Equitist wrote on Oct 3
rd, 2010 at 3:06pm:
There are a lot of inter-related socio-economic issues involved here...
Ironically, the main reason why we have current housing shortages is that: due to a raft of tax and Superannuation changes over the past decade, negatively-geared residential real estate is nowhere near as attractive as it used to be...
I suspect that some of these changes have had unintended consequences for housing supply - especially CGT on shares, high-end tax cuts and Superannuation rorts...
Real estate investment has disproportionately-high entry, holding and exit costs - some of which costs can be claimed up-front - but most of which must be amortised over many years...
With the high-end tax cuts so far this century, the geared amortisation of costs has become far less lucrative - especially when coupled with reduced CGT on share ownership, salary sacrificing and the 15% effective marginal tax rate of contributions to Superannuation...
In FY00, an individual earning $100,000 pa paid tax on all income over $50,000 at the marginal rate of 47%.
In FY10, an individual earning $100,000 pa paid tax at much lower rates - only 30% on income between $50,000 and $80,000 and only a 38% marginal rate on income between $80,000 and $100,000.
Not only, is the middle-high income individual paying much less tax on their other income, before any gearing, but any gearing is now far less lucrative...
So, compared to FY00 and despite the massive drop in tax payable in the first instance, someone earning $100,000 in FY10 who might potentially have $20,000 in claimable deductions against a residential property, might now percieve themselves to be 9% of $20,000 ($1,800 ) worse off annually - and this will influence their decision to incur the high entry costs of purchasing/constructing residential real estate.
Meanwhile, Superannuation Tax Concessions have created an effective marginal tax rate of only 15% for most high income earners - who could instead salary sacrifice into Superannuation and claim much larger tax concessions, without all the hassles of being a landlord...
On top of this, they now have the option of gearing on Shares - and the relative CGT disincentive has been removed...
It is high-time that our Federal Govt reviewed (and remedied) the most counter-productive impacts of these tax and Superannuation measures on the socio-economic fabric of this country - especially housing supply/demand and costs...
It is not only the tax concessions for the upper income brackets, it is also the fixed minimum hourly rate that has been set too low. Successive govts have allowed business to pay less to their employers over the years, the savings of which have been directed towards profits which have grown over those self same years. People on average and middling incomes cannot survive on their own. They must have their income subsidised by welfare... Family Tax Benefit, Child Care Benefit, Child Care Fund, Immunization Allowance, Educational Allowance and for lower income earners you can add in primary benefits such as Parenting Payment Partnered and Single to that raft of wage subsidization listed above.
Business talks about profits for the shareholders and Govt sneakily talk about 'mum and dad investors' yet the bulk of all shares are held by that very small social cross section called the very rich.
Govt should not have to subsidize the full time worker. All their living needs and saving needs should be covered by their wage. The only way to achieve this is to increase the minimum wage significantly, decrease welfare wage subsidy and demand that business return their profits to a level that is respectable by increasing the wages of those who help those business to profit in the first place.... or tax all profit over a respectable level and redistribute that profit either directly into the hands on middling and lower income earners or into their communities so reducing or remove child care and educational costs etc...
For small business who claim to be impacted by increases to the minimum wage, subsidies could be offered after first doing a feasibility study and audit on that business... no point subsidizing a business that is failing or not properly disclosing. And the tax office is already set up for this with the required number of staff for this.
A full time single wage should cover a persons rent/mortgage, utilities, food, self maintenance needs (based on female costs since they are more expensive), transport, entertainment and savings for that single person.
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