Gains would be treated as income and taxed at the business owner's marginal tax rate.
For example, a mechanic who owns and operates the business has assets including land, buildings and a range of valuable machinery and equipment. They also own any goodwill that is part of the business' brand and reputation. Any increase in the value of all these things would be subject to CGT.
FARMERS
The TWG has recommended land be subject to a CGT.
The farm's family home would be exempt but any home site area over 4500sq m would be subject to a CGT. Increases in livestock herd value would be subject to tax.
Environmental taxes on water uptake and discharge, and pollution have been recommended.
Revenue from the proposed environmental taxes is not included in the $8 billion of revenues the TWG has estimated a CGT would raise over its first five years.
Of this 10 per cent, or $800m, would be contributed by a "rural property" CGT.
Federated Farmers vice-president and dairy farmer Andrew Hoggard says environmental taxes would have the greatest impact on farmers because they will hit "year after year" whereas a CGT will tend to be a one-off tax at the time of the property sale.
KIWISAVER AND DIRECT SHARE INVESTMENT
Gains on Australian and New Zealand shares would be taxed.
In KiwiSaver funds this would be on an accrual basis.
The tax would be calculated daily and paid once a year like the income tax currently is.
To counter the impact of this tax on gains on KiwiSaver members the TWG has proposed the lower prescribed investor rates would be dropped to 5.5 per cent and 12.5 per cent.
It also wants the employer's superannuation contribution tax (ESCT) refunded for KiwiSaver members earning up to $48,000 per annum and clawed back for members who earn between $48k and $70k.
It has proposed increasing the government contribution from 50c per $1 of contribution to 75c per $1 of contribution up to the cap of $1042 a year meaning a member could get a maximum of $781.50 up from $521.
It also wants the government contribution paid to those on parental leave even if they don't contribute.
On direct share investments, the tax would be paid after the shares are sold.
LIFESTYLE BLOCK OWNERS
The TWG proposes a CGT would apply to profit after the sale of residential property and all land and buildings except the family home.
The tax rate would be set at the income-earner's top tax rate, likely to be 33 per cent for most. It is proposed a CGT would apply after April 1, 2021.
Real Estate Institute of New Zealand chief executive Bindi Norwell says if sales of lifestyle properties last year were indicative of a normal year's sales, a similar portion of the market would be likely to have to pay a CGT on the portion of their land that is greater than 4500sq m.
She predicts if a CGT is introduced many lifestyle property owners will sell ahead of 2021.
"Some properties will have been in families a number of years - it'll be heartwrenching."
PROPERTY
The TWG's key recommendations were to tax capital gains made on investment housing, shares, business assets and some intangible assets, but to exempt the family home and certain personal assets such as jewellery and art.
The tax would not apply to past gains in a property's value, but only to the increase after some future "valuation day". As recommended, the tax would be paid at the taxpayer's marginal rate.
Westpac's chief economist Dominick Stephens says: "It would improve housing affordability, lead to a higher rate of home ownership, help remove the heavy skew we have towards land-based investments, and eventually lead to a more diverse national balance sheet. It would also improve incentives to engage in paid work if income tax was reduced."
However, Andrew King, chief executive of the NZ Property Investors' Federation, says landlords are already heavily taxed plus they pay local body rates.
Capital Gains Tax 'unfair' for retirees who saved
Tauranga property investor Sharon Jackson says she's worked hard to get to where she is, and asks why landlords are being targeted.
Jackson owns several properties and felt the proposed implementation of a CGT was "unfair".
"I don't know why they are landlord bashing. You would think they would be happy we are providing accommodation for people," she said.
"It's how they will implement that, that's a concern for me."
Jackson said in 1971 there was a significant government campaign which instructed New Zealanders to start saving as there were concerns there would not be enough funds for a national superannuation scheme in the years to come.
"They really pushed that we needed to provide for ourselves and we heeded that message. Over the 40 or so years since we worked hard and lived prudently and put a bit aside. I don't see why we should be punished for that."
