Green co-leader Chlöe Swarbrick has been questioned about how soon inheritance tax would have to be paid under their proposed policy, and what would happen with any inherited second or investment properties.
Entitled 'A Tax System for All of Us', yesterday the party annoucned a proposed wealth tax on net assets above $10 million and income tax changes it said would result in a tax cut for 96% of New Zealanders.
The policy would tax net assets — including property, shares, and bonds — above $10 million at 2.5%, with the family home exempt.
Additionally, the party wanted to introduce a revived inheritance tax charging 33% on inheritances received worth over $1 million.
Small gifts, family homes and farms were exempt, and it would be the person receiving the inheritance or gift who would pay the tax — not the estate or the person passing it on.
Speaking to Breakfast's Tova O'Brien, Swarbrick answered questions about the specifics of the "seven major changes that are in our policy package".
Speaking to Breakfast's Tova O'Brien, Swarbrick answered questions about the specifics of the "seven major changes that are in our policy package". (Source: Breakfast)
"There's really only three options for us. Either we fix the tax system, and I think right now, when you have a situation where plenty of domestic research has told us that the wealthiest people in this country pay $9 in tax for every $100 they make, while a teacher, nurse, the average New Zealander, pays $22 on every $100, that is fundamentally unfair, but it is also robbing us of the investment necessary and fixing the infrastructure that all of us rely on," she said.
Asked whether Kiwis would be able to defer the wealth tax until the asset was sold, Swarbrick replied: "Yep."
"So it will be on the realised gains, not on unrealised gains?" O'Brien questioned.
Swarbrick responded: "If the person is not able to pay that out at the point of the wealth tax being due, effectively."
"How does that apply to the inheritance tax as well? Will people have to pay that immediately upon benefiting from an inheritance?" O'Brien asked.
"I believe that all New Zealand children deserve to inherit a country that is going to allow them to realise their potential. Right now, genius is just as likely to be born in a cold, damp, mouldy garage as it is in a mansion, but one in seven New Zealand children are living in poverty," Swarbrick said.
O'Brien cut in: "Will people have to pay immediately upon benefitting from the inheritance?"
Swarbrick said: "Being somebody who is inheriting an excess of a million dollars above the family home, and the family farm? Yes."
O'Brien asked if people would be able to defer payment if their inherited wealth was tied up in assets, such as an investment property or investment fund, that they had been gifted by their parents.
"Again, let's talk about the reality, but around 1000 people of 38,000 inheritances are going to be impacted every single year, so yes, this will be one of those circumstances where I'm sure hypotheticals will come out of the work, but I'm not talking about hypotheticals," Swarbrick said.
O'Brien asked: "If someone inherits an investment property worth $2 million do they immediately have to find $333,000 even though that money is tied up in that property?"
Swarbrick responded: "Congratulations, they are incredibly lucky to be an individual that is inheriting an excess of $2 million."
O'Brien the asked: "They have no cash, do they sell that house? Do they draw down on a mortgage? Do they get a deferred payment? What do they do? How do they pay that figure?"
"Any of those options," Swarbrick answered.
O'Brien asked about a single parent who may be "broke" inheriting this example of a $2 million property and would rather hold on to the property than be forced to sell it to pay for the inheritance tax.
"Let's just come back to the reality that if somebody is inheriting a family home, and an investment property on top of that, the family home is not taxed, and they are getting unearned wealth, to the tune of, for sake of your argument, an extra $2 million dollars," Swarbrick explained.
O'Brien asked: "So, would someone would someone ever be forced to sell an inherited asset to pay the tax?"
"Someone would have to pay their taxes fairly," Swarbrick said. "That is the case with all New Zealanders who have income taxes that they have to pay."
"It is again an excess of the family home and an excess of a million dollars. We are talking about the first million dollars of unearned wealth being acquired in tax-free, we're talking about the family home and the family farm also being able to be passed on.
"So, if somebody is inheriting an excess of the family home and then an extra investment property worth millions of dollars, for sake of your argument, they are incredibly lucky to be doing so, but they're inheriting a lot."
She said she did not want to "deal with these hypothetical examples" as the "tax debate continues to carry on".
"We're also again talking about a few percentage points of a few people on the margins who are inheriting enormous amounts of currently untaxed and unearned wealth."
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