27 Mar 2018

Capital gains gets tick from Aus tax expert

5:56 am on 27 March 2018

An Australian tax expert has thrown his weight behind a capital gains tax on property sales barring the family home, saying it's one of several ways to raise extra revenue without rocking the boat too much.

generic tax return and finance calculator

Photo: 123rf

Paul Drum from Certified Public Accountants Australia (CPA) is in New Zealand to discuss the group's submission to the government's tax working group.

The CPA submission is recommending the government look for innovative ways to raise more money, as New Zealand's tax system is already broad and well-balanced.

Mr Drum suggested lowering the company tax rate to encourage more overseas investment in New Zealand businesses.

"New Zealand is a net importer of capital - much like Australia: it relies on foreign investment, and to attract foreign investment it needs to have a competitive corporate tax rate."

He said the working group should also ask itself whether any actions could be taken to make life easier for small businesses and start-ups.

"Is there an opportunity - and is it worthwhile - to perhaps have a lower tax rate for small-medium enterprises, or small businesses in particular? Instead of just one rate for all, perhaps a different rate for small businesses to encourage start-ups, to encourage growth, and to encourage businesses that are already up and running, to give them opportunities to grow as well."

Introducing a capital gains tax on assets other than the family home would be sensible, as New Zealand was already behind the eight-ball in that respect, Mr Drum said.

He also advocated an examination of the dividend imputation system - which is used in Australia and New Zealand, ostensibly as a way to avoid shareholders paying double tax on dividends they receive.

"Non-residents get no benefit from the imputation credit. So, is it an impediment to the cost of investing in New Zealand?"

"That doesn't mean going to a system of double tax where you tax first the company on the profits, and then the shareholders taxed on the dividend. What is could mean is ... for example, putting the dividend in the hand of the shareholder [to] be taxed at a lesser rate."

"In Australia when they did their tax review ... it talked about an income tax discount on income from savings. That would mean income from rents, from interest-bearing deposits, and income from dividends."

"I think that's very fertile ground to be explored."

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