'Bold' NZ prescription to be revealed

Labour leader Phil Goff. Photo / Sarah Ivey

Labour hopes to swing public opinion behind its capital gains tax plan by including an exemption for hundreds of thousands of tradespeople and small owner-operated businesses.

And it is understood there will be a five-year moratorium on the tax applying to gains from the sale of residential and commercial property in earthquake-stricken Christchurch.

The exemptions come on top of those already leaked out in advance of today's launch of Labour's economic policy, which is being touted as a "bold" prescription for lifting New Zealand's economic game.

Other exemptions will include the family home and inherited assets, while dollar thresholds will be set before gains on the sale of other personal assets are subject to the otherwise broad-based tax, expected to be set at a rate of 15 per cent.

As part of its pledge to leave the great majority of people better off as a result of its overall tax changes, Labour will exempt the first $250,000 in gains from the sale of small business assets to protect those who have invested in their enterprises as a means of saving for their retirement.

The owner will have to be above a certain age - probably 55 - have owned the business for 15 years and still be working in it. The exemption would benefit the 324,000 sole owner-operator enterprises that make up nearly 70 per cent of all businesses.

More than 90 per cent of all New Zealand businesses have fewer than 10 employees, but it was not clear last night how Labour was defining what qualified as a "small business".

A panel of tax experts will be invited to resolve the complex issues involved in constructing a viable and loophole-free capital gains tax.

That means such a tax is unlikely to take effect before October next year at the earliest should Labour win this November's election.

Under other tax changes, the first $5000 of income would be tax free, and the top tax rate will move back to 39c in every dollar above $120,000. At present, it's 33c above $70,000.

It is understood Labour's private polling suggests most New Zealanders disapprove of a capital gains tax. However, they are far more supportive when the tax is contrasted with National's preference for state asset sales as a means of reducing debt.

Labour leader Phil Goff yesterday maintained his stance of not commenting in detail on the economic package ahead of today's launch.

He said the "bold decisions" were not focused simply on the election "but what this country needs long term".

"That policy will enable us to pay down our debt, it will leave almost 80 per cent of New Zealanders much better off and it will enable us to keep our (publicly owned) assets."