Proposed Measure to Remove Land Tax

Discussion in 'Accounting & Tax' started by Paul@PAS, 1st Nov, 2017.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Peter Martin: Could land tax 'Bowie bonds' be a nifty fix for stamp duty?

    An academic (I can hear the groans) has proposed a way to abolish stamp duty and replace it with broad land tax. Think of it as a two tier system. Those who paid duty would not pay land property tax and those who dont would avoid duty and then pay an annual broad land tax. Over time (perhaps even a specific period of time) the two tiers would become one.

    Problems :
    - OSR and Council systems would have to be better integrated
    - National uniformity to avoid inconsistency
    - Exempt users would face a higher degree of inflationary impact.eg primary production, boarding and low cost housing. Social issues ?
    - Who would set annual reviews and increases ? For uniformity ?
    - Currently land tax and duties are used to address undesired buying eg foreign buyers. A complete national approach would be needed. Given Labor and Lib disparity how will that occur ?
    - Removing upfront duty for a annuial charge would eliminate property value based spikes in state revenue which they rely on (NSW). They may not want to lose this benefit and if they overcharged annual rates to address this benefit it would be unfair and excessive to all landowners.
    - Could be inflationary to rent. At present landlords dont charge for stamp duty recovery. They likely would increase rents for a specific property annual tax. Especially where it is an additional outgoing v's present.
    - Inflationary impact on property. Imagine removing the upfront impact of duty and replacing it with an annual charge. Significant increases in purchasing would occur from :
    • First home buyers of all ages since savings needed to access property would be slashed
    • Investors - Barriers to entry would be substantially reduced (ignoring post APRA lending issues)
    • Foreign buyers !!
    • Flippers. Duty acts as a massive disincentive to flipping. Removing this would likely see massive hyper inflation to a segment of unrenovated properties. Further affecting first home buyers



     
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  2. Hamish Blair

    Hamish Blair Well-Known Member

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    Is it time to abolish state governments? Think of the savings!
     
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  3. Owlet

    Owlet Well-Known Member

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    I am confused
    I have paid Stamp Duty on all properties
    I pay Land Tax as well (except PPOR)

    Does this mean on all properties that I will no longer have any tax bills for these properties? (Those who paid stamp duty will not pay land tax?)
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Its been doing rounds of all levels of Govt for a few years. The problem is how to make it fair and not double tax some owners who already paid duty. Whenever taxes are changed there is also some who are badly affected.

    No. You would pay different tax. ( IF it ever occurs.) instead of a huge slug when you buy its a annual tax.

    A broader based land tax on ALL property incl your own home would replace stamp duty. On top of council rates. This latest suggestion proposes a phased change so those who paid duty would be exempt from the new property tax (but still pay the old land tax) and new sales free of duty would pay the proposed new property tax only (I have called it property tax to be distinct from land tax)

    Two taxes would be replaced by one. (ie Stamp Duty and old land tax) replaced with a single (higher!) land / property tax.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Then you've got to capture inherited properties, property settlements etc too.
     
  7. hobartchic

    hobartchic Well-Known Member

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    You mean like bring in one tax (GST) and abolish all other taxes? Yeah, right, governments' just love to reduce tax.
     
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  8. SatayKing

    SatayKing Well-Known Member

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    Ah bring on imputation of rent on PPORs. Problem solved except for who collects it. Been stewing on the back burner at Treasury for years. I believe the Netherlands has a form of it.
     
  9. Mike A

    Mike A Well-Known Member

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    just another grab for money to pay for social welfare and foreign aid.
     
  10. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Despite constant commentary about the unaffordable of housing, the biggest hindrance I see to people getting their own home is the deposit. It's not easy to save $100k or more for an entry level deposit.

    Stamp duty is part of the deposit equation. If you remove stamp duty, it will allow people to pay higher prices for housing, triggering a significant price increase. This has been well documented when state governments have removed stamp duties for first home buyers.

    It makes it easier to get into property but creates a larger long term debt bubble. Ultimately it means that the wealth gap if widened further.
     
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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    But then I wouldn't need to try to learn 8 different laws in relation to land tax, stamp duty, trusts, property etc etc. What would i do with the extra time on my hands?
     
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  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    And imagine the impact of flippers. Every man and his dog will create the world largest (second largest) tax scheme to avoid income tax and GST and price the battler out of renovator properties.

    Whats the world largest tax scheme you ask? Australian superannuation balances of $2 trillion ($2,000,000,000,000 or two million million dollars) with a legal tax rate of 0% to 15%.

    Short of a tax free nation its biggest in the world of its type AND when money gets contributed it can get a tax deduction of up to 47% :eek:
     
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  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Just one tax is needed - GST on everything with no exceptions.
     
  14. Mike A

    Mike A Well-Known Member

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    agreed with you Terry.

    - raise GST to 20%.
    - remove income taxes.
    - cut back social welfare to first child only.
    - reduce ATO staff as a much simpler system
    - imposition of GST on the poor can be offset through social welfare system

    AS AI starts to replace many jobs. I think many accounting and legal jobs wont exist in 20 years time with AI technology then the concept of a Universal Basic Income is becoming a hot topic.
     
    Last edited: 1st Nov, 2017
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  15. Scott No Mates

    Scott No Mates Well-Known Member

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    So you can contribute before tax $$ without the contributions tax?
     
  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Outsource all taxation to the banks - They are brilliant at this stuff. They would build automated processes into every account / transaction process and take tax as they go. No returns for anything. Appeals and objections ? NEXT !...You are the 2,050th person in the queue. Press 1 to remain online.

    Abolish states OR local Govt.

    National ID system linked to medical, education, tax and all services.

    Social welfare isnt for the poor. Its for many who claim to be poor. Increasing welfare to compensate GST etc would attract more flies. A robust welfare system should be needs based. At present it is demand based.

    Phase out age pensions and reintroduce tax on super ...Too many people are feeding from the one trough. We seem to have expanded both super and pensions when one should have replaced the other as a safety net.

    No free school education - Why is it seen as free ?? No other government service is. Charge all who can afford it basic fees. Make education less funded by taxes. Target break-even or a profit to pay for capital works.

    Govt should be banned from creating infrastructure. It demonstrates its economically unviable. The high cost argument fails as they just overspend and thats why its costly. Look at NBN. No NBN, No tunnels. No rail. No new major roads etc..If private enterprise wants to build it then proceed willingly. If they go broke there is no bail out.
     
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  17. hobartchic

    hobartchic Well-Known Member

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    By all means, raise the GST to 20 % and see consumer spending plummet further. Modelling showed that a rise to 15 % as proposed by academics would likely cost more than it would raise. You will note that this has not been mentioned by politicians of late.
     
  18. hobartchic

    hobartchic Well-Known Member

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    Government are the best at building infrastructure. They should just take their time and tell people that it will cost lots of money and create lots of jobs as Telstra used to. The whole point of government is to build infrastructure and provide services that no company can profit from. The NBN is a good idea if everyone accepts a twenty to thirty year build time with jobs for locals, well paid, and done properly. Will never make a profit though and Telstra engineers always knew this which is why they did not do it (zero business case).
     
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    But tax cuts on income would compensate. GST also gets non-resident who are here but don't pay tax. It also will hit pensioners, but the pension could be increased to compensate.
     
  20. hobartchic

    hobartchic Well-Known Member

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    Those are fair points. I'm still not convinced that it's the most efficient way to procure tax, in part due to all the people that would be potentially compensated, and the noticeable downturn in consumer activity this close to Christmas. It would hit those on Newstart and very low wages the hardest and they would not be adequately compensated. I know being single and without children and work seems to cause derision. I am yet to meet anyone who found themselves on it that is not shocked at how low it is.