Move to tax every cent of earnings

[ocelad]

Interesting article re the potential removal of the tax-free threshhold:

http://www.smh.com.au/articles/2004/03/18/1079199365133.html

Cheers

ocelad

[Aceyducey]

And it's Labour talking about it, not the Liberals ;)

Punish the lowest income earners so that the middle class can get tax relief....hmmm not traditional Labour is it? Oh small businesses will be hurt as well - that's alright then!

But as I suspect the aim is to move brackets not reduce tax rates.

If Howard is confident he'll lose the election his best best is to reduce tax rates...then Labour will be in the bad guy position and have to raise them again ;)

Cheers,

Aceyducey

[Thommo]

You're not suggesting John would sabotage the budget and pass on a poisoned chalice?

I thought he was doing that last time before the MV Tampa allowed him to pull off an unlikely victory.

T

[JumJones]

How many people agree that the current status of the RE market is that of a "tax-driven property bubble"??

Tax driven?

Who here invests for tax reasons?

I'd say its more greed driven.

[Aceyducey]

How many people agree that the current status of the RE market is that of a "tax-driven property bubble"??

I'd say its more greed driven.
I don't believe it's tax-driven...Negative gearing provisions have been around for a long time (excluding 1985-87)...people could buy in for tax benefits at any time.

Greed-driven - well partially....people have seen the huge property CG over the past few years & a few greedy souls who haven't realised that the market has turned may still be buying in.

Possibly right now the market is more fear-driven.....
Gen-Xers don't want to end up like their folks and baby boomers are looking at a poor retirement & more are taking their futures into their own hands (often nagged into it by their children who are more financially savvy or afraid of having to support their folks).

However right now in many places people simply aren't buying....so on balance I'd call it a cautious market with slight bearish tendencies (due to media influences).

Cheers,

Aceyducey

[Corsa]

Greed-driven - well partially....people have seen the huge property CG over the past few years & a few greedy souls who haven't realised that the market has turned may still be buying in.

Possibly right now the market is more fear-driven.....
Gen-Xers don't want to end up like their folks and baby boomers are looking at a poor retirement & more are taking their futures into their own hands (often nagged into it by their children who are more financially savvy or afraid of having to support their folks).

Acey..so if I settled on a property last Friday, and hence would meet the definition you have described above "a few greedy souls who havent realised that the market has turned may still be buying in.."

Does that make me greedy?

I would agree that the focus on the article is more about shifting the brackets and thereby spreading the taxes across more people rather than a few in the middle and high brackets.

But the article also picked up on another point being:

"The current tax system is producing major disincentives and distortions, including a massive and flourishing cash economy, a brain drain and a tax-driven property bubble," said the report's author, Professor Geoffrey Walker, of the University of Queensland.

At the end of the day, we are currently losing a lot of smart people in Australia who go offshore in search of better tax benefits, that is a reality.

Fear driven?...

With a self funded retirement the only way to go, it is just becoming part of the norm that investing for your future is something that people need to do. That includes investment across many asset classes that deliver growth and income benefits in conjunction with tax benefits. It is ok to factor in tax benefits to an investment decision, which then technically make it a tax factored decision.

I think Fear and Greed are not necessarily the terms that I would use but rather Smart and Realistic.

[Aceyducey]

Acey..so if I settled on a property last Friday, and hence would meet the definition you have described above "a few greedy souls who havent realised that the market has turned may still be buying in.."

Does that make me greedy?Corsa,

I think you should be addressing your reply to Jum Jones not me :)

I didn't say that everyone buying property right now is acting out of greed, I'm just saying that there may be a few people still doing it out of greed. If so, these people are ignoring a lot of responsible advice.

I don't see experienced investors falling into this type of group. Rather they are being highly selective in their purchases.

And frankly I don't know anyone who's gone overseas for 'tax benefits'. For more money, better prospects, improved working conditions & a sense of adventure yes....but tax benefits - I doubt it! :)

Cheers,

Aceyducey

[Corsa]

Hi Acey

No this part of the post was addressed to you, I felt that your comment that a few greedy people may still be buying in was finite, and since I am currently buying in, and still intend to buy in, my question was "does that make me greedy?" Do I not realise the market has turned?

The clarification you have provided is ok though.

Corsa,
I think you should be addressing your reply to Jum Jones not me :)

I didn't say that everyone buying property right now is acting out of greed, I'm just saying that there may be a few people still doing it out of greed. If so, these people are ignoring a lot of responsible advice.

And your comment:

And frankly I don't know anyone who's gone overseas for 'tax benefits'. For more money, better prospects, improved working conditions & a sense of adventure yes....but tax benefits - I doubt it! :)

I have just done a random poll around the office, plenty of people in high paying jobs go overseas for tax benefits including places like Dubai, Bangalore, and India where they offer ridiculous salaries with ridiculous benefits and even more ridiculous tax shields. Just because you have dont know anyone, doesnt mean that it doesnt happen :cool:

In general, the whole post was addressed to Jum Jones, other respondants, and other readers.

I hope that by stating my opinion on your post and the set of posts that this is ok? :)

Cheers

Corsa

[Aceyducey]

I hope that by stating my opinion on your post and the set of posts that this is ok? :) Always Corsa :)

I would still maintain that the people around your office would be more interested in working overseas because of the 'ridiculous salaries with ridiculous benefits' rather than the tax shield bit of it.

This is partly on having done it myself & meeting a lot of people who were doing it at that time & subsequently :)

Here's another thought for your workmates. I know several people who have gone overseas to do community service work in 3rd world countries...they get paid barely anything (not even a living wage), but they don't have to pay tax at all!

Maybe you should suggest this idea to those people in your office. If the tax shield part is the most important to them they'd probably jump at this opportunity to avoid paying tax altogether.

The other question to ask them - is why aren't they overseas reaping the benefits already :)

Cheers,

Aceyducey

[Sim]

Corsa - you are not buying in Sydney or Melbourne are you ?

[Kristine..]

And frankly I don't know anyone who's gone overseas for 'tax benefits'. For more money, better prospects, improved working conditions & a sense of adventure yes....but tax benefits - I doubt it! :)Aceyducey


Hi

I received this email from a close friend in England this week, following her two week holiday in America where she stayed with relatives:

..."The life style in America is oh so very different from ours. They work very
long hours and get very little holiday (10 working days per year) if any.
My nephew works on commission alone and although he is doing quite well
financially, he is out of the house from 0630 until 1930 and gets no paid
holiday. I think this is really unhealthy as the home/work balance is so
lop-sided. Is it any wonder they eat nothing but fast food, gulp down
Starbucks coffee and get stressed?..."

Mind you, in England fully employed people get 25 days paid annual leave and 8 (or 10?) public holidays. I'm not sure about sick leave and there is no long service leave.

In Australia we get 20 days paid annual leave, 13 public holidays, a minimum of 5 sick days per year, and cumulative long service leave.

We also have one of the lowest tax rates in the world (approx 32c/$ averaged over $100,000 per annum), and one of the best education and health care systems, plus welfare benefits such as invalid, unemployment etc

You get what you pay for. We pay reasonable taxes and we get exemplary benefits.


Regarding the market:

Loan approvals have dropped dramatically. However, only a proportion of property sales involve finance. Don't be fooled by statistics. think of all those Lines of Credit and ordinary mortgages out there with undrawn balances. Purchases funded by these existing arrangements will not show up in the statistics.

Purchase information takes a while to filter into data, in Victoria accurate information can be six months old before publication. We really won't know how 2004 has travelled until about this time in 2005.

Now is always the right time to buy. No. 1 son settled two weeks ago, and we consider it a fair purchase. However, this is the longest any of our properties have been vacant, and although we needed to do a bit of work on the place and it isn't a problem, two weeks without an application is unusual.

I concede that the market has slowed, but by no stretch of the imagination has it dropped or crashed or plummeted. It needed a correction and perhaps this is it.

Cheers

Kristine

Edit

correcting a couple of typos

[always_learning]

...
It needed a correction and perhaps this is it.


Paraphrasing a treasurer of 10 years ago: "The correction we had to have!" :D

[Kristine..]

Hi AL

Yes, I remember those days well!

But as I have mentioned previously (probably numerous times!!) I bought my first business in 1989 and 'happily' paid 24.25% interest on my Better Business Loan.

However, a market correction - whether up or sideways or even down - is part of the natural ebb and flow of economies. Even within markets there will always be movement - suburbs become fashionable, lose popularity, suddenly have new housing estates which create a higher median but perhaps make it harder to sell the older, existing housing stock which then becomes cheaper by comparison, etc etc

The Recession We Had To Have was blood letting the economy. The operation was a success but the patient died?!

However, provided we all don't succumb to the next influenza epidemic which is around the corner (according to Acey) then we shall all move to the next stage of the cycle 'remembering' this stage just as fondly as we remember 1989 - 1994.

Aaah, those were the days!

[Corsa]

Always Corsa :)

I would still maintain that the people around your office would be more interested in working overseas because of the 'ridiculous salaries with ridiculous benefits' rather than the tax shield bit of it.

This is partly on having done it myself & meeting a lot of people who were doing it at that time & subsequently :)

Here's another thought for your workmates. I know several people who have gone overseas to do community service work in 3rd world countries...they get paid barely anything (not even a living wage), but they don't have to pay tax at all!

Maybe you should suggest this idea to those people in your office. If the tax shield part is the most important to them they'd probably jump at this opportunity to avoid paying tax altogether.

The other question to ask them - is why aren't they overseas reaping the benefits already :)

Cheers,

Aceyducey

Hi Acey & All

Thank-you for your post Acey, we may be slightly off track the original intention of this post, so I want to apologies for leading us off the track perhaps direct the conversation back to the move by the Government to tax every cent of earnings.

Perhaps the question at hand isnt what motivates people to think that tax cuts are good, but how Government derives it budgetary requirements from each individual and the skew of applicable tax. I read an article in the Fin review this weekend that the Government has asked for ideas on how to reform our already complicated tax system and that to the degree that their requirements are met they would endorse a change in the tax system. It is not necessarily how "much" tax is taken but how the tax is taken from individuals. I would endorse a model that denotes the more you earn the more you are taxed, the more you invest in the economy in all asset classes the more you are shielded from tax. Losing the tax free threshold may not be the answer to continueing with this kind of model.

If people want tax cuts (and lets face it, lots of people complain about the amount of tax they have to pay), then I would say well what sacrifices are we prepared to make in terms of the quality of eduction, transport, community services, etc. Its almost like people want the tax cuts but are also not then prepared to pay more for necessary services which is a paradox.

The last point I would like to address is that some people in my office, yes they are in someways motivated by taxes, they earn significant income and consequentially are in the tax bracket that has to pay the most tax even though they may not necessarily use all the services, but..that is just the way it needs to be. It is not necessarily an ideal outcome to have a proportionately based tax system where the services you use is how you get taxed. That is why a I think that the Government does need to retain tax benefits for investors so that people continue to invest in our economy for its overall benefit and continued strength. To say that investing in the economy is a derivate of "greed" or "fear, is not necessarily the case, it is how we want to align peoples interests.

Your comment "Maybe you should suggest this idea (to travel to 3rd world countries for 0 tax) to those people in your office. If the tax shield part is the most important to them they'd probably jump at this opportunity to avoid paying tax altogether" I dont necessarily see the two as mutually exclusive, as much as there are people in the office who complain about tax (re dont understand the tax system), there are plenty of people who help out in the community, donate salary to third world countries and charities of choice, and go on stints overseas to help out.

Thanks again for replying to my post

Kind regards

Corsa

[Corsa]

Corsa - you are not buying in Sydney or Melbourne are you ?

Hi Sim - No I am not actively buying in Sydney or Melbourne...what is the relevance of this question?

Cheers

Corsa

[Sim]

Just that Acey's comments (and others) may have been related mostly to the state of the market in Sydney, Melbourne and perhaps Canberra - Adelaide and Perth (and to a certain extent Brisbane) have quite some way to go in the current cycle due to always lagging Sydney and Melbourne by quite some months (and sometimes years).