Thanks to a Taxpayers Union email today, a CGT also taxes victims of inflation. Here is an example:
In 2027 a property liable for the CGT is bought for $1 million.
In 2040 that property is sold for $2.5 million.
If inflation for 2027 to 2040 is a cumulative 40% then in 2040 terms
the amount paid for the property is $1.4 million, so the real gain is
$1.1 million after allowing for inflation. Will the CGT be levied
against the $1.5 million or $1.1 million?
Now consider a small adjustment. In 2035 house prices reached
unaffordable levels and a gradual decline occurred that is still in
progress in 2040, such that the property sells for $1.3 million in
2040. In gross real terms the property sold at a loss. The CGT is
28% then the CGT liability is $84,000 on a property sold for less than
its purchase price in real terms.
There is a message here that National and ACT need to simplify and get
out in the next election campaign if Labour still proposes a CGT.
On 2025-10-29, Crash <nogood@dontbother.invalid> wrote:
Thanks to a Taxpayers Union email today, a CGT also taxes victims of
inflation. Here is an example:
In 2027 a property liable for the CGT is bought for $1 million.
In 2040 that property is sold for $2.5 million.
If inflation for 2027 to 2040 is a cumulative 40% then in 2040 terms
the amount paid for the property is $1.4 million, so the real gain is
$1.1 million after allowing for inflation. Will the CGT be levied
against the $1.5 million or $1.1 million?
Now consider a small adjustment. In 2035 house prices reached
unaffordable levels and a gradual decline occurred that is still in
progress in 2040, such that the property sells for $1.3 million in
2040. In gross real terms the property sold at a loss. The CGT is
28% then the CGT liability is $84,000 on a property sold for less than
its purchase price in real terms.
There is a message here that National and ACT need to simplify and get
out in the next election campaign if Labour still proposes a CGT.
Thanks for the example Crash. Examples are useful.
Inflation means that you need to adjust the figures. Obvious but not done. >For example the AA is suggesting that the trafic fines are only half of what >they were in 1999, so to get relative the fines need to double. A similar >thing happens with tax brackets which get adjusted no often enough to keep
up with inflation.
Even if there is 0% speculation it is fair to assume that the house prices >would rise at the rate of inflation, and this would need to be taken into >account.
Nation et al, needs to start hammering like a preacher on the list of >Labour's proposal as to why it is not a good idea. For it will take time and >maybe there is a chance that Labour will pull the plug on it. If not the >ballot box will have to decide.
There are many groups saying that it is bad and that the devil is in the >detail really applies in this case. NZ does need to take the speculation >fever out of the housing market so that some money can be freed up. Thus >allowing the economy to grow.
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