Recommended NZ | Guide to Money | Gimme: Competitions - Giveaways

Tax Working Group release interim report regarding Capital Gains Tax

Contributor:
Fuseworks Media
Fuseworks Media

With the Tax Working Group (TWG) releasing their interim report, there were three key issues arising from it that Tony Marshall, tax advisory partner for Crowe Horwath, believes will have a wide-reaching impact on farming in New Zealand for decades to come.

As promised during the election campaign, the government formed a Tax Working Group to examine further improvements in the structure, fairness and balance of the tax system. One area of focus of the group has been whether New Zealand needs a capital gains tax (CGT). CGT has always been a contentious topic and sends nervous tension through the farming community however it was not the only issue arising from their findings for the farming community.

CGT is leading the headlines however issues around environmental taxes and existing deductions for development expenditure are equally as important and need to be addressed," Marshall states.

"Emissions for farming is something that needs to be addressed at the farm gate, not at the processor level, to provide farmers with the opportunity to reduce and mitigate their own emissions. If emission are levied at the processor level it is really just another tax. With the Emissions Trading Scheme (ETS) already established the framework for this regime has already been laid out and can easily be applied to agriculture when it comes into the ETS," Marshall explains.

Marshall also warns of the implications for future generations of farmers if a CGT goes ahead without very careful examination of how and when rollover relief would apply. "If a CGT is to be paid on an asset being transferred from one generation to the next, it would create a significant hole in any cash required to complete the deal. This would encourage farmers to defer the sale, until they pass, so it can then be inherited". An inheritance tax has been specifically ruled out in the TWG terms of reference.

With a number of implications, and complexities ahead of the government to implement a CGT and/or environmental taxes, Marshall urges the Government to consider the effect this could have in the decades to come on what remains the backbone of New Zealand’s economy.

All articles and comments on Voxy.co.nz have been submitted by our community of users. Please notify us through our contact form if you believe an item on this site breaches our community guidelines.