Changing the goal posts

[karina]

Hi everyone,

I was reading the editors comments in the API magazine this morning (the current issue) and she is disussing tax reform.

Basically the article suggests that the real estate institute of Australia has made a proposal for tax reform and changes to CGT on property.

The proposal suggests the current 50% rate after 1 year would increase to 75% and reduce in a sliding scale down to 30% after 10 years. Investors would be better of if they held for the long term but worse off if they sold before 6 years (as it would take that long to get to the 50% rate)

Just wondering if this were to be introduced at tuesdays budget what would you expect to happen to the property market and rents.

I guess an important consideration would be when the new laws became effective as if they are say 1st Jan next year then there could be a flood of people short term listing properties on the market to get the 50% exemption that exists today. (and this could cause oversupply and prices to fall)

I for one am counting on selling a few places in the next 60 days or so (due to a recent purchase) and would hate to have my CGT bill for these jump overnight!

Long term this would create big incentives to hold long term. The states may be worse off with less property trasactions taking place so less money coming in through stamp duty.(long term)

Your opinions appreciated.

 

[emu]

I guess an important consideration would be when the new laws became effective as if they are say 1st Jan next year then there could be a flood of people short term listing properties on the market to get the 50% exemption that exists today. (and this could cause oversupply and prices to fall)


.

And create a rental housing crisis sending yields skyhigh
What a great buying opportunity it would be.
I'm in it for the long haul

 

[Glebe]

I'm not a fan, it's market manipulation. The government should be looking at simplifying the tax system, not increasing it's complexity.

 

[kph]

The CGT concession was brought in to make Australia more competitive globally to attract foreign investment.
It wasn't put in place to appease property investors !

We're still not competitive at the current 50% concession rate, why would they make us more uncompetitive ??

So unless they now start to discriminate specifically against property as an investment vehicle, I can't see how they can introduce that sort of change to the existing CGT rules.

I wonder how many people would modify their strategy anyway ?

I mean a buy and holder would take no notice, and a developer who sells anyway, would also not be affected.

I must be missing something here.... ( not the first time !!)

kp

 

[kierank]

Imagine what it would do to the sharemarket?

If these suggested rules only applied to property, I would guess that it would make the sharemarket more attractive pushing prices up; if the same rules applied to all assets (including shares), then I would guess that shares would become far less attractive causing the share market to come down.

I can't see them getting "the light of day".

 

[Merovingian]

I'm not a fan, it's market manipulation. The government should be looking at simplifying the tax system, not increasing it's complexity.

I agree, Glebe.

Anything the Government can do to simplify the tax system would be generally considered to be a good thing.

I'm interested to see what Treasurer Costello comes up with in the Federal budget coming up. Thought I think it will be relatively conservative, i.e. no massive changes, just tweaks.

 

[landlubber]

If this was to come about (which I doubt) it would be yet ANOTHER factor deterring new property investors .
So far we have (1) high prices (2) low yields (3) recent increase in int. rates .
If we now increase the CGT ...that would be reason no. 4 .
Less new property investors mean rents will rise markedly. Already vacany rates are very low.

So ...bring it on !! Love them rent increases !!

LL

 

[D.T.]

Hi

Less new property investors mean rents will rise markedly. Already vacany rates are very low.

So ...bring it on !! Love them rent increases !!

And the increasing returns would then bring in new investors?

 

[kph]

I agree, Glebe.

Anything the Government can do to simplify the tax system would be generally considered to be a good thing.

I'm interested to see what Treasurer Costello comes up with in the Federal budget coming up. Thought I think it will be relatively conservative, i.e. no massive changes, just tweaks.

Lower the top tax rates and increase the thresholds.?

We are already taxed on income as well as spending.
Time to reduce the tax on income maybe ?

kp