Re: General Discussions
Reply #2625 –
My understanding is that there is a hybrid method of grandfathering which will be a little complicated, with assets needing to have a valuation on or around 1 July 2027.
Current CGT is 50% discount then taxed at marginal rates. Using a capital gain of $100k on a property:
if you are in the top bracket (47%) - discount $50k, tax @ 47% = 23.5k
If you are in the 35% bracket - discount$50k, tax @35% = 17.5k
These taxed gains are offset by deductions already claimed for negative gearing.
With flat rate of 30% less CPI - it gets more complicated to work out, but if we say bought for $500k, sold for $600k, CPI was a constant 3.5% for five years of holding the asset:
Cost Base goes to $593k - which gives a $7k Gain taxed @ 30%?
Taxing discretionary trust distributions at a flat 30% is also interesting. There are many who use it as pure tax minimisation/rort because they can (eg child is 19 and is given a distribution of up to the 35% bracket, which decreases the distributions required to the highest earning trustees, often in the family - pure rort), but also understand that some are used in a genuine manner to distribute to those that need it. It may affect small business that genuinely operate in a way that family don't draw a wage, but rely on the distributions instead.
What is the solution to housing affordability proposed by those that are against this? All I have heard is reduce immigration (which the wider ranging effects are fairly complex)
In terms of Private Health rebates for seniors, I'm not really sure about this. While rules have changed and just using my parents as an example - the last few years of dad's work before retiring, he could package all his salary to super and then draw a tax free pension. He hasn't paid any income tax or medicare since he was about 62 - over 20 years ago. I can see the impact of removing the rebate, but don't really understand how to feel about it...
There needs to be change to NDIS - it has blown out, with claims for frivolous, tenuous things to inflated costs for specialists - it has unfortunately been subject to rorts and 'mission drift'. Needs to be reigned back in.
Alternatives? There are none, unfortunately. We desperately need a viable alternative.
The housing affordability issue is as simple as follows:
We live in a hyper inflated environment. A recession is the answer to that, but no one REALLY wants one and the government is doing everything it can to prevent one. The reasons behind is that it will hurt more than it will help in the short term and that means that they will be voted out. We have kicked the can so far down the road on one, we are actually going to have a worse one when we finally bite that bullet and experience one.
So what happened? People bought assets that appreciate as a store of wealth. Banking interest cant beat inflation, and nor do they want to. The growth in the cost of homes doesn't perfectly reflect inflation over time, but it costs a lot to service a loan on a property, premium property in premium suburbs fetch premium pricing, and the equation there is, there is no way to make more premium property locations. So put whatever CGT, negative gearing rules you want to around property, but as a store of wealth with appreciation, you cant beat property in a premium location i.e. inner city suburbs. This is not solely a problem here in Aus, places like Lisbon and Athens are the same, where the average wage is much lower than here, but an apartment in the inner city will cost you upwards of 400 000 euro. CGT, and Negative gearing is a furphy, the property price equation is a premium property will fetch premium price, in a premium location. Always has been the case. What was a million dollars back in the 90's in Toorak, is 10s of millions today, vs what was 200k in Box Hill, which is worth about 2 million today. Both have increased 10 times in value, and neither has anything to do with tax law but the greater economic climate. This leads me to why those rules are problematic. 1. They only hurt the very people they are aiming to help. 2. It looks like a cash grab by the government that will likely lead to more expensive rates to cover increases. I.e. Why would I service a debt at cost, when I can service it at no cost considering I will then get penalised for any gains in line with inflation? So change the rules, it wont change the purchasing of property.
Supply vs Demand is the equation.
We have a limited supply, and an increasing demand. That's an equation for an increase in prices over time, particularly when combined with inflationary pressures in the economy. I know people who develop property. They wear all the risk of building it, all the cost of building it, and now they are going to pay a bunch of tax on their gains afterward which will make the heartache of doing it perhaps not worthwhile doing, although they will continue, perhaps at a slower rate. Will this lead to fixing the supply problem? Not likely.
So what to do.
I don't have the answers, but having purchased property, and thought about developing one, without contacts, its an expensive and risky proposition that will ruin me if it goes wrong. No one is gonna be there to help me out if it goes pear shaped, Ill wear all the risk, but the gains are gonna be socialised.
I missed something here earlier. Post edit:
Boomers bought property in the then city fringes. The appreciation of the value in property is the issue. My grandparents bought in Hawthorn when it was undesirable. They sold it and bought in donvale a bit later, and when the girls got married (mum and my aunty) they sold donvale, and bought 3 homes in burwood/burwood east. 1 for mum. 1 for aunty. 1 for them. They moved in with mum initially and lived with us, until 1993. I was born in 82.
At the time, Burwood east was an upcoming city fringe suburb surrounded by farmland, a bit like Cranbourne today. It was just much closer because our city was smaller.
Topic: General Discussions (Read 1729764 times)
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