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Ongoing Climate Of Change

A capital gains tax may be off the table, but there’s still a heavy schedule of policy and tax reforms ahead – and investors need to be well prepared for the changes they will bring.

By: Miriam Bell

30 April 2019

Well, what a turnaround! After months of heated speculation about the looming spectre of a capital gains tax, suddenly the prospect was no more. In delivering the Government’s much anticipated response to the Tax Working Group’s recommendations, Prime Minister Jacinda Ardern definitively ruled out the introduction of a capital gains tax.

And not just now, but while she is Prime Minister. That means New Zealand is not likely to see an attempt to levy taxes on capital gains for many years. Given the Labour Party’s past commitment to a capital gains tax as well as the extent of the TWG’s recommendation, the announcement came as a big surprise to many.

There was widespread concern among investors that the Government might play to the anti-landlord mob and opt to simply introduce a capital gains tax on investment properties.

But now that has not eventuated a big area of uncertainty has lifted for investors. Despite this, it is not smooth sailing ahead for investors. With a capital gains tax off the table, there’s fears that the bright line test might be extended from five years to 10. Finance Minister

Grant Robertson has said this is “unlikely”, but the Government plans to release a refreshed tax policy work programme mid-year so it remains to be seen.

Meanwhile, the new rules around the ring-fencing of rental losses are set to go ahead. Although they have not yet been officially passed by Parliament, they are expected to be and it’s proposed the changes will be introduced in the 2019-20 tax year.

On top of all the tax changes, there’s the implementation of the Healthy Homes minimum standards and the coming reform of tenancy law. It still all adds up to an ongoing climate of change.

One which investors need to be informed about and ready to adapt to. As ever, it’s our job to help our readers with that – by providing content that educates, inspires, and suggests new paths. So, in this month’s issue, we take a look at new builds and outline the reasons why they are currently a good option for investors. These include better access to lending and a lower compliance burden, which are attractive right now.

We also see part of our role as bolstering the morale of investors, especially given the high degree of unwarranted antipathy around. To this end, high-profile investor Graeme Fowler contributes an article to this issue, which confronts and dispels some of the popular misconceptions about investors.

Enjoy reading these articles, along with the rest of this month’s content, and be prepared to tackle the new environment.

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