CGT exemption comes early for in­vestors

The Irish Times - Business - - NEWS -

Christ­mas is set to come early for canny prop­erty in­vestors on the back of a mea­sure in Tues­day’s bud­get which has brought for­ward the date prop­erty in­vestors can ex­er­cise a cap­i­tal gains tax exemption.

It’s a mea­sure that may not have re­ceived too much hoopla, but may yet have a sig­nif­i­cant im­pact both on sup­ply of prop­erty and on the pock­ets of bust-era in­vestors.

The CGT exemption was first in­tro­duced on both res­i­den­tial and com­mer­cial prop­erty back in the dark days of De­cem­ber 2011 to stim­u­late ac­tiv­ity in the be­lea­guered prop­erty sec­tor. At the time, it was in freefall in the af­ter­math of the fi­nan­cial crash. The re­lief was avail­able to both companies and in­di­vid­u­als, from De­cem­ber 2011 un­til end-2013, a date that was sub­se­quently ex­tended by then min­is­ter for fi­nance Michael Noo­nan to the end of 2014, when he shut it down.

At the time, prices had halved from an April 2007 high, ac­cord­ing to the prop­erty price in­dex from the Cen­tral Sta­tis­tics Of­fice, and in­vestors were thin on the ground. The car­rot from the gov­ern­ment in Bud­get 2012 was a cap­i­tal gains tax holiday; the only caveat was that in­vestors had to hold on to the prop­erty for at least seven years. And, as fig­ures from the prop­erty price reg­is­ter show, in­vestors rushed in by year-end 2014 to avail of the exemption.

Now the Gov­ern­ment is try­ing to re­verse its original pol­icy. It now wants them to sell, but even the ear­li­est in­vestors in this scheme were locked in to the end of 2018. Hence the new early-re­lease date al­low­ing these prop­er­ties to be sold after four years of own­er­ship.

And, as prices have surged in re­cent years, these in­vestors are sit­ting on sig­nif­i­cant gains. For ex­am­ple, an in­vestor in Dublin city would have paid a mean price of €279,040 back in De­cem­ber 2011; to­day that has soared to €402,453. The €123,413 gain would or­di­nar­ily be sub­ject to CGT at 33 per cent. How­ever, thanks to the bud­get de­ci­sion, in­vestors can bring their prop­er­ties to market now and ben­e­fit from a €40,726 wind­fall.

But if the Gov­ern­ment is to lose on one hand, it will gain on the other; its de­ci­sion to up stamp duty on com­mer­cial prop­erty trans­ac­tions means the State’s cof­fers too will ben­e­fit from an uptick in trans­ac­tions.

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