment is something of a national obsession in New Zealand, encouraged by the fact that when investors sell the property they usually don't pay tax on their profits. 。

Source: NZPA

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• Property investors face further taxes under Labour (3:25)

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  How a capital gains tax would impact the property market (8:03)Labour will introduce a capital gains tax on investment properties if it wins the election.。Australia has long had a capital gains tax, and it seems that if elected Labour will follow suit in New Zealand. 。Tax experts believe such a tax could raise up to $4.5 billion. 。Guyon Espiner says he understands the capital gains tax rate would be set at about 15%. So if an investor had bought an investment property at about $400,000 and sold it for $500,000, making a profit of $100,000, the investor would pay 15% or $15,000 of that to the government in tax.。"We employ carpet layers, plumbers, electricians, builders. We employ a lot of people in our business and it's a big business, its a billion dollar business in New Zealand, and we don't think it should be tinkered with or destroyed," he said. 。The policy was supposed to be under wraps until next week but ONE News tonight confirmed it.。Sources say the capital gains tax is a key plank in Labour's proposed tax overhaul to be officially unveiled next week.。That announcement comes next Thursday. 。Property investor Kevin McCarthey has seven investment properties and is worried a capital gains tax could hurt his business. 。Labour has some big spending promises to pay for, including making the first $5000 of income tax free and removing GST from fruit and vegetables, so it will probably also raise the top personal tax rate. 。Espiner said the tax would not be retrospective, so profit that might have been made from buying a property some years before the tax was introduced would not be taxed.。"People only pay the tax when they sell the asset and so people tend to hang on to those assets for longer. They are hideously complex and people spend their life with their tax accountants," Key said.。He said no-one likes paying tax, a new tax is difficult to sell, and the approximate 200,000 property investors in New Zealand are not going to like it. But he pointed out most new Zealanders do not have an investment property and will not be hit by the tax.。"New Zealand's problem over the last decade has been a lot of capital has gone into housing because of the tax incentives when where we really needed it was in the productive sector," said Russel Norman, Greens co-leader.。Also in Labour's favour, he said, is that it's easy to find experts in New Zealand and overseas who say that a capital gains tax is a good way to drive investment away from housing and into the productive side of the economy.。The Greens have long supported a capital gains tax. 。"I'm not ruling anything in or out at this stage. You'll just have to wait for the announcement," Goff said.。Asked by ONE News political editor Guyon Espiner whether he is announcing any new taxes, Labour leader Phil Goff said: "Ah I'm going to leave all comment about the announcement until I make the announcement." 。Prime Minister John Key says the only winners from a capital gains tax will be accountants. 。ONE News understands Labour will include a capital gains tax in its tax policy next week, although it will exclude the family home.。He said capital gains taxes don't raise a lot of money up front for a government.