PHOTO: Over 20 years, a bach initially worth $400,000 would attract capital gains tax of $194,000 simply in inflationary gains. (File photo)
OPINION: It seems all but certain that, early next year, the Tax Working Group will advise the Government to adopt a capital gains tax.
The idea is that you should pay tax on the wealth you gain as your property and investments become more valuable. At face value, it’s a simple, compelling idea.
Unfortunately, there are spanners in the works – perhaps the gnarliest being the question of inflation.
Each year we get richer on paper, even when in real terms our buying power remains the same. The paper value of an asset tends to increase by about 2 per cent each year, regardless of any real increase in value.
READ MORE:
* Tax plan for baches will rob Kiwis of their dream
* How a capital gains tax could affect you
* ‘Bach tax’ pushing ordinary Kiwis into a corner – MP
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