Tax Tip 369: How Property Related Taxes and Become Higher over the Years

It seems that taxes in relation to property keep going up. Here are some examples:


· Back prior to 1985 there was no CGT at all.

· Around 2007 discretionary trusts stopped receiving a land tax threshold in NSW

· 2000 GST was introduced.

· 2017 approx. foreign persons land tax surcharges were introduced, higher stamp duty too for foreign persons

· 2019 Ability to claim travel removed (except for companies)

· 2019 ability to claim depreciation on 2nd hand fixtures and fittings removed (except for companies)

· 2019 ability to claim interest during construction removed (except for companies)

· 2019 the 50% CGT discount for non-residents was removed.



I can’t really think of any times that the taxes have dropped, other than perhaps the 50% CGT discount which was introduced around 1991.


What does this suggest?

Taxes related to property will probably further increase over the coming years.

 

The personal tax rates and bands have dropped tho? And will be decreasing further?

 

Yes true. They give with one hand but take back with the other though.

 

The land tax thresholds (in VIC) have hardly changed in years. But land prices have skyrocketed. So there is an implicit land tax increase!!

 

Same in qld too

 

Btw I think there is an increase coming in vic

 

No they have actually gone the other way. And company tax rates can now be 25% v 30% for a LONG time.

States and the Commonwealth WILL need to consder taxes after this pandemic ends. Property wealth is a obvious target. Taxing wealthy property owners is a palatable story in the media.

• CGT concession cut
• Mechanisms that strip deductions for interest eg NZ and UK model
• Possibility of a seperate minimum tax rate to property gains
• QLD chnages to land tax eg multiple trust rule
• Reduced / capped indexation in NSW ?
• Developer taxes which take a cut of profits esp where rezoning benefits values. Some indirect through levies etc
• First home buyer and duty concessions ? They could be capped and not reflect rising values
• Indirect mechanisms eg lending limits on speculation and investors

 

Its good public policy to make property easier to hold for the owner occupiers at the expense of rich investors so whenever they want to raise taxes they tax the investors as this shifts the burden to the 'rich' and makes it easier for the average person to buy their home.

 

Yes there is. :-(

 

But total tax paid still increases due to bracket creep / income increases.

Also:
Superannuation caps/limits
FBT (paid by employers but used for government benefit calcs)

 

land tax will be decreasing in vic for some but increasing more for others in 2022

 

Given recent value increases, likely those with a valuation above $250k (to be $300k) will likely lose any threshold increase savings with offsetting increases in valuations however.

 

Agree 100%...govt will look for revenue post this pandemic... A lot of people are playing the same game as last 5 years. If a recession hits at the same time you will know who is swimming naked.

 

Now it’s Liberals telling us we are going to have to cut the capital gains tax concession if we want to get Australians into homes

 

The matters most at risk
- Interest deductibility on all investments. Some countries cap it or limit it.
- Neg gearing (as a consequence)
- CGT discount of 50%
-Potential to introduce a "middle of the road" CGT outcome. Let me explain. Long term holding gets a CGT discount. Short term isnt. Perhaps they will introduce a middle of the road rule which seeks to strip the CGT discount when other tax benefits were obtained eg neg geared for 3 of the past 5 years or 50% of the ownership period. If you meet that test there is no discount.
- Div 43 deductions
- All existing Div 40 deductions ?
- A statutory deduction cap to higher income earners or standard deduction which is used in some countries

Imagine the impact of IP servicing cals if neg gearing was a tax deduction. 30-50% of some servicing could be lost. To be honest its the one most probable as it can also impact leverage and further acquisitions. Just not this side of the next election

 

Wonder if this will impact property taxes in VIC

 

Add to this the recent changes to QLD land tax law where they will be indirectly taxing land held in other states! Some taxpayers have reported land tax will go from about $2000 per year to $7000 per year.

 

This won't be happening now

 

But the next targets could be
- negative gearing, and
- the 50% CGT Discount

Negative gearing and capital gains tax discount set to cost the budget $20 billion a year within a decade

 

I may argue that at some point if CGT reform occurred the pre-CGT issue could also be included. Its 37 years since capital gains became subject to tax. The numbers of pre-CGT sales is minor and with deaths seems to erode progressively. One way to avoid widespread outcry from people who may hold pre-CGT assets is to announce a end date and give taxpayer advance notice so that they may choose to trigger a CGT free sale so that future gains can be managed by the taxpayer rather than imposing pro-rata obligations