Government to introduce 2.25% Levy on Sale of Investment ppty's
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- Start date
Land tax I thought was a tax on the rich and/or rich speculators. Tax the rich on their total land holdings!
Luckly that we have a Labor government which has now democratized it....we all have to pay!
Like Nick said, it is not indexed, in 10 years everyone will be paying. Everyone in Sydney almost certainly will in 10 years will be paying the top 1.4%.
Luckly that we have a Labor government which has now democratized it....we all have to pay!
Like Nick said, it is not indexed, in 10 years everyone will be paying. Everyone in Sydney almost certainly will in 10 years will be paying the top 1.4%.
always_learning said:
Isnt it ironic how we have property investors here complaining they aren't rich and they are the battlers. Yet look in the forum and you see plenty of threads with polls asking "Are you are millionaire", with a high percentage of those folks saying "YES". If you are have over a million dollars worth of asset, I don't think you should call yourself the average battler.
Pay up!
alpina said:
The land tax rates are (I think):
0 - 400,000 x 0.4%
400,000 - 500,000 x 0.6%
500,000+ x 1.4%
Keep in mind that it the cumulative value of a properties land component. If you have several trusts with less than $400,000 of land value each, you'll never have to pay more than 0.4% land tax. If you had all of your property in one trust or in your own name, you'd end up paying more if the total land value was more than $400,000.
I'm assuming that NSW doesn't count all of your trusts as one entity.
Love the Pollies forsight
Afternoon all,
Just thought the below was good for a quick ironic read.
This is quoted from SMH
http://www.smh.com.au/articles/2004/04/06/1081222468831.html
"Who's going to pay for it?" yelled an excitable John Brogden across the table.
"It's actually you and me," replied Michael Egan.
Not quite right, Michael. Although the Treasurer is a paid-up member of the Meriton generation - those people who own investment units in the large apartment developments that have been built during the property boom - John Brogden has only his Bilgola house.
Another person who will not be paying it is Bob Carr, who believes in escaping all these dreadful NSW property taxes by investing outside of the state. He used to own an investment in Victoria, now it's a rural property in New Zealand".
Good to see how our premier views his own policies in the local market for property investment .
Regards,
NAS
Afternoon all,
Just thought the below was good for a quick ironic read.
This is quoted from SMH
http://www.smh.com.au/articles/2004/04/06/1081222468831.html
"Who's going to pay for it?" yelled an excitable John Brogden across the table.
"It's actually you and me," replied Michael Egan.
Not quite right, Michael. Although the Treasurer is a paid-up member of the Meriton generation - those people who own investment units in the large apartment developments that have been built during the property boom - John Brogden has only his Bilgola house.
Another person who will not be paying it is Bob Carr, who believes in escaping all these dreadful NSW property taxes by investing outside of the state. He used to own an investment in Victoria, now it's a rural property in New Zealand".
Good to see how our premier views his own policies in the local market for property investment .
Regards,
NAS
It's occured to me that this might make it easier to wrap properties. Most wrapees are first home owners thus stamp duty is never an issue for them.
By timing your wraps you avoid the land tax and you simply factor in the extra 2.25% into your sales cost.
By timing your wraps you avoid the land tax and you simply factor in the extra 2.25% into your sales cost.
np2003 said:Isnt it ironic how we have property investors here complaining they aren't rich and they are the battlers. Yet look in the forum and you see plenty of threads with polls asking "Are you are millionaire", with a high percentage of those folks saying "YES". If you are have over a million dollars worth of asset, I don't think you should call yourself the average battler.
Pay up!
No! I will just choose to buy somewhere else! Mind you I think Victoria where my IP's are (also Labor) will also democratize land tax.
np2003 said:Isnt it ironic how we have property investors here complaining they aren't rich and they are the battlers. Yet look in the forum and you see plenty of threads with polls asking "Are you are millionaire", with a high percentage of those folks saying "YES". If you are have over a million dollars worth of asset, I don't think you should call yourself the average battler.
Pay up!
I have no problem with the new Land Tax as it is applied to everybody unlike the old version which was very hard on people who had a few props. I do have a problem, however, with the Stamp Duty on sale of a prop. The government is always saying they want people to self fund for retirement, and as soon as you try to do that you are taxed at every turn. They should be encouraging investment instead of penalising it.
It will spread like cancer...
Hi All
RESPONSE
Have spent a busy day advising clients on the changes I can say, yes, there is a general panic in the market for the average 1 or 2 IP investor. Many angrey with Carr and threatening to vote him out.
IS IT FAIR
Some comment here of fairness applying land tax to all IP but hang on, if thats fair where the annual share tax?!?!
Lets see.... I own $100k in shares so please take 0.4% or $400 tax each year Mr Carr. But hang on, because of inflation my shares rise in value (but probably not return) so the $400 grows each year.
It is plainly not fair. No Stamp duty in or out on shares so whuon property. It is very bad policy to start treating different forms of investment on the government of the days interputation of equality (social engineering).
BENEFIT TO FHO
As raised how p#ssed would you be as a FHO having bought last week, last year and coughed up the 4%! Up until yesterday Carr was repeating the mantra "No relief on Stamp Duty".
WHAT TO DO
So do we invest in other states and let NSW become and enclave of the mega rich or public housing? Sure rents will rise so smart investor like us will find a way to roll it up. But whilst this is bad policy it is very good vote buying.
AGAIN DO THE NUMBERs
12% of aussies are IP owners so a whopping 88% are not. And those whose votes matter (western sydney) are the ones whose sons and daughters cannot buy their first home and will welcome the drop in stamp duty.
Carr is very smart and has changed the game BIG TIME. I see VIC and others getting in on the deal within their next budgets. QLD not so sure.
Regards, Peter 147
Hi All
RESPONSE
Have spent a busy day advising clients on the changes I can say, yes, there is a general panic in the market for the average 1 or 2 IP investor. Many angrey with Carr and threatening to vote him out.
IS IT FAIR
Some comment here of fairness applying land tax to all IP but hang on, if thats fair where the annual share tax?!?!
Lets see.... I own $100k in shares so please take 0.4% or $400 tax each year Mr Carr. But hang on, because of inflation my shares rise in value (but probably not return) so the $400 grows each year.
It is plainly not fair. No Stamp duty in or out on shares so whuon property. It is very bad policy to start treating different forms of investment on the government of the days interputation of equality (social engineering).
BENEFIT TO FHO
As raised how p#ssed would you be as a FHO having bought last week, last year and coughed up the 4%! Up until yesterday Carr was repeating the mantra "No relief on Stamp Duty".
WHAT TO DO
So do we invest in other states and let NSW become and enclave of the mega rich or public housing? Sure rents will rise so smart investor like us will find a way to roll it up. But whilst this is bad policy it is very good vote buying.
AGAIN DO THE NUMBERs
12% of aussies are IP owners so a whopping 88% are not. And those whose votes matter (western sydney) are the ones whose sons and daughters cannot buy their first home and will welcome the drop in stamp duty.
Carr is very smart and has changed the game BIG TIME. I see VIC and others getting in on the deal within their next budgets. QLD not so sure.
Regards, Peter 147
Seems it's not only the NSW gov gunning for you, the Feds are hopping onto the bandwagon.
Anyone who has taken notice will be aware that my lady is with a big accounting firm. Just come home with the word that the ATO is examining the deductability of previously allowable exs. No detail but is likely to be regulation, not a big deal like disallowing neg gearing.
Don't shoot me, I'm just the piano player!
Anyone who has taken notice will be aware that my lady is with a big accounting firm. Just come home with the word that the ATO is examining the deductability of previously allowable exs. No detail but is likely to be regulation, not a big deal like disallowing neg gearing.
Don't shoot me, I'm just the piano player!
Curious isn't it - when the government changes the investment rules it's the guys with few or no investments who get most upset.Peter 147 said:
People with larger investment portfolios adjust & move on.
I think that it's at least partly to do with peoples' mindsets.
The more flexible & creative you are, the easier it is to cope with changes & take the steps requires to minimise their negative effects and maximise their positive.
People with few or no investments are often not as forward thinking or close to pauper level - so no fallback position.
Of cause there are exceptions (people just starting out, etc) - but I'd say that mindset is a key factor in whether people have built a large investment portfolio (of any type of investments) or not.
Cheers,
Aceyducey
Hi Peter 147
Sorry, but must disagree with you. The first part of this sentance.
"Carr is very smart and has changed the game BIG TIME"
Changing the rules mid stream is not smart. Alienating 12 % of the population is not smart (even though he is obviously playing the numbers game).
As you stated "12% of aussies are IP owners so a whopping 88% are not."
Some possible changes that might occur as a result of his decision;
Buy IP's in another state, or has been suggested, another country, NZ
Change investor attitude or direction, eg shares
and the obvious possibility of resistance to buying IP's at all.
Possible result of these alternatives happening in big enough numbers and there could be problems with insufficient number of rentable properties in NSW.
If there are insufficient numbers for housing, who has got to supply them. The Gov. ? They are already scraping as much as they can from people who are trying to cover their own retirement, because the Gov can't fund the future numbers (and they basically admit this) so therefore they are making short sighted decisions with longer term ramifications.
BTW. Is that some sort of record speed for panic.?
"yes, there is a general panic in the market for the average 1 or 2 IP investor."
Guess I'll just see what happens next, and wait a bit before buying the next one. It won't be a unit even though the land tax would be less.
jahn
Sorry, but must disagree with you. The first part of this sentance.
"Carr is very smart and has changed the game BIG TIME"
Changing the rules mid stream is not smart. Alienating 12 % of the population is not smart (even though he is obviously playing the numbers game).
As you stated "12% of aussies are IP owners so a whopping 88% are not."
Some possible changes that might occur as a result of his decision;
Buy IP's in another state, or has been suggested, another country, NZ
Change investor attitude or direction, eg shares
and the obvious possibility of resistance to buying IP's at all.
Possible result of these alternatives happening in big enough numbers and there could be problems with insufficient number of rentable properties in NSW.
If there are insufficient numbers for housing, who has got to supply them. The Gov. ? They are already scraping as much as they can from people who are trying to cover their own retirement, because the Gov can't fund the future numbers (and they basically admit this) so therefore they are making short sighted decisions with longer term ramifications.
BTW. Is that some sort of record speed for panic.?
"yes, there is a general panic in the market for the average 1 or 2 IP investor."
Guess I'll just see what happens next, and wait a bit before buying the next one. It won't be a unit even though the land tax would be less.
jahn
Acey, nobody likes the rules being changed during the game! Super is another thing many people have given up upon because the rules keep changing during the game. If I moved back to Australia I would need to pay 9% of my salary as super, but I dont feel I am getting 9% of value for it, I see it more like a tax than an asset. Ie. I would much perfer to invest the 9% in my own way...then I would feel it is worth 9%!
I agree- perception is an important thing.
People look at the 2.25% and are calculating how much they will lose if they sell.
But, that tax will be deducted form their profit for CGT- so a taxpayer on the high bracket will get taxed effectively at 1.125%.
And it will not apply if you've made less than 12% profit on the sale.
A property bought for$350K and sold for $500K- held for > 12 months, highest tax bracket:
.Before- tax payable on 50% of the profit- about $37K (federal) tax
.After- Stamp duty on $500K @ 2.25% = $11,250.
Profit = $500,000 - 350,000 - 11,250 = $138,750
Tax on 50% of profit = $34,687
I've lost a little less than $2,500- but I've still made $138K. Why panic?
If I keep it, I'll now be paying land tax. $500,000 at .6% - $3,000 pa. But before I would have been up for tax on $500K less the $320K margin- $180K at 1.7%- $3,060. Now it's on $500,000 at .6%- $3,000.
I have one propert in my trust- that was previously at 1.7%, now at .4%. I'm better off.
And Jan says "Don't sell". So I will avoid another tax hit.
People look at the 2.25% and are calculating how much they will lose if they sell.
But, that tax will be deducted form their profit for CGT- so a taxpayer on the high bracket will get taxed effectively at 1.125%.
And it will not apply if you've made less than 12% profit on the sale.
A property bought for$350K and sold for $500K- held for > 12 months, highest tax bracket:
.Before- tax payable on 50% of the profit- about $37K (federal) tax
.After- Stamp duty on $500K @ 2.25% = $11,250.
Profit = $500,000 - 350,000 - 11,250 = $138,750
Tax on 50% of profit = $34,687
I've lost a little less than $2,500- but I've still made $138K. Why panic?
If I keep it, I'll now be paying land tax. $500,000 at .6% - $3,000 pa. But before I would have been up for tax on $500K less the $320K margin- $180K at 1.7%- $3,060. Now it's on $500,000 at .6%- $3,000.
I have one propert in my trust- that was previously at 1.7%, now at .4%. I'm better off.
And Jan says "Don't sell". So I will avoid another tax hit.
jahn said:Hi Peter 147
Sorry, but must disagree with you. The first part of this sentance.
"Carr is very smart and has changed the game BIG TIME"
Changing the rules mid stream is not smart. Alienating 12 % of the population is not smart (even though he is obviously playing the numbers game).
As you stated "12% of aussies are IP owners so a whopping 88% are not."
Some possible changes that might occur as a result of his decision;
Buy IP's in another state, or has been suggested, another country, NZ
Change investor attitude or direction, eg shares
and the obvious possibility of resistance to buying IP's at all.
Possible result of these alternatives happening in big enough numbers and there could be problems with insufficient number of rentable properties in NSW.
If there are insufficient numbers for housing, who has got to supply them. The Gov. ? They are already scraping as much as they can from people who are trying to cover their own retirement, because the Gov can't fund the future numbers (and they basically admit this) so therefore they are making short sighted decisions with longer term ramifications.
BTW. Is that some sort of record speed for panic.?
"yes, there is a general panic in the market for the average 1 or 2 IP investor."
Guess I'll just see what happens next, and wait a bit before buying the next one. It won't be a unit even though the land tax would be less.
jahn
Hi Jahn
I welcome your disagreement
I agree with your comments re changing the rules.
I have only recently raised in the forum that when economists model outcomes they often assume the same parameters will remain. Already here we are seeing mutiple possible solutions to the problems and some people.
GeoffW is saving land tax from his trust down from 1.7% to 0.4%. Congratulations Geoff. Will IP investors all move to trusts now? Will they invest in NZ or Qld? What will happen to NSW. As a long term investor myself looking for return I see benifits as well.
Long term ramifications? Hum, Bob Carr is on record that Sydney is big enough and the "house is full" sign would go up if it was up to him. Perhaps he WANTS less growth in to lessen the demand on infrastructure? IF prices/rent go up let them live in Dubbo! Decentralisation driven by market forces?
Personally he has bought in NZ and with all the other problems here in NSW ( don't go to the hospital) I feel he may give it up soon anyhow. What has he to prove?
I have met him a number of times in my past employment on Gov infrastructure and he not your average politician. He is much happier examining fossils and trees than kissing babies and businessmen. He really does not care about being popular.
My comment "yes, there is a general panic in the market for the average 1 or 2 IP investor."
Humm, got me .. Panic is a strong word that can be interputated one way or anther.
What I can advise and let the reader determine if this can be called a panic:
1. whilst at a clients offices yesterday ten potential and existing IP owners spoke to me to bemoan the changes and predict doom and gloom. Some very uspset. Suprisingly no potenital FHO jumping up and down?
2. I was at McGrath REA (biggest eastern suburbs agent) main Sydney Office at 4pm and the agents reported a lot of calls from potential sellers on the fence who had been tipped over to sell by the new tax. Geoff is right to say it is not all that bad but these investors are driven by the fear of the unknown. Also in Sydney of late I have had fielded more questions re selling than buying so perhaps this is the final straw?
3. Papers gave lots of press to the effect and impact. More support for the "crash is coming" doomsayers.
4. It is not fair, It will hurt. CGT aside and all that some one always gets hurt. For example:
I have a client who just inherited $2.65M of property. He has no other investments. He worked 15 years as a carer to his Aunt for this bonus.
She paid Land tax at 1.7% and rates every year.
He had expected to pay agents fee, marketing, me and thats it. No CGT applies.
Now for no benefit the NSW gov will take on $2.65M $59,625 of his money.
He has no job having been her carer so he has no career prospects and is aged over 40. Sure he still gets lot of money but the levy is still unfair in this instance.
The double irony is because he will be registered as the owner of the property on transfer he will probably also be excluded from savings in FHO stamp duty when he uses some of the fund to buy his own modest home!
Regards, Peter 147
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