Change capital gains tax laws, experts warn

The proposal, unveiled by Finance Minister Michael Cullen in May's Budget, puts a capital gains tax on overseas investments, including the $3 billion in Australian shares owned by Kiwi households in the likes of Westpac, ANZ and AMP.

Add to that a further $2.5b held by Kiwis in British and American shares and National's deputy leader, John Key, thinks it could become an election issue.

If National was voted in at the next election the proposal would be binned, he said, as would Dr Cullen's KiwiSaver scheme.

The capital gains tax proposal is part of a shake-up of taxation on investments here and overseas, but tax experts say the proposed rules would be too complex for the average investor.

John Shewan, of PriceWaterhouseCoopers, said many investors would fall foul of IRD penalties because they would not realise, for example, that an AMP shareholding listed on the NZX market was an overseas investment.

And even Treasury officials have admitted that the calculations investors would be required to do to ensure they paid enough tax would be tough.

Under the proposed tax rules, overseas investments would be taxed on 100% of their capital gains. Income from them is already taxed at the investor's marginal rate.

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