Changes tabled in Henry Tax review

[warrenkh]

There is a news article this morning on the Age detailing some of the recommendations tabled in the Henry Tax review. Here is the full link:

http://www.theage.com.au/business/tax-reformer-henry-rides-in-20100122-mqs8.html

There are two points that are relevant to us:

1. The stamp duties are here to stay. Previous recommendation have obviously been withdrawn.

" The generous tax treatment afforded the family home will remain in place but, to help compensate for that, so too will stamp duty when homes are bought. The committee has not recommended replacing stamp duty with a land tax. "

2. Possible changes to capital gains tax.

"The review recommends that all savings be tax-preferred compared with wages and that the effective tax rates of different types of savings move closer together. This will mean a reduction of the 50 per cent concessional rate applying to capital gains, but it will not mean a return to indexation of capital gains for tax purposes."

Very interesting time ahead. The general direction appear to be more tax to the middle and higher income earners to offset the cost of aging population.

Warrenkh.2010

 

[Aaron Sice]

WTF was that about CGT? sounds like there'll be brackets to tax CGT separately, instead of adding it your wage.

if you have savings in the bank - THAT will be taxed instead of your wages...so living hand to mouth is ENCOURAGED by the tax system....but discouraged by the banking system?

so ...... once again govt has no idea about the real world when drafting legislation?

 

[tristo]

Hehe, talk about sensationalist BlueCard. It's saying people who own dozens of houses should be taxed higher than those who have zero savings and who are forced to spend most of their wage on kids, bills, etc.

 

[GreatPig]

I understand it to mean that the CGT discount would decrease (putting up effective CGT where that applies), tax on bank savings would decrease, and the tax rate as you get older would decrease.

Sounds all good to me at the moment.

GP

 

[zargor1]

If they're smart, the Rudd govt. will hold off any changes (remember these are only recommendations by Henry) until after this year's Fed election.

They'll already have their hands full with an ETS when a deal is done this year.

Zargor

 

[Neophyte]

I'm not sure that CGT discount should be reduced.

I think instead that there should be a reduction in tax in interest bearing savings. Term Deposits, Bonds, etc...

I had someone explain the CGT discount to me once. Basic assumption inflation is 3%, capital growth on asset is 6%. If there was no CGT discount then after X years you would make almost no gain from owning the asset since you get taxed on the 6% growth (reducing it to only 4% if you are in theoretical 33% tax bracket), then inflation wipes out another 3%, so your left with a 1% real gain. With the CGT discount you get a 2% real gain in this scenario.

Without the CGT discount it doesn't make sense to invest in assets that have capital growth of less than about 10%.

 

[The_Bludger]

Looks like negative gearing is going too. Hmmm, all the things I liked about property investing are disappearing. Not looking good.

Does anybody know when the Government is due to release the final tax findings and move ahead with the new changes?

 

[Aaron Sice]

i'll bet a beer that 95% of it gets knocked on the head, watered down or debated to the point of obscurity.

 

[hobo-jo]

Looks like negative gearing is going too. Hmmm, all the things I liked about property investing are disappearing. Not looking good.

Where have you read that bludger?

 

[wobbycarly]

Looks like negative gearing is going too.

I wish them luck with that. It worked so well in 1985... (not that I remember it personally! )

But I reckon every 2-3 years there's "noise" about removing negative gearing. I don't think it's worth getting worried about...yet!

 

[Rickardo]

Does anybody know when the Government is due to release the final tax findings and move ahead with the new changes?

Well the Treasurer received the report late December but is yet to announce when it will be released, which recommendations they will be implementing or when this will be done. My guess is the report will be released within the next 3 months however I think the Govt will be careful with what they implement in this election year.

 

[The_Bludger]

Where have you read that bludger?

Do a google. All over the place.

 

[jingo]

Looks like negative gearing is going too. Hmmm, all the things I liked about property investing are disappearing. Not looking good.

Hi Bludger,

Have you got any updated information regarding the treatment of negative gearing?

I can only find older articles on google like this one which is rather sensationalistic:

http://www.theage.com.au/national/scrap-negative-gearing-experts-20090619-cr9l.html

Regards Jason.

 

[hobo-jo]

Do a google. All over the place.

Discussion on the topic has been around for years, I thought you meant there was some recent development that was going to literally see it removed, not just speculation. You spoke about it as if the removal was fact.

By the way while googling I couldn't help but chuckle at this poorly worded and argued case against negative gearing:
http://taxreview.treasury.gov.au/content/submissions/post_14_november_2008/Xiao_Charlie_20090225.pdf

Let's blame all our problems on negative gearing shall we??

 

[warrenkh]

re

By the way while googling I couldn't help but chuckle at this poorly worded and argued case against negative gearing:

Fully agree.

And in the article it talked about: "the rich getting richer", and of how higher mortgages lead to decreased quality of life, and increased maternal age.

Well, my replay would be, sorry, but there are alot of us investors out there worked our butts off to get to where we are. Its not easy, property investment is much more about buying and selling houses. And if you are not prepared to work as hard as us, then you are not going to have as much.

Warrenkh.2010

 

[Player]

Is Charlie you tenant

Poor old Charlie........what a victim.

Yeah abolish negavtive gearing like in the US however allow tax deductibility on the PPOR so that people upgrade the trophy home McMansions as soon as the bank starts throwing money around again......bigger houses, bigger rooms, greater need for high status artefacts and plasma's, five bathrooms, third kitchen, etc., etc.

There would be a high probability that Charlie may be someone's tenant here on SS

 

[Francesco]

Poor Charlie X hasn't cotton on that property investors are subsidising tenants through negative gearing. Governments engineered this situation because it is draining their budgets to provide housing and divert funds from core programs in health, education and pensions.

 

[Aaron Sice]

if the govt had to go out and buy land and build houses when neggearing is abolished because investors dump stock, that'll cost 4x as much as the $50bil....

 

[joeExpat]

if the govt had to go out and buy land and build houses when neggearing is abolished because investors dump stock, that'll cost 4x as much as the $50bil....

Investors dumping stock to who ? The answer is owner occupiers and former renters. The number of people and houses remains the same, the houses don't disappear.

Far from investors subsidising renters, it is the other way around. The sooner negative gearing goes the better for everyone, in the long term investors included as yields will improve through lower real estate prices.

 

[josko]

Investors dumping stock to who ? The answer is owner occupiers and former renters. The number of people and houses remains the same, the houses don't disappear.

Far from investors subsidising renters, it is the other way around. The sooner negative gearing goes the better for everyone, in the long term investors included as yields will improve through lower real estate prices.

Hi Joe,

Those OO's you talk about already have houses - without NG where is the incentive to buy property that cannot be PG or NG???? Why on earth would your average Mum and Dad investor want to suddenly start taking over multiple Investment Properties at such a loss to their family income?

As for renters, if they haven't bought now, then they won't then. Without a huge FHOG and considering rents have risen considerably, I think most opportunities have passed.

I'm not just talking about income either. It's a mindset to 95% of investors. You will not have multitudes of people suddenly making up their minds to invest in property - Especially when multitudes of investors will be exiting in droves. Imagine the media coverage "HOUSING MARKET PLUMMETS AS INVESTORS PANIC."

Not much of an incentive for OO's or Renters to buy.

Regards JO