A national land tax is comming!

[Graemsay]

Daniel, the Henry Report is due out in a couple of months. If an investment property is a meant as a long term play then a little wait isn't going to hurt.

I think that you're being a bit paranoid about land tax rates. The yet-to-be-announced changes will keep taxation at the same sort of levels, and Henry has stated that he thinks that the architecture of the system is about right. So I don't expect any major changes, and the article that KeithJ linked to pretty much echoed what has been telegraphed in speeches by various Treasury officials.

The US rate of land tax that you cited is around 3.5%. That doesn't mean that any potential Australian version will be at that level. For example, sales tax in the US is 4% to 7.25%, depending on state, versus 15% to 25% in the EU and 10% (GST) in Australia.

A 3.5% rate would correspond to about $17K per annum on an average Melbourne home. That would equate to 20 - 25% of household income (guessing $60K to $80K), and would be a massive tax hike. I can't see that being a popular move...

There's a far bigger risk that tax deductions will be capped or eliminated. Negative gearing and other deductions on property have risen from $600 million in 2001 to $6.4 billion or $11 billion, depending on which figures you take.

My guess is that negative gearing will be constrained in some way (e.g. limited tax write-offs to property income only, and not against overall income), particularly as it's been growing so fast. The tax man abhors a loophole...

I'm not at all bullish about property, and would argue that there are big downside risks. Most posters here would (and have) disagreed with me on that one.

 

[BV]

My guess is that negative gearing will be constrained in some way (e.g. limited tax write-offs to property income only, and not against overall income), particularly as it's been growing so fast. The tax man abhors a loophole...

If they do that, they'd better start building housing themselves
because many property investors will pull out of the property market.

This will probably affect the upper price brackets first but overall housing prices will suffer and rents will go through the roof.
Bring it on I say....

By the way, our negative gearing component varies each year and my claim for 2009 is almost zero when in 2008 it was around $30K.

The 11 Billion $ you refer to, were due to the high interest rates so this year claims will go down and back to normal plus our rents have increased so our losses will be even lower, if any.

 

[kum yin lau]

HI, Bill's hit the nail squarely!!

The entire reason for the hikes in housing is in the demand, in many cases pent up over years.

Does anyone in any state see a state govt building houses for the masses?

Here in SA, the state govt had been trying for many years to get out of that commitment. They'd rather private landlords deal with the maintenance & other issues of providing housing.

The housing trust had been selling quite steadily. Someone working for that dept said that they have to sell 500 houses in a month to stay solvent.

So I agree with Bill. Govt stuffs up the current status, they better start preparing to house the masses themselves.

KY

 

[Perp]

The US rate of land tax that you cited is around 3.5%. That doesn't mean that any potential Australian version will be at that level. For example, sales tax in the US is 4% to 7.25%, depending on state, versus 15% to 25% in the EU and 10% (GST) in Australia.

A 3.5% rate would correspond to about $17K per annum on an average Melbourne home. That would equate to 20 - 25% of household income (guessing $60K to $80K), and would be a massive tax hike. I can't see that being a popular move...

We also have to remember that US housing prices are (in most places) much lower than here in Australia, so the property tax isn't anywhere near this high in dollar terms for the majority of the population, and that they pay much lower personal income taxes. Imposing a similar property tax here in Australia would be a much more significant tax imposition on the general populace than it is in the USA, and as hinted, public opinion would make it exceedingly difficult to implement.

Obviously Ive pissed too many people off here and that was not my intention, I wanted to have a rational debate about government distortions in the market but got smacked all over the place.

It can feel that way sometimes, but don't leave. Somersoft's a great community where open-minded people can learn a lot. There are some "less than polite" folk around - as in any large community - just learn to ignore 'em!