Local Labour with Rachel Jones

This election Labour is promising to bring in a capital gains tax. The idea of introducing a capital gains tax used to be political suicide, but times have changed.

In fact a recent survey reveals more people are in favour of capital gains tax than against it.

What does Labour's policy mean for you?

If you are selling your family home, nothing changes. You keep your profit or suffer your loss in the same way you do now.

If you are selling an investment property, however, you will pay 15 per cent tax on any profit you make.

But if you bought your investment property, for example, a bach, for a song in the 1970s and it's now worth millions, don't worry.

Labour won't be backdating the tax – instead your profit will be calculated based on gains in the value of the property from the time the new tax is introduced.

And farmers have no need panic either, as their family home will also be exempt. The tax will only apply to the productive land of the farm – not the house.

Despite some scaremongering by other parties, KiwiSaver and other retirement scheme gains, collectables, and small business assets sold for retirement will also be exempt.

So what's the benefit of having a capital gains tax? Basically it encourages investors to consider investing in assets other than property.

We all know the New Zealand housing market is overheated. It would be much better if investors put their money in productive assets, like investing in businesses.

It is also an issue of fairness. Why should those who can afford to buy multiple properties keep benefitting from increasing house values without paying a tax on their profits?

People who earn wages pay tax on their incomes. Having a capital gains tax evens up the playing field somewhat by taxing the income of those who speculate in the property market.

Labour estimates a capital gains tax will bring in $26 billion during 15 years. Sounds good to me.

What do you think? Drop me a line at rachel.jones@labour.org.nz