Government Creates Retirement Tax
A new bill that proposes to impose taxation on capital gains from offshore investment will hurt many existing and future retirees.
This move will tax 85% of all capital gains earned by direct investors from offshore equity investments. Investors can elect a maximum taxable capital gains income of 5% in any one year, but the balance capital gain income will be carried forward to accumulate until the investments are sold and the funds repatriated.
This means those near or reaching retirement will be stung with substantial, accumulated tax liabilities when they start to sell down their offshore holdings either to spend the capital or to re-invest in more secure income producing investments.
John Commins, General Manager of Equity Investment Advisers & Sharebrokers Ltd says, "Prudent investors who have saved for their retirement and diversified their risk by investing offshore will be penalised. As they become more conservative and sell their offshore investments and increase their fixed interest investments they will be required to pay more tax at the very time when they can least afford it".
"The bill is poor policy from a government that is supposedly trying to encourage people to save for their retirement and increase personal savings generally," says Commins. "It is in stark contrast with Australia which will make payouts from superannuation schemes tax free from 1st July 2007. This is in addition to Australian tax deductions for investment in personal super schemes."