ANNOUNCEMENTS! Capital Gains Tax off the Table // Phase 2 of Overseas Investment Act
Debated for years and just like that, axed! A lack of public support and non-consensus within Cabinet has seen Capital Gains Tax (CGT) wiped off the table. The CGT campaign has been heavily on the agenda for three elections and a ‘wait and see’ approach has been influencing the decision making of investors for months. While it’s surprising that a CGT ‘lite’ version hasn’t been explored, Viranda is certainly in favour of the announced decision.
“The proposed CGT had the ability to put the handbrake on commercial property sales and penalise property upgrades. Less funds available would have discouraged investment and innovation, not to mention a whole raft of new complexities and expenses that come along with any new tax.
This is a welcome decision from government and will provide confidence for investors to continue participating in the New Zealand markets,” says Oliver Wills, Director – Commercial Property, Viranda
Growth of our economy requires investment – local and overseas. So, off the back of this news, Government also launched its public consultation document on the ‘second phase’ of its Overseas Investment Act 2005 reforms.
The reform aims to achieve a balance between supporting high-quality investment and ensuring governments have flexibility to manage any risks arising from overseas investment.
On the agenda this round includes a focus on keeping our nation an appealing destination for overseas investment by (a) reducing unnecessary complexity and ensuring compliance costs are in balance with the risks of the investment, and (b) looking at ways to better ensure that overseas investment is consistent with NZ’s national interest.
The key areas that Government are looking at include:
What assets require consent? Treasury is reviewing whether it is appropriate to continue classifying land that adjoins land with sensitive characteristics as “sensitive” and whether the three-year lease threshold for a relevant “interest” in sensitive land is too low.
Who needs consent? To improve the Act’s efficiency, the definition of “overseas person” is being reviewed.
How the Act screens investments in sensitive assets. The “investor test” may be amended by reviewing the scope of the good character assessment (e.g. introducing a bright-line checklist style assessment) and potentially removing the requirement for New Zealanders to satisfy the test.
Full details about the proposed changes can be found here and by all means do get in touch if you would like to discuss the possible implications for you. Viranda is immersed in these topics on a daily basis and is here to protect and provide the best opportunities for you.