The Tax Working Group, as appointed by the New Zealand Government, has released a series of nine tax recommendations, including capital gains tax. But what does that mean for us, and why should "generation rent" give a fuck?
The once proud dream of New Zealand being a country where everyone can own a home has been subverted through years of mishandling and government policies on both sides. So when a proposed capital gains tax will include land, shares, investment properties, business assets and intellectual property, it’s a little hard for us to believe there will be something for us to worry about.
Ella Morgan, a student at the University of Waikato studying a BA in political science and public policy, says unless students are buying and selling properties, the capital gains tax won't directly affect them. However, there may be a number of indirect consequences that could have an effect on students.
“Some economists and property owners have warned that higher rents will be introduced; of course, this is of huge relevance to students. Many students already struggle to make ends meet with rental prices at an all-time high, and extra financial pressure could be crippling to people who are already struggling.
“I’m reluctant to state my personal opinion as I try to be as objective as I can when thinking about issues like this. But I do support the implementation of a capital gains tax. If you are using the buying and selling of property as a means of earning money, you should be taxed just like anyone else’s income is.
“I think that the capital gains tax recommendation should most definitely be adopted. Most developed nations already have some form of capital gains tax, and of course, we can look to these examples of how and how not to handle the transition. Despite this, we can’t always fully predict what is going to happen and the effect that this will have on not only the property and the rental market, but the lives of New Zealanders.”
The proposed capital gains tax is set at the highest personal tax rate of 33%. This has received a largely negative response. However, the government hit back at doubters, reminding them that the recommendations are just that: recommendations. Finance Minister Grant Robertson says the idea behind the Tax Working Group was to identify what would constitute a fairer system.
“The document we got did the job we asked of it. It's now our job to go through and say does that really add to fairness,” said Robertson.
Multiple points have been raised about how this will affect young people, including students. One point raised is how it could affect KiwiSaver both negatively and positively. Individuals earning up to $70,000 a year - and not just low-income earners - should see benefits that reverse the effect of any tax paid on it.
Tax Working Group chairman Sir Michael Cullen says recommendations as part of the report from the tax working group show kiwis will be far better off.
“If all of the TWG’s proposed KiwiSaver measures are adopted, then KiwiSaver members earning over $70,000 would also, as a group, be better off.
“It’s good to have this national debate on tax and how we could be affected by the recommendations, but the debate should be based on full consideration of the facts.”
University of Waikato Communications student Spencer Lowe says he believes the recommendations could affect him buying a house in the future.
“I have heard of the proposed changes to our tax, with a capital gains tax that could be coming in.
“I’m a little concerned that this could affect any chance of me actually being able to afford a house in the near future. I think the government needs to keep in mind the individual situation when it comes to tax.”
It is fair to say that all this tax talk can be complicated. But whatever does end up happening, you could be affected in some form. Your rent may go up, you may pay more at the supermarket, you could get less KiwiSaver in your back pocket. So keep an eye out for what changes do come through and how that could potentially affect you now and in the future.