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The government is urged not to make changes to the bright line test as a way to curb the rise in house prices.
Last week, Finance Minister Grant Robertson and Reserve Bank Governor Adrian Orr wrote to each other and agreed to look at ways to improve housing affordability.
Median house prices in New Zealand hit a record $ 725,000 in October, nearly 20 percent higher than the previous year. The median price in Auckland also hit a new high of $ 1 million.
The unexpected increase, driven by historically low interest rates and the removal of mortgage-to-value ratio (LVR) constraints, put the issue of escalating house prices back on track. the spotlight and lobbied the Labor government for solutions.
READ MORE:
* Why this Government must finally catch the nettle on housing
* Grant Robertson to RBNZ’s Adrian Orr: Work with us to set home prices
* Grant Robertson writes to the Reserve Bank, saying it’s time to think about house prices.
Cue Robertson’s letter to Orr, in which he asked the central bank to think about ways in which it and the government could work together to achieve “the sustained moderation in house prices that we have both sought.”
During the previous Labor-led government, Prime Minister Jacinda Ardern was unable to convince her coalition partner, New Zealand First, that a capital gains tax was a good idea, and said she would not try to introduce one again while I was the leader.
ROBERT KITCHEN / Things
Finance Minister Grant Robertson has asked the Treasury to analyze how well the bright line test is working.
Labor has also ruled out income tax increases in the next period, apart from a new tax rate on income earned above $ 180,000.
Yet critics of the government say Robertson plans to breach that promise, and there is speculation that Labor will make changes to the bright line test, a fiscal rule introduced under Sir John Key’s national government.
The bright line test requires that those who sell a residential property, which is not their main home, within five years of purchase, pay income tax on capital gains. It originally applied to properties sold within two years, but in 2018 it was extended to five years.
Things he asked Robertson’s office if it had suggested to the Treasury that the test period for the bright line could be extended.
A Robertson spokeswoman said she asked the Treasury to look at how well it was working.
Recent figures from Internal Revenue show that a quarter of real estate speculators subjected to the bright line test did not pay the tax applied to them. Of the 1701 property sales you applied to in 2019, 1,285 homeowners paid the required tax.
The Green Party has said that the bright line test should be extended beyond five years, and enforcement should be strengthened.
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National MP Andrew Bayly says if the government extends the bright line test, more people will pay the tax than before.
But National’s shadow treasurer Andrew Bayly said Robertson’s “flirtation” with extending the bright line test suggested that Labor’s pre-election tax commitments were empty promises.
Grant Robertson promised New Zealanders he would not touch the bright line test; it has now asked officials to investigate its extension. “
He said that the rise in house prices was a supply problem and that the Government should immediately reform the Resource Management Law to remove the barriers that hinder the construction of new houses.
Cameron Burnell / Stuff
Taxpayers Union spokesman Jordan Williams says Grant Robertson is preparing for a U-turn in his tax pledges.
Taxpayers Union spokesman Jordan Williams said extending the bright line test would be a “de facto capital gains tax” on housing.
“Extending the bright line test is effectively imposing a nasty capital gains tax of up to 39 percent for those who sell within 10 years.”
Bellingham Wallace’s chief tax officer, Graham Lawrence, said the bright line test had not been effective in addressing rising house prices.
If the five-year extension hadn’t had an effect on the market, he struggled to see how extending it to 10 or 15 years might have an impact, he said.
“It really is akin to just introducing a full capital gains tax,” Lawrence said.
Extending the bright line trial period was not the same as introducing a new tax, but it was extending the tax and how it could be applied, he said.
“A lot of people in my profession have suggested that they are trying to sneak in a capital gains tax.”
A more effective tax rule already existed under section CB 6 of the Income Tax Act, which said that someone who acquired land with the intention of disposing of it should pay taxes, he said.
“It’s been around since before my time, but it just hasn’t been enforced.”
That was because Inland Revenue had not had the proper information, yet the tax department was beginning to crack down because more information was available, he said.
“The tax department is starting to get quality information and they are starting to use it.”
