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Labour says grace period 'likely' for capital tax on deceased parent's home

The Labour Party says there will be a "grace period" on the sale of a deceased parent's home before applying capital gains tax to its sale, but exactly how long has yet to be determined.

In response to National Party claims that a deceased parent's home would have to be sold within a month of their death to avoid being caught by Labour's proposed capital gains tax, a Labour spokesman told BusinessDesk by email "there is likely to be a grace period but details such as this will be worked out by the expert panel prior to implementation."

Labour regards the capital gains tax as central to its "economic upgrade" package of reforms because it would discourage speculative residential property investment.

While the tax would not apply to the family home, National has been seeking chinks in the policy, questioning earlier this week whether family homes owned by trusts would be affected and seizing today on comments by Labour leader David Cunliffe in a radio interview yesterday making it clear that a deceased parent's home could attract the tax when sold by its inheritors.

Cunliffe has confirmed that family homes held in trust will not be subject to capital gains tax when sold, but National's finance spokesman, Bill English, said Cunliffe had nominated a one month grace period after a parent's death before the tax would apply to such a property's sale.

"New Zealand families will be distressed to learn that Labour would force them to sell their deceased parents' home within a month of their death or face a punitive capital gains tax," he said, claiming Cunliffe and his finance spokesman, David Parker, had given different answers on the question in different radio interviews.

"The more David Cunliffe tries to explain his complicated capital gains tax, the more he ties himself in knots and confuses New Zealanders," said English.


Comments and questions

These guys are seriously useless. They can't even manage a single policy let along a 4-party coalition of the biggest egos in NZ politics (plus Kim Dotcom in the not so distant background)

What a shambles.

What's seriously useless is National did nothing about the out of control market demand since being in government. Now ordinary Kiwi are priced out of the market.

Just before Key's first term as PM, we were discussing the matter in NZ Political forum's google groups (a fact he personally was aware of and made), and so they had their eyes wide open going into government yet did nothing about it. Here's what Gareth Morgan has to say

I think capital gains doesn't go to the heart of market speculation problem, who have enjoyed tax free gains for many years. They simply are paying any share for their gain. Gareth Morgan's also published his book "The Big Kahuna" where he specifically addresses all the problems New Zealand faces. In it he also outlines his CCT scheme, or comprehensive capital tax scheme.

What a load of drivel. So now the governent can and should control property demand? The property boom was caused by cheap capital and the fact that particularly in Auckland and Christchurch land availability is limited but the population is growing. What would you have the government do, legislate that more land should be created? Or perhaps they should artificially raise interest rates and destroy NZ's international competitiveness as a result of the massive jump in the exchange rate such a move would cause.
Affordability is an issue facing governments all over the world, you only need to look at Vancouver, Hong Kong or Sydney to realise that this is a problem not exclusive to New Zealand. To try and park this solely at the door of the National party when there are any number of governments struggling with the same issues is just cheap political point scoring.
Your comment about market speculation is also incorrect, both National and Labour funded significant increases in IRD expenditure to clamp down on that very activity through the existing CGT legislation. The myth that there are uncontrolled hoardes of property speculators making massive untaxed profits buying and selling housing is an urban legend perpetuated by the left because it fits their envy politics narrative. Also, your Morgan article specific states any CGT should target owner-occupiers as well. So that would be the 60 to 70% of the housing market Labours policy specifically excludes. Are you happy to hand over 15% of the value of your family home to the government rather than your children when you sell it? I, for one am not, but knock yourself out and write the cheque to the IRD if you think that's a good idea.
Obviously all housing should be returned to state control and people should form an orderly queue to apply to buy state constructed housing at a price fixed by central government - yeah right.

CGT works nowhere in the world to quell property values.

Here we go.. first sign of controversy, or popularity issues and out comes loophole after loophole which will make the whole thing a bureaucratic nonsense.
It was already watered down to begin with, but now it will get so weak by trying not to step on any toes they might as well shelve it.
This is why the property market is what it is because the parties don't want to upset any potential voters.
If they wanted to deal with the property issue properly they would bring out a land tax, end of story.
And to Edward property prices exploded under the last Labour govt so they were as seriously useless as National has been in dealing with the property market.

Agreed they are hopeless. Just read the exemptions in this morning's Herald. Anyone with half a brain could angle to avoid any CGT under Labour. Their policy is pointless and seriously flawed.

Ummm here is some policy on capital gains tax, oh not sure its on the family home, oh yes it is if parents die and kids sell, oh they will need time, ok we will give them a month, not long enough oh then lets decide later.
What a bunch of no hopers and these are the people & you wish to let them run our country, in-conjunction with the Greens as my sainted aunt used to say, God help us all

The CGT has been Labour policy for 4 years now and they are still struggling with the detail. But just trust them they'll sort it out after the election!

and heaven help us all. What else do they have up their sleeves we don't know about?

It was hardly National's claims that a sale would have to eventuate within a month to avoid the CGT. It was Cunliffe himself that claimed that when speaking to Larry Wiliams on newstalkzb yesterday. He said it then repeated it when queried.

It was hardly National's claims that a sale would have to eventuate within a month to avoid the CGT. It was Cunliffe himself that claimed that when speaking to Larry Wiliams on newstalkzb yesterday. He said it then repeated it when queried.

What this CGT debacle shows is how utterly driven by sentiment of the last 24 hours Labour are. With 4 years of planning the policy and it's designers had loads of time to do their sums. Their surpluses are based on this policy, so now every time they react to another sensible question which was not anticipated by the two David's their finances are changed for the worse. How can the two David's possibly run a country when they motify a policy built over four years every 15 minutes. A complicated tax is a tax that delivers little, encourages schemes to circumvent, creates no value for society.

The labour envy tax is a winner for National, it (the policy) will fester from now till Election Day as more "what about this situation" questions arise, and fobbing off to an expert panel does not wash. Why would we believe the David's expert panel, the fact is the CGT is a can of worms and the rules to keep Labours constituents on side will allow the rest of us to drive a bus through the loop holes. The result of which is a Tax Regime that delivers no tax, just more revenue for lawyers accountants and valuers.

"Expert Panel" = Norman, Hare, Parker and a small army of sycophantic bureaucrats making work for each other to justify the committee's existence.

Whale says it best yesterday...

"According to REINZ there are around 6000 residential house sales every month.

Even in the unlikely event the “expert panel met every day in the month they would still have 200 sales to review each and every day. Working on 20 working days per month that would actually be 300 sales to review.

Labour’s capital gains tax will drown the bureaucracy in paper work, and slow down sales int he market significantly…

Yeah - but think of the job creation within all the committees of panel experts on CGT.

Labour will reduce unemployment so much - they'll need rely on immigration to fill all the vacancies...

Can't sell ANYTHING until probate is issued, and good luck making that happen within a month of decease.

And grievin' can wait...

case: Public Trust freeze assets for 6 months due to risk of will being contested.

So that's why David Cunliffe has been practicing all the double speak for the last several months, talking out both sides of his mouth at once trying to explain all the other half-baked policies - it was all practice leading up to their CGT.

...and despite all that practice and his close input into the policy... he still can't articulate its simplicity and ease of implementation.

Labour - it's not too late to bring back Shearer ya know.

Although it would adversely affect me if NZers decide they should have a CGT tax, and there are good arguments for one, we would be better to follow the example of the introduction of GST and make it comprehensive, including the family home, and have a major reduction in all income tax rates. Otherwise what we have seen in the last few days from Labour while just be a prelude for what will happen after its introduction.

Yeah, details should be worked out as the law works through parliament (how novel!). What's important is that a CGT has its merits.

On paper yes, a CGT has some minor merit, but in practice, no it has none, as it's just too complicated to make it work efficiently.

Wont affect anyone. The current proposal can be sidestepped with no great effort.

A bunch of rapacious deadbeats should keep their filthy mitts outta family assets.

Please NZ - don't let these guys and their mates anywhere near government.
They've only been working on their CGT for 4 years, it's unreasonable to expect that they would have sorted all the details in such a short time frame.

What a shambles. So when your parent or parents die, all Labour cares about is that you sell the family home otherwise they are going to tax you.

It's only a small step from here before Labour introduces Death Duties. There is no end to their belief that what is yours and your families, what you have built up over a lifetime, belongs to them.

It is worse than that. Internet Mana has an inheritance tax as part of its policy manifesto (but not on communally owned Iwi land of course).Vote Labour for a CGT get an Inheritance tax for free.

Hang on. What about the gifting to trust loophole? Oh, get rid of that too? So, how will the new legislation treat past gifts? Retrospective? Mad rush to gift before change of legislation? The mind boggles.

Parker & Cunliffe are morons !
Labour was a flake of a party up until last week, but they had a chance due to the old habitual voter base who always vote labour just like ma & pa. Now they have committed suicide simply due to a new tax that is death duties in disguise guaranteed to hit every hard working kiwi rich and poor.
No room now for a swinging protest vote against smarmy Key & Brownlee, Barry & Findlayson (incl so many others). Cannot risk Labour getting any its back to Nats for a party vote. Make me want to puke.

I've never voted labour but will this time. As a lower middle income worker there's nothing in the election for me from either side but Key and his twisted mates have to go

OMG, really??? You'd vote for a party with half baked policies because you don't like some dodgy dealingsby ano ther party?
Best you look elsewhere then, unless of course you wish to overlook all other parties dirty dealings such as labour's n-bomb tactics in 2008 and Winnie's Owengate scandal.....

That's a fairly limited view of the potential damage Lab/Grn could do to the economy.

Labour needs to issue a clear statement as to how a CGT would work in various likely scenarios;this should not be too difficult.
And as long as they don't the confusion surrounding this matter (ably stirred by Key and co) will continue.

Agree. Labour would have better served by implementing a comprehensive CGT (similar to GST) where everything including the family house is captured, and then if they wanted to appease their voters they apply a tax scale as for income tax.

Hi Patrick - can you see if you can clarify one other area of contention - capital gains tax on kiwisaver. Parker has said no tax on withdrawal of kiwisaver. But what about the funds themselves - will they be paying CGT internally on NZ and AU share, bonds etc which are currently exempt? How will CGT interact with FIF?

Another area where labour has a polocy "wish list" rather than a policy is NZ Power. The policy document is so vauge it says things like that returns for generators will be based on capital cost MAYBE adjusted for inflation. So for the waitaki dam built 80 odd years ago is may be 10,000 pounds or whatever small amount it was (or is maybe 500 million or whatever the inflation adjusted amount is! Just unbelievable that you can have years and years to develop what would be major reform/revolution and not spend more time on how you would actually do it..

The CGT will drive behaviour to keep family homes and build these up like castles. Labour will not get any tax intake at all. A load of rubbish policy. Better to build more houses and speed this up.