The Australia Institute has called for changes to capital gains tax, claiming exemptions are costing the Federal Budget $48 billion. It’s recommended removing exemptions for the family home if it’s valued more than $2 million.
The think-tank has proposed changes to capital gains tax, claiming it would save the Federal Budget $12 billion. Under the proposal, the family home would no longer be exempt from the tax if it’s valued more than $2 million.
However, the housing industry has downplayed the idea, claiming it could put pressure on the property market ::
The Federal Government says everything is on the table as part of a whole-scale review of the tax system, and the Australia Institute argues capital gains tax should be at the centre of the debate.
The Institute’s chief executive, Ben Oquist says the tax and other discounts and exemptions available to homeowners and investors are the most expensive tax concessions in the Federal Budget
“The Government is losing almost $200 billion over the forward estimates.” Mr Oquist said. “That’s more than the entire spending on the age pension, more than the Government spends on Medicare.”
The family home has been exempt from capital gains tax since 1995. But the think tank wants that exemption to be removed if the property is worth more than $2 million.
Mr Oquist says this move alone could save the budget $12 billion over four years.
“If you are considering genuine tax reform and if the budget is in strife,” Mr Oquist said. “It would seem nonsensical not to have a look at it.”
The Institute also released a study from NATSEM, the National Centre for Social and Economic Modelling, showing the top 20 per cent of earners receive 55 per cent of the benefit.
“Unlike raising the GST to 15 percent, tackling the capital gains tax discount and its interaction with negative gearing is likely to only affect the most well off in society and yet give the budget bottom line a big boost.” Mr Oquist said.
However, the Housing Industry Association – HIA – says such a change would have a detrimental effect on housing supply in Australia.
Shane Garrett is the association’s senior economist, and he’s warned it could reduce property investment and place extra pressure on affordable rental accommodation.
“It could almost act like a super stamp duty.” Mr Garrett said. “The capital gains tax exemption on the family home is one way to encourage more demand for new homes and it’s also a way to encourage more new homes to be built. In the context of supply shortages that are affecting parts of the market around Australia at the moment, we think it would have detrimental impacts from that point of view.”
Mr Garrett says the $2 million limit proposed by the Australia Institute would be too low and would act as a disincentive for people to move house.
“In Sydney for example, the median house price at the moment is close to $1 million, so as far as a $2 million situation that would affect some houses that would not be particularly at the extreme end of the scale.” Mr Garrett said. “I mean there are many fairly standard houses in Sydney now that would be in that price bracket.”
REBLOG! Meet the home owners going back to renting
Once upon a time you got a foot on the property ladder and kept climbing until the mortgage was paid off. But in today’s world that picture seems a little quaint. Just as jobs for life and together forever relationships carry a vintage hue, so too, does the idea that the transition into home ownership will be a permanent one.
The renting versus buying question is one that we may continue to encounter throughout our lifetime :: Read the full SMH article »»»»
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Anatomy of a Bloodbath! Will Augusts Stock Market Correction CRASH?
Many financial analysts have rushed to describe the current global stock market turmoil as a historic event, unprecedented, a bloodbath, however its evolution has so far been quite traditional. The correction, if that’s what this is, has been building since 2011/12 when many analysts began to question the numbers attached to Chinese growth, peaking earlier this year when markets reached new optimism, April marked historic highs for global indices. And while markets around the globe rally to retake losses, China remains the question on everyone’s lips.
Globally this current selloff started as a repricing of growth outlooks, in the main based on believable or unbelievable numbers out of China over the past 5 years, mounting evidence of economic weakness in the worlds second largest economy, coupled with persistent low growth in Europe and Japan, made it hard for markets to ignore the impact on earnings and profitability of what looked suspiciously like a global slowdown :: Read the full article »»»»
RELATED! Investor Home Loans Tighten
Mortgage brokers are reporting credit conditions in Australian housing lending market have become a lot tougher in the past two weeks according to CLSA’s leading bank analyst Brian Johnson.
Mr Johnson said recent discussions with broking contacts pointed to banks cutting discounts on investment loans and demanding tougher scrutiny on borrowers’ ability to repay their debts.
The crackdown comes only days after data was released showing mortgages had soared to a new record high of $31.3 billion in March.
Lending to property investors is now growing at 21 percent year-on-year, more than double the so-called speed limit of 10 per cent identified by the Australian Prudential Regulation Authority – APRA – earlier this year.
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