Australia’s Taxing Problem

Australia’s Taxing Problem

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It’s no secret that the Australian government is up the proverbial creek without a paddle given its federal budget is in crisis. Finance Minister Mathias Cormann told the Ten Network “We inherited a budget in a very bad shape from the Labor Party, a $30 billion deficit at the time of the election and deteriorating, net debt heading for $200 billion, gross debt heading well beyond $300 billion.”

This week, Australia’s growth to slow: Goldman Sachs “Relative to the acceleration forecast in the global economy, in Australia we expect economic growth to decelerate in 2014, anticipate further easing required by the RBA, forecast additional fiscal drag and see a corporate sector set on a path of investment restraint.” So based on this forecast the federal government is going to have to “trim the sales” where possibly they may be left with no other alternative than to introduce significant tax reforms.

On September 20, 1985 the Hawke/Keating government introduced the Capital Gains Tax in Australia where the tax only applies to assets acquired on or after that date where the most significant exemption was the family home which to this day remains tax free. On 1 July, 2000 the Howard/Costello government introduced the Goods and Services Tax (Australia) a value added tax of 10% on most goods and services transactions. It replaced the previous Federal wholesale sales tax system and was designed to phase out a number of various State and Territory Government taxes, duties and levies such as banking taxes and stamp duty. Well we know the States and Territories have all put stamp duty up since then.

BareIsland

SYDNEY AERIAL PHOTOGRAPHY 

BUY PRINT

Record Stamp Duty windfall for NSW government where the Sydney Morning Herald reported on figures published by the NSW Office of State Revenue showing a record $356.8 million was made from Stamp Duty receipts collected in October 2013. The booming property market has done wonders for the NSW State Government’s September quarterly budget. The June budget had forecast a $374 million deficit, but a surplus of $239 million was actually achieved. You can see why the States and Territories opted to ignore removing Stamp Duty from their respective cash registers.

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In July 1985, the Hawke/Keating government introduced Negative Gearing Australia the tax treatment of interest expenses and future gain affects the after tax return. Losses from negatively geared property investments, share investments, and other commercial business ventures are tax – deductible against other taxable personal income in Australia. Let’s get negative about negative gearing – “The federal budget is in crisis on the revenue side, and one of the unexamined holes in the budget is the $5 billion a year used to fund negative – gearing tax concessions.”

In recent times property investors have been the major players in the market – more particularly Asian buyers make up a quarter of buyers in Gold Coast. To further add to the confusion when Prime Minister Tony Abbott announced his cabinet he removed the Housing portfolio so on that basis his government is actually blindfolded on what is actually happening within the Australian property markets – this was a dumb and ill – informed decision.

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A few weeks ago I wrote in Virtual Realty News “I am advised that Mosman has approximately 6,000 properties for rental which in itself is a staggering number – 46.6 per cent. If the government were then to be heavy handed on negative gearing the Mosman property market would be absolutely decimated with investor exit strategies.”

Should it be phased in over say a ten to fifteen year period this could bring down the government at the next election as it would provide the Opposition a great platform – much like the Carbon Tax campaign Tony Abbott fought so hard on to remove the Labor government. Not to dismiss the hostile campaigning from Hawke/Keating who were the architects of this policy reform.
It doesn’t matter which side of the fence you sit on the Negative Gearing debate is good for the economy and the government given that investors keep investing back into their investment properties which in turn provides jobs for other businesses.

The biggest problem for the government is when the Howard/Costello government introduced the GST this created the ‘cash economy’ where improvements are done less for cash. The households are all over the less for cash while the investors demand the full invoice to claim a greater tax deduction. Therein, lies the problem for the government – it is hammered on both fronts.
So the Capital Gains Tax is severely impacting the Goods and Services Tax – the Abbott government would be better served critiquing the Capital Gains Tax where with the family home it becomes a tax deduction and tax is proportionately paid on the sale. Australia today remains one of the very few countries that doesn’t tax the sale of the family home. Obviously this must be retrospective so with one third of Australians renting, another third owning with a mortgage and the remaining third owning their homes outright this could further stimulate the markets.

It would certainly reduce the cash economy.

MOSMAN – 2088

• Number of houses on the market this time 2012 – 99
• Number of houses on the market last week – 99
•Number of houses on the market this week – 86
•Number of apartments on the market this time 2012 – 106
• Number of apartments on the market last week –59
• Number of apartments on the market this week – 64

CREMORNE – 2090

• Number of houses on the market this time 2012 – 13
• Number of houses on the market last week – 13
• Number of houses on the market this week – 11
• Number of apartments on the market this time 2012 – 21
• Number of apartments on the market last week – 16
• Number of apartments on the market this week – 16

NEUTRAL BAY – 2089

• Number of houses on the market this time 2012 – 16
• Number of houses on the market last week – 9
•Number of houses on the market this week – 6
• Number of apartments on the market this time 2012 – 53
• Number of apartments on the market last week – 33
• Number of apartments on the market this week – 29

Source: Australian Property Monitors

For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate

*               *Click Here

For this week’s opens for inspections

               *Click Here

We are witnessing the final market run before Christmas so all that remains to be seen is just how low will the number of properties on the market fall?

Cheers ^__^

One Response to “Australia’s Taxing Problem”

  • Michael says:

    Really interesting graphs and charts, thanks for putting those together & sharing. “Past performance doesn’t guarantee future performance” my mentor always tells me this quote, but I always tell him that a trend is a trend, why fight it?

    Anyways, thanks again!

    – Mike

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