17 November 2011

Capital Gains Tax bad for NZ businesses, say business brokers

‘Labour’s bid to kill Kiwi entrepreneurial spirit’

The introduction of Capital Gains Tax into New Zealand could shatter the future retirement plans of a significant proportion of business owners, warns leading business broker, Switch Business.

Director at Switch Business David Newport said that with many ‘baby boomer’ business owners approaching retirement age, New Zealand could see a flurry of business sales if the tax was introduced.

“If Labour wins the election, my advice for anyone even considering selling up or retiring would be to do it immediately, because the Capital Gains Tax they are proposing would devalue any future growth in New Zealand businesses by at least 15 per cent ,” he said

“To propose its introduction, at a time when many New Zealand businesses have not been lower in value since the ’87 crash, seems to me a bid to kill the Kiwi entrepreneurial spirit.”

Mr Newport said that many business owners view their businesses as their retirement fund, and have witnessed the erosion of their value in recent years thanks to a poor economic climate.

“A Capital Gains Tax would just erode them further,” he said.

Mr Newport also said that Labour’s ‘concession’ for small business owners for assets up to $250,000 would have little benefit as the criteria is too restrictive, and the future implications of the tax would automatically devalue the business.

“Potential business buyers generally aim to grow the profit and value of their purchase and they would have to take into account that 15 per cent of that growth will be going into the Government’s pocket and not their own, or their children’s.,” he said.

“Business owners often risk everything they own for their business venture, including the family home. Our economy relies on business owners continuing to take that risk, and yes a Capital Gains Tax would only penalise those whose risk paid off.”

His advice to business owners contemplating a vote for Labour or the Greens was to take the Capital Gains Tax proposal into serious consideration.

“This is not just about your business, but the business you’d hoped to pass to your children as well.”

David Newport is a director at business brokers Switch Business.

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