Interesting article in todays Australian suggesting there may be some reform to capital gains tax that will benefit investors. Any thoughts on how this could change the market, this would surely make investing in real estate more attractive and perhaps create more demand by having more people enter the market and hold on to property for longer?
Investors in line for budget tax break
Steve Lewis and Elizabeth Colman
April 22, 2006
INVESTORS who hold on to shares and some property investments could benefit under capital gains tax reforms being considered by the Howard Government.
Farmers are also expected to be granted tax relief in next month's federal budget when they roll over or sell assets.
Under existing laws, farmers who have combined assets worth more than $5 million are not able to access small business tax concessions.
But The Weekend Australian understands that the Government is considering lifting the $5million threshold on capital gains tax.
The move would be welcomed by the Nationals, who have been lobbying for changes.
They argue that since 1999, when the threshold was introduced, farm families have been hurt by rising property prices when they try to expand or retire.
The Weekend Australian understands the Government has already decided on some broader changes for investors in shares following a lukewarm report card on capital gains tax, included in the Hendy/Warburton report comparing international rates.
It showed that while many developed economies cut their capital gains tax when shares were held for the long term, Australian investors continued to pay 24.3 per cent - whether they held their assets for one year or for 10.
Final decisions on the shape of the budget will be made over coming weeks, with market economists predicting a bigger-than-expected surplus to be unveiled by Peter Costello on May 9.
It is not expected the Government will reduce capital gains tax applying to property assets, despite a strong lobbying campaign by the construction sector.
The push to reform capital gains tax came as John Howard said yesterday he was in favour of "tax reform" and signalled the Government was doing more to reduce the tax burden for individuals and businesses.
"I think we've had a lot of reform. I'm in favour of further reform and nobody should suggest that further reform is off the agenda," the Prime Minister told Melbourne radio.
Business leader Peter Hendy, co-author of the tax report handed to the Treasurer 10 days ago, last night repeated his call for capital gains tax reform.
"If we want to keep and build investment dollars in Australia, we need to reform capital gains tax by reducing the burden," said Mr Hendy, chief executive of the Australian Chamber of Commerce and Industry.
ACCI has lobbied for the tax to be cut to zero if assets were held for 10 years or more. The Government will not go that far but it is understood modelling has been done on a stepped rate. This would see investors pay a lesser amount of capital gains tax the longer assets were held.
The international comparison report showed capital gains tax in Australia was particularly punitive, with the third-highest top rate among the 30 OECD economies for shares held between one and two years.
Investors now pay the full marginal rate of 48.5 per cent in capital gains tax on assets held for less than a year. That is halved, to 24.3 per cent, for assets held for 12 months or more. The OECD average is 15.2per cent for assets held for less than a year, and 14 per cent when shares are held for a decade or more.
Mr Costello is under pressure to offer broad tax cuts. The Government is understood to have been working on a range of measures, including the plan to lift the threshold for farms and other small business assets.
Despite insisting for months voters wanted "tax cuts, not tax reform", Mr Howard said yesterday he was "in favour" of income tax reform.
Investors in line for budget tax break
Steve Lewis and Elizabeth Colman
April 22, 2006
INVESTORS who hold on to shares and some property investments could benefit under capital gains tax reforms being considered by the Howard Government.
Farmers are also expected to be granted tax relief in next month's federal budget when they roll over or sell assets.
Under existing laws, farmers who have combined assets worth more than $5 million are not able to access small business tax concessions.
But The Weekend Australian understands that the Government is considering lifting the $5million threshold on capital gains tax.
The move would be welcomed by the Nationals, who have been lobbying for changes.
They argue that since 1999, when the threshold was introduced, farm families have been hurt by rising property prices when they try to expand or retire.
The Weekend Australian understands the Government has already decided on some broader changes for investors in shares following a lukewarm report card on capital gains tax, included in the Hendy/Warburton report comparing international rates.
It showed that while many developed economies cut their capital gains tax when shares were held for the long term, Australian investors continued to pay 24.3 per cent - whether they held their assets for one year or for 10.
Final decisions on the shape of the budget will be made over coming weeks, with market economists predicting a bigger-than-expected surplus to be unveiled by Peter Costello on May 9.
It is not expected the Government will reduce capital gains tax applying to property assets, despite a strong lobbying campaign by the construction sector.
The push to reform capital gains tax came as John Howard said yesterday he was in favour of "tax reform" and signalled the Government was doing more to reduce the tax burden for individuals and businesses.
"I think we've had a lot of reform. I'm in favour of further reform and nobody should suggest that further reform is off the agenda," the Prime Minister told Melbourne radio.
Business leader Peter Hendy, co-author of the tax report handed to the Treasurer 10 days ago, last night repeated his call for capital gains tax reform.
"If we want to keep and build investment dollars in Australia, we need to reform capital gains tax by reducing the burden," said Mr Hendy, chief executive of the Australian Chamber of Commerce and Industry.
ACCI has lobbied for the tax to be cut to zero if assets were held for 10 years or more. The Government will not go that far but it is understood modelling has been done on a stepped rate. This would see investors pay a lesser amount of capital gains tax the longer assets were held.
The international comparison report showed capital gains tax in Australia was particularly punitive, with the third-highest top rate among the 30 OECD economies for shares held between one and two years.
Investors now pay the full marginal rate of 48.5 per cent in capital gains tax on assets held for less than a year. That is halved, to 24.3 per cent, for assets held for 12 months or more. The OECD average is 15.2per cent for assets held for less than a year, and 14 per cent when shares are held for a decade or more.
Mr Costello is under pressure to offer broad tax cuts. The Government is understood to have been working on a range of measures, including the plan to lift the threshold for farms and other small business assets.
Despite insisting for months voters wanted "tax cuts, not tax reform", Mr Howard said yesterday he was "in favour" of income tax reform.
