AusGeoff wrote on Jun 13
th, 2022 at 10:23pm:
Most family homes are exempt from land tax under what’s
known as the “principal place of residence” (PPR) exemption.
More importantly, negative gearing must be phased out.
Speculators are a major part of the reasons that younger
people currently have even less chance of buying their first
home, and older low-income people are struggling with
increasing rents.
Just found this clear explanation from the Reserve Bank regarding the distortive effects of negative gearing ...
Quote:Negative gearing
The RBA argued that negative gearing – the ability to deduct legitimate expenses incurred in the course of earning income – was "an important principle in Australia's taxation system, and interest payments are no exception to this".
"It is worth noting, however, that the interaction of negative gearing with other parts of the taxation system may have the effect of encouraging leveraged investment in property," it said.
"In particular, the switch in 1999 from calculating CGT at the full marginal rate on the real gain to calculating it as half the taxpayer's marginal rate on the nominal gain resulted in capital gain-producing assets being more attractive than income-producing assets for some combinations of tax rates, gross returns and inflation.
"This effect is amplified if the asset can be purchased with leverage, because the interest deductions are calculated at the full marginal rate while the subsequent capital gains are taxed at half the marginal rate. Since property can usually be purchased using higher leverage than other assets that produce capital gains, property is especially affected by this feature of the tax system."
https://www.afr.com/policy/plan-to-cut-capital-gains-tax-discount-for-property-i...*
I'd like to see land tax steeply ramped up on short term rental properties to free up well needed housing stock for long term housing.
And while their at it, a higher rate land tax for long term vacant properties!
The Airbnb effect needs to be kerbed!
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