CGT will apply to KiwiSaver
August 12th, 2011 at 9:00 am by David FarrarTrans-Tasman reports:
In a press statement issued August 3, Labour’s finance spokesman David Cunliffe stated categorically “KiwiSaver funds will not incur capital gains tax on their share investments under Labour’s policy proposals. KiwiSaver funds which invest in shares are already taxed as portfolio investments entities (PIEs) at the PIE rate of 28%, or as widely-held superannuation funds taxed at 30%.”
So a categorical statement that CGT will not apply to share investments in KiwiSaver funds.
Revenue spokesman Stuart Nash added “in neither case would the KiwiSaver fund attract additional capital gains tax, as tax is already paid on a trading basis.” This is not correct. One of the big attractions of KiwiSaver funds is they do NOT pay tax on share trading gains.
So they got the current law wrong.
Based on a written response from Cunliffe to the Shareholders’ Association on July 20, in circumstances where currently no tax is payable on capital gains, the 15% CGT would apply under Labour’s proposal. So KiwiSaver funds would suffer CGT on share trading gains, which are currently exempt from CGT, at the rate of 15%.
And they got their own policy wrong. KiwiSaver funds will be subject to CGT on currently exempt share trading gains.
And where Labour says PIEs are taxed at 28%, the maximum rate, they are actually taxed at the rate of the investor, which could be lower than 28%, ie at 10.5%, or 17.5%.
So got that wrong also.
Widely-held superannuation funds are taxed at 28%, not the 30% rate, as Cunliffe contended.
This is surely a serious blow to Labour’s credibility, if Trans-Tasman are correct.
Related posts:
- A good thing about KiwiSaver
- 20 out of 24 ING Kiwisaver funds losing money
- The case against a CGT
- Does KiwiSaver increase savings?
August 12th, 2011 at 9:08 am
Well it would be if they had any to start with
Vote:August 12th, 2011 at 9:10 am
DPF says: “This is surely a serious blow to Labour’s credibility…”
Given Labour’s track record to date, I had thought that their credibility barometer had already reached it’s nadir. But maybe not – there’s still plenty of opportunity to achieve new lows between now and the General Election.
They are the gift that just keeps on giving…
Vote:August 12th, 2011 at 9:11 am
@krazykiwi: kaaaaaa – ching!
Vote:August 12th, 2011 at 9:15 am
Hmmmm. Even more stupid, if the funds are actually taxed at 28%, why wouldn’t they allow them to shift to the CGT rate – 15% – saving everyone some tax? If they believed this was what their policy was doing, why would they want savings outside a Kiwisaver fund to be advantaged compared to savings inside a Kiwisaver account?
Vote:August 12th, 2011 at 9:24 am
PualL, bearing in mind who we are talking about, a much more likely scenario is that the would require one to pay both taxes.
Vote:August 12th, 2011 at 11:40 am
[sarcasm]
Vote:It’s OK, the expert panel will sort it all out.
[/sarcasm]
August 12th, 2011 at 11:48 am
They can’t get their own policy wrong. What they announce is their policy. If they say “it won’t apply to Kiwisaver”, all they need to do is, when drafting the bill, include a bit that says “doesn’t apply to Kiwisaver”. They got some of the details of the current law wrong, as has been pointed out, if it got to select committee and it turned out that it would unintentionally apply to Kiwisaver accounts, they would simply amend it to add an exemption to remove that unintentional effect.
Vote:August 12th, 2011 at 12:06 pm
simonway,
They said it wouldnt, turns out it would. If they change it to say that it wouldnt, then they were wrong to say that it would.
This wasnt a reconsideration of the issue. They simultaneously held two different positions.
PaulL, currently capital gains on NZ and Australian listed shares are tax free. If the CGT was going to apply then the tax rate on those gains goes from 0 to 15%.
Vote:August 12th, 2011 at 2:01 pm
That also includes casual investing Kimble, but Labour want to make all share transactions taxable. This will include hobby investors, Kiwisaver investments and venture capital, which for me is a huge problem. The current common law is well thought out, and accepts that there are other reasons besides capital gains for one purchasing shares.
Vote:August 12th, 2011 at 2:09 pm
Why the comments?
Do you really expect Labour back in Government in November…seriously!
Best,
Vote:Ewen
Travel NZ
August 12th, 2011 at 3:54 pm
The core should be least tax, not less tax.
It seems a no brainer to me that retirement funding should not be taxed both trading and on reciept after 55yrs.
Plus any scheme like Kiwisaver shouldn’t be at risk from politicians and their ideologies.
Cunliffe is a prat to not know the basics.
Vote:August 12th, 2011 at 5:16 pm
Considering that nearly all shares are going to get hammered, the chances of any capital gain in any Kiwisaver account is going to be very rare. To pick the wrong time to bring in a CGT in say 200 years it would be now.
Vote:BTW is the famous Dr. Bollard going to raise interest rates any time in the next 2-3 years. Japan hasn’t for twenty years, the Yanks are going to follow the Japanese.
I do not know how Dr. Bollard keeps his job, he can not see past breakfast.
August 12th, 2011 at 11:50 pm
Well put it this way: What is the incentive to save when the interest is so low? None. Do we have a massive savings culture problem? Can people afford to save money in the first place? No! Ding ding ding! And that is why Kiwisaver is a load of shit. It cons those who can’t afford to save for their retirement now to save, while allowing those approaching it to collect government subsidies that they’ll be able to access quicker on top of the Super scheme which anyone born after 1975 probably has no chance of collecting. Anyway, fact of life: if they want us to save money, then they need to either lift interest rates or the IRD needs to slash RWT.
Vote:August 13th, 2011 at 7:54 am
This is just going to add another tax with loopholes and rorts, evasion and avoidance. Discount our already under preforming share market and add huge compliance cost. Another reason for the well of to take their money else were and take away the incentive to invest in productive sectors. More taxes less tax. More loopholes more avoidance. labor policy based on penalize the productive and elevate the non productive
Idiots
Vote:August 13th, 2011 at 10:20 am
I wish you lot would just wait until the expert tax panel are selected so this could all be sorted/cleared up.
Vote:August 13th, 2011 at 8:05 pm
They haven’t appointed the committee to select the expert panel yet.
Vote: