Govt came close to changing capital gains tax rules on property

The papers show ministers ruled out a capital gains tax, a land tax, and the risk free rate of return tax on rental housing relatively early in the piece - indeed, a Cabinet paper the day the working group released its report ruled out those three options.

But "bright lining" the existing provisions in the Income Tax Act underwent a considerable amount of work before being abandoned.

The papers show the Treasury was quite keen on the idea: the Inland Revenue Department opposed it.

The proposal was that any property sold within five years of purchase be taxed on its capital gain, thus sidestepping the current requirement in the law that the Inland Revenue Department prove the taxpayer intended to sell the property for a capital gain.