ALP tax grab on Negative gearing, CGT, SMSF and trusts will dissuade property investors.
Returns on investment are income and capital gains.
With the high property prices, the rental income less expenses (including rates and land tax) and building depreciation do not cover the cost of capital and there are opportunities providing better returns in alternative investments.
The loss after deducting loan interest, expenses and building depreciation can be reduced by tax deductions, reducing the loss.
Under ALP, the incentive to invest in property will be substantially reduced due to removing the available tax deductions. The incentive can only be compensated by increase rental income (to reduce the loss) or /and drop in property prices (capital investment).Investorsearned gross rent of $38.7 billion in 2013-14, a rise of just 1.8 per cent inthe year. But they claimed $42.5 billion in deductions, for mortgage paymentsand other costs, and the net rent, claimed against other income for taxpurposes, and lost to the public, was negative $3.71 billion. CoreLogicnoted that the net rent was down 59 per cent since the peak of 2007-08, largelydue to falling mortgage costs. The losses could rise again if or when interestrates rise.
Furthermore, the incentive to invest in property on the assumption of rising property prices do not fit in the present falling house prices environment. Investors taking risk on the longer term increase in property price valuation will be hit by higher CGT, under ALP, transaction costs and stamp duty.
www.theaustralian.com.au/business/wealth/labors-tax-grab-its-the-capital-gains-tax-stupid/news-story/4ca62ca5f3bcd63e147379c294608592
In addition, ALP hit on SMSF and trusts will affect superannuation funds and family investors investment strategy.Investorsdo pay tax. In 2013-14, they paid, even at the concessional marginal rate,around $5 billion in capital gains tax on $33 billion of net capital gains.More recent tax collections would be higher.
They alsopaid a substantial share of the $45.2 billion collected in 2014-15 in stampduty, municipal rates, and land tax.
TheCoreLogic numbers show that investment properties are cheaper than the generalmarket, with 53 per cent worth less than $500,000. Investors are competingdirectly with first home buyers but they do not appear to be buying expensiveproperties to maximise the taxation advantages.
The numbersshow that investors take a greater proportion of new properties, 40 per cent inMarch, than is widely believed.
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