A Capital Gains Tax would reduce retirement savings for an average earner’s KiwiSaver by $64,000 over the course of their working life, making a nonsense of the Prime Minister’s claim that her tax plans are about fairness, Leader of the Opposition Simon Bridges says.
“This literally poses a $64,000 question because that’s about the same as the average annual wage. Would the ordinary Kiwi be happy to work an extra year when their retirement is in sight?
“The Government’s tax scheming is a direct attack on the incomes and assets of everyday Kiwis. They want to tax your savings. The Government should be protecting the nest egg that many New Zealanders are building up for their retirement not taxing it more.
“Under the Working Group’s proposal, if the value of the New Zealand and Australian shares in their scheme rises it will be taxed – even if the shares aren’t actually sold. It would discourage people from saving and stop them investing in anything except the family home.
“This is the last thing New Zealand needs – a tax that encourages people to hide more of their money in the family home, where capital gains will be tax-free, instead of saving or investing in more productive parts of the economy.
“The estimated $64,000 reduction in value assumes a 45-year working life and is based on 15 per cent of a ‘balanced’ KiwiSaver fund being in Australasian shares, which would be taxed on an accrual basis on total annual gains. It also assumes the minimum employer and employee contribution rates.
“For anyone making more than the minimum contribution it would be worse. At 4 per cent, the value at retirement is reduced by $74,000 and at 8 per cent it widens to $113,000. The more you save, the more you pay. We haven’t included the possible offsets because the Government hasn’t committed to them and in a whole package of changes, they may not lead to revenue neutrality.
“Most New Zealanders would be caught by the tax because almost 3 million of us have KiwiSaver and some will also be hit through owning a family bach or a lifestyle block.
“The Prime Minister says this is about making sure Kiwis pay their fair share as well as getting a fair go. But there’s nothing fair about being taxed on your retirement savings or being discouraged from any investment except the family home.
“National will fight the Government’s proposed tax grab every step of the way. We will repeal a Capital Gains Tax and we will not introduce any new taxes in our first term. National believes New Zealanders should keep more of what they earn and don’t need ever more ways to be parted from their hard-earned dollars.”
NB: 3% wage growth is used, as of HYEFU (Dec 2018) the Treasury is forecasting annual wage growth over the next 5 years of 3.1%, 3.3%, 3.5%, 3.4% and 3.5%. Therefore 3% appears conservative based on current short-term forecasts.