Tax Working Group report in a nutshell

Here's a breakdown of what the Tax Working Group (TWG) has recommended.

Capital Gains Tax (CGT)

  • TWG recommends a CGT on all gains and losses on land and improvements (except the family home), including shares and business assets
  • The tax would not apply to personal items, like bikes, boats and art
  • Capital gains would be lumped in with personal income, so gains or losses would be added or subtracted from wages to take a person to their tax bracket
  • Gains would be taxed when the asset is sold
  • Gains would be calculated from the date the new law was implemented

Capital gains example provided by the TWG: "Wiremu bought some shares for $40,000 after the new rules had been introduced. A few years later, he sold them for $50,000. That's a capital gain of $10,000. Wiremu also earns $48,000 in wages, so his total income in the year he sold the shares is $58,000. Wiremu's employer would have already sorted the tax on his wages, paying $7420 to Inland Revenue.

"At today's rates, his extra $10,000 would be taxed at 30%. Wiremu will have $3000 more tax to pay, because of the gain from the shares, for a total tax bill of $10,420.

"That's exactly the same as someone who earned $58,000 just in wages."

Environment

  • TWG recommends a pricier Emissions Trading Scheme (ETS)
  • The group wants the ETS it to be "more 'tax-like'... providing greater guidance on price and auctioning emissions units to raise revenue"
  • It recommends that all emissions face a price, including agriculture
  • An increase on tax on water pollution has been proposed
  • In order to accurately tax water pollution, it recommends better tools to measure water pollution
  • It also supports congestion tax reviews by Auckland Council and the Government

Tax cuts

  • Nearly every earner's income tax would change under TWG recommendations
  • Low income workers would be affected the most
  • It recommends the bottom income tax threshold be increased from $14k to $20-$22.5k. The rate would continue to be be 10.5 percent on that bracket of income
  • That would be coupled with an increase in benefit payments
  • It recommends increasing the rate at which earners in the second income tax bracket are taxed
  • Working for Families could be used to offset the increase for those in the second tax bracket
  • To encourage saving, TWG recommends refunding tax paid on KiwiSaver contributors who earn less than $48,000/year and cutting KiwiSaver tax rates for low and middle income earners
  • No tax cut for businesses

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