Getting Hammered every which way

[MTR]

I am ticked off with the amount of tax we property investors have to pay, in particular stamp duty, its cruel.

...... and there is more.... once I complete my developments this year I will be also up for GST and CGT, they take a bite each way. Of course there is also land tax.

Here is some relative info for those interested:

According to a recent study by UHY Haines Norton, which is a globally-respected US accounting network, only India, Spain and Britain have higher tax on property purchases. For comparison, the US is below 1% and Canada is below 1.3%. As we will soon see, Australia?s tax is quite high in comparison to the other main English-speaking countries.

A property that sells for $545,000 in Australia would face an average tax of 3.7% of the purchase price compared to 3.65% for WA, while one selling for $382,000 would be taxed at 3.2% average for Australia compared to 3.183% in WA. Anyone who can afford to pay $3.82 million for their home would be taxed at an average Australian rate of 5.3%, compared to 4.9% in WA.

In the financial year 2011-2012, state governments collected over $1.2 billion in stamp duty tax.

Queensland is King

In Queensland, rates are roughly a third of what they are in the rest of Australia, at least on the lower end, putting them on a level with the US and Canada. This makes Queensland an attractive place for many Australians who are moving and want to purchase a home.


MTR

 

[cu@thetop]

My accountant says not to complain about paying taxes- it means I'm making money.

 

[MTR]

My accountant says not to complain about paying taxes- it means I'm making money.

Heard this expression many times.......off topic, however it reminds me of the time I received my accountants bill, asked him why I am paying so much, he always came back with the same answer "you pay peanuts, you get monkeys". I have since moved and saved 50% on my bill, this acct is even better.

Can not shop any of this though

 

[ok180]

Look somebody has to pay for all the middle class welfare, may as well be us. I have always said it, it is 20% of people sustaining the other 80% in the economy.

 

[Peter_Tersteeg]

Can not shop any of this though

It would be nice if you could shop around your tax bill.

Imagine if you voted for one party. If that party wins, you have to pay certain taxes, if they loose you don't have to pay those taxes. Voting is compulsory and a donkey or invalid vote means you pay. Essentially if you want someone to run the country, you take responsibility for your vote and their decisions. The mind boggles.

Unfortunately property is one of the worst taxed asset classes. You're taxed on the way in, on the way out, and you're taxed just for having it. Compare this to shares and the only real one is CGT. There's even ways of avoiding that completely if you're clever.

 

[MTR]

Hi PT

If only....

Not in New Zealand, they don't pay stamp duty or capital gains tax, its very investor friendly.

 

[TMNT]

The other saying I seriously hate is
"oh don't worry, it s a tax deduction"
When you buy something that is useless or can't be returned

I always reply "fine! How about you pay me for it and I'll issue you an invoice for it"

 

[Ed Barton]

Stamp duty needs to be replaced with a different tax. It discourages mobility and is very variable and therefore must be a PITA for state governments.

 

[Aaron_C]

Stamp duty needs to be replaced with a different tax. It discourages mobility and is very variable and therefore must be a PITA for state governments.

How is getting money for nothing a PITA?

 

[MTR]

I recall a couple who did something similar very successfully in Sydney about 8-9 years ago. They did it so successfully that they were interviewed on A Current Affair.

The ATO and NSW Office of State Revenue followed up, told them they were running a property business, hit them with a rather large fine for tax avoidance. They also had to pay back the stamp duty they saved and the CGT.

It would be wise to seek further advice on this.

That is nasty.

I thought about doing a development in my own name, rather than company and therefore possibly get away with not paying GST for one development, however, not sure if this is legal?? Perhaps ATO can flag names to companies, not sure what they can or can not do??

 

[nhg]

In Queensland, rates are roughly a third of what they are in the rest of Australia, at least on the lower end, putting them on a level with the US and Canada. This makes Queensland an attractive place for many Australians who are moving and want to purchase a home.
MTR

Does this take into account the higher insurance and council costs? I also agree Qld is more investor friendly, though there are other costs involved there that are higher than say, NSW.

To be frank, if the opportunity to set up shop in QLD had come up, I would have taken it in a second (and I HATE the heat). I'll be looking to expand there as soon as it is feasible.

It would be nice if you could shop around your tax bill.

Well, you can. One could always move to Monaco

 

[skater]

It would be wise to seek further advice on this.

And maybe if you are doing something like this, keep it to yourself.

 

[tobe]

there are only two kinds of money problems.

Too much, and not enough.

Yours falls into the too much catagory. You can either get a better accountant, get more aggressive in your tax planning, or grin and pay it.

 

[DavidMc]

I agree... add to that ridiculous fines and car parking... $5.50 per hour in the Melbourne CBD, I hope you have $11 in coins when you want to park!

 

[Bigtone]

you got it wrong MTR, I have read 1000's of times how property investors use negative gearing to pay no tax and are propped up by middle class battlers who are then priced out of the property market

 

[luckyone]

ACT is phasing out stamp duty by increasing rates and land tax I believe and stamp duty will be eventually gone by 2020. Only problem is, for those of us who have already paid stamp duty, we'll also now get slugged with higher ongoing taxes!

 

[alexlee]

Just looking at the cost of property purchases is misleading.

While stamp duty in the US (i.e. tax on purchase) is much lower than Australia, ongoing property taxes (equivalent to our council rates) are very high in the US compared to ours, and often based on the market value of the property. This is because in the US they use local taxes to fund things like emergency services, police, hospitals and schools, while in Australia these are state services (and stamp duty, of course, is a state tax).

Would you prefer to pay more when you buy or pay more going forward? An interesting effect is that retirees in the US, for example, probably move more in the US because their property taxes keep going up (unless you live in California where there are caps) while in Australia once you buy a property it's relatively cheap to continue living there (the proverbial old granny in the mansion). This is one of the reasons why US property seems so cheap to us: imagine if your council rates rose to 2% of the market value of the property. You'd factor that into the purchase price, and it affects owner occupiers.

It also makes people more likely to lose their homes when they lose their jobs, since they have to pay property taxes even if they don't have a mortgage. Whereas in Australia, if you have a mortgage free home there are few other costs to keep it.

In Australia we have GST (a national tax), while the US doesn't have a national consumption tax. However, they have state sales taxes (which Australia doesn't have).

In Australia we have federal income tax that's higher than the US, but the US also has state income taxes, which we don't have.

 

[MTR]

there are only two kinds of money problems.

Too much, and not enough.

Yours falls into the too much catagory. You can either get a better accountant, get more aggressive in your tax planning, or grin and pay it.

I have a new accountant who has set up a bucket company which will help reduce tax for development purposes, that is fine, however I am annoyed about the number of taxes that property investors are stuck with, the big one is stamp duty. I would hate to think how much money I have paid the tax man over the last decade.

 

[MTR]

ACT is phasing out stamp duty by increasing rates and land tax I believe and stamp duty will be eventually gone by 2020. Only problem is, for those of us who have already paid stamp duty, we'll also now get slugged with higher ongoing taxes!

What's that saying, rob Peter to pay Paul

 

[MTR]

Some might be interested in this chart, and can someone interpret this for me

http://taxcredits.net/oecdtaxrevenues/