From: Ian Findlay
Hi all,
I agree with GoAnna. The tax system in Australia encourages IPs by giving tax breaks. This basically derives from the problems governments with housing poorer people.
There are two options:
1. Encourage the private sector by tax breaks (Australia)
2. Build up public rental properties e.g. council houses (UK model).
I prefer option 1 (not just because I benefit from the tax breaks) but also owners tend to take better care of their property and will turf out bad tenants. In option 2, the state is too cumbersome to look after its rental properties and many fall into severe disrepair thus lowering rental income etc. There is also the tendency for rental ghettos to be formed which over time only have troublesome tenants and ultimately no-go areas.
GoAnna is right that I have experience of overseas rental property (I have a unit in South London). The UK has no tax breaks (neg gearing etc) for IPs other than very limited CGT exemption therefore most units are owner occupied unless rents totally pay mortgage which is only beginning to happen now with lower interest rates.
From my experience it is not cost effective to have IPs as investment vehicles in the UK unless you own them outright and can charge high rents.
This leaves only shares which may be fine, but again no tax advantages. This is why most the % of people having shares (outside super) is low (<25% compared to 70% odd for Oz). The main savings vehicle in the UK is super and the vast majority of people make compulsory contributions before tax i.e. compulsory salary sacrifice.
I, with many others in this forum suspect, feel that it is better to encourage people to save for their financial future rather than spend and depend on the state particularly with the very scary projected demographics leaving almost no young people to pay for a huge aged population through their tax dollars.
What I'd do is:
1. Have a spending tax (you can call it a GST if you like Mr Howard).
2. Compulsory super for everyone.
2. Increase rate of super contributions for both employee and employer but offset by having compulsory salary sacrifice.
3. Tax free interest on savings up to a set amount say $10,000
4. Tax on credit card buying (say 0.5%), which would help fund a pension safety net for lower earners.
I've probably said enough to go off topic and get shot down in flames,
Ian
Hi all,
I agree with GoAnna. The tax system in Australia encourages IPs by giving tax breaks. This basically derives from the problems governments with housing poorer people.
There are two options:
1. Encourage the private sector by tax breaks (Australia)
2. Build up public rental properties e.g. council houses (UK model).
I prefer option 1 (not just because I benefit from the tax breaks) but also owners tend to take better care of their property and will turf out bad tenants. In option 2, the state is too cumbersome to look after its rental properties and many fall into severe disrepair thus lowering rental income etc. There is also the tendency for rental ghettos to be formed which over time only have troublesome tenants and ultimately no-go areas.
GoAnna is right that I have experience of overseas rental property (I have a unit in South London). The UK has no tax breaks (neg gearing etc) for IPs other than very limited CGT exemption therefore most units are owner occupied unless rents totally pay mortgage which is only beginning to happen now with lower interest rates.
From my experience it is not cost effective to have IPs as investment vehicles in the UK unless you own them outright and can charge high rents.
This leaves only shares which may be fine, but again no tax advantages. This is why most the % of people having shares (outside super) is low (<25% compared to 70% odd for Oz). The main savings vehicle in the UK is super and the vast majority of people make compulsory contributions before tax i.e. compulsory salary sacrifice.
I, with many others in this forum suspect, feel that it is better to encourage people to save for their financial future rather than spend and depend on the state particularly with the very scary projected demographics leaving almost no young people to pay for a huge aged population through their tax dollars.
What I'd do is:
1. Have a spending tax (you can call it a GST if you like Mr Howard).
2. Compulsory super for everyone.
2. Increase rate of super contributions for both employee and employer but offset by having compulsory salary sacrifice.
3. Tax free interest on savings up to a set amount say $10,000
4. Tax on credit card buying (say 0.5%), which would help fund a pension safety net for lower earners.
I've probably said enough to go off topic and get shot down in flames,
Ian
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