TOTAL BACK DOWN ON TAXATION OF CAPITAL INCOME
Many took the April 17th announcement by the Labour Government that the tax system would be subject to a wide ranging review as an indication that they would introduce a tax on capital gains as promised in the election campaign. The appointment of Sir Michael Cullen as the Chair of the committee to undertake that review further strengthened this view.
This however, to the relief of business owners, investors and farmers, has now been scrapped entirely. Though this is a good outcome it has caused a large amount of concern and uncertainty for many of our clients during the process. It does beg the question of whether the review was a good use of taxpayers funds, estimated costs are $2 million, given that there have largely been no outcomes and it created significant uncertainty in the business community.
Most surprising was that even the minority report, which recommended a CGT (Capital Gains Tax) on rental properties and second homes, was also ignored. This should be seen as a reprieve for an investment sector that is already under significant tax reform pressure.
It is important to note that the recommendations in relation to Greenhouse Gases and reforms of the Emissions Trading Scheme will be ongoing, the report notes that it will be “considered as part of the Climate Change Response Act Amendment Bill. The Interim Committee on Climate Change is also considering the treatment of agricultural emissions.” This is an area of the climate change response that needs to be watched and submitted on by both major industry players and also farmers themselves who could be substantially affected.
If you have any questions around Capital Gains Tax, please call us on 07 889 7153.