$2m Home Tax - What's next?

[Buddy]

Well, family homes are subject to gains tax in some other countries. USA for example. But the system has been there for a long time and they also treat the family home same as any investment, where tax deductions are also permissible, eg interest is tax deductible. I can recall when interest was even tax deductible in OZ. So if CGT were to be ever introduced in OZ, it would have to be on a fair basis, with tax deductions for interest, improvements, and certain other expenses (land tax, stamp duty...blah blah).

The biggest problem with setting up this system, is what is the original cost basis for working out the CGT? If it were to be their original price already existing it would bankrupt most people in Australia if they changed houses. And I am being serious when I say that. Just imagine someone who purchased a house 30 years ago, for say $40,000 and it is now worth $2,000,000 (I could probably show you, if I had the time to do the research, tens of thousands of examples of that), and then they sell (for whatever reason) to buy another house. If they had to pay CGT on $1.96m they would not be able to purchase another similar house and would probably face bankruptcy. I simply don't believe it is feasible to introduce this system and make it retrospective on existing properties.

There are huge problems with setting up this sort of system from scratch, and it is all very well for the socialist class of envy to say tax the buggers. But think about it. You would simply be creating another class of welfare dependants by sending the so called rich (they could be asset rich but cash poor) to the bankruptcy court if they changed houses. You might say fine, they deserve it but you might also find some people getting rather angry about this, to the point of violence.

I don't think it is a great plan. I suspect also, in the grand scheme of things, it is a vote looser not a vote winner.

 

[gooner]

Well, family homes are subject to gains tax in some other countries. USA for example. But the system has been there for a long time and they also treat the family home same as any investment, where tax deductions are also permissible, eg interest is tax deductible. I can recall when interest was even tax deductible in OZ. So if CGT were to be ever introduced in OZ, it would have to be on a fair basis, with tax deductions for interest, improvements, and certain other expenses (land tax, stamp duty...blah blah).

The biggest problem with setting up this system, is what is the original cost basis for working out the CGT? If it were to be their original price already existing it would bankrupt most people in Australia if they changed houses. And I am being serious when I say that. Just imagine someone who purchased a house 30 years ago, for say $40,000 and it is now worth $2,000,000 (I could probably show you, if I had the time to do the research, tens of thousands of examples of that), and then they sell (for whatever reason) to buy another house. If they had to pay CGT on $1.96m they would not be able to purchase another similar house and would probably face bankruptcy. I simply don't believe it is feasible to introduce this system and make it retrospective on existing properties.

There are huge problems with setting up this sort of system from scratch, and it is all very well for the socialist class of envy to say tax the buggers. But think about it. You would simply be creating another class of welfare dependants by sending the so called rich (they could be asset rich but cash poor) to the bankruptcy court if they changed houses. You might say fine, they deserve it but you might also find some people getting rather angry about this, to the point of violence.
.

So sell a house, have $2m cash. Capital gain of $1.96m. Home purchased 30 years ago, therefore CGT of nil, as a pre-1985 asset. Even if was bought after then, and assuming the same numbers (obviously unrealistic), a gain of $1.96m, apply the 50% CGT discount is $980,000. Even if on top tax rate, tax payable is $456,000 leaving $1,544,000 cash. So where does the bankruptcy court come into it? Can still buy a house for $1,544,000. As an offset would also have tax deductibility of various expenses spent on the house and interest payments. So net impact probably not that great.

 

[trainspotter]

So success is a measure of putting up with crap to just to earn a buck?

I can think of a lot of other things I'd rather do to be successful Trainspotter than this - put this down to heat of the moment comment?

Cheers

Nope ... no heat of the moment comment at all there Buckeroo and Gooner. Set clear objective pathways and follow them to the end. You may not like your boss/income provider/money making machine but guess what ... at the end of the day you can go home and he/she/it is not there. Work to be paid is the answer. I have performed many tasks that have earned income (for me)for people that I did not really care for but their money is as good as anyone elses I have found. There was no quantum leap of not liking someone to new found success in my formula. If it means you have to bite your tongue and still take their money then it is "game on" in my view.

I have lost count of how many times I have contracted to people that I would not have to my place for dinner but I still took their money from them.

I own a pearl farm right? The worst job is cleaning the shell with a 3000kpa water jet pump (cleans the weed off allowing the oyster to filtrate) It is the worst job on the farm BAR NONE. I am the only one that grabs that jet propelled weapon of destruction and hammers all day. The rest of the crew think I am mad. You don't have to like it ... just take the money.

It could be written as simply as "Do the worst job first and the rest is easy"

Gooner "to what end" ? you may ask. Until you are satisfied that the job you have done is the best to your abilities. Once this is established then the rewards follow. Normally it is in the way of cashflow ie money in the bank.

I hope this has cleared up my point of view in this matter. If it hasn't then I am quite prepared for both of you to come over to the pearl farm and do a weekend of cleaning 15,000 oysters (just for the experience I might add) and sit down at the end of the day knowing you have performed a job well done.

You may not like me at the end of the experience but the rewards are handsome.

 

[Buckeroo]

I hope this has cleared up my point of view in this matter. If it hasn't then I am quite prepared for both of you to come over to the pearl farm and do a weekend of cleaning 15,000 oysters (just for the experience I might add) and sit down at the end of the day knowing you have performed a job well done.

You may not like me at the end of the experience but the rewards are handsome.

We'll, good for you. If only I could instill this sort of attitude in my kids - but alas, not a hope there.

And 15000 oysters may be out of my league - how about maybe 10 & then a few beers while fishing off that boat of yours?

Cheers

 

[trainspotter]

We'll, good for you. If only I could instill this sort of attitude in my kids - but alas, not a hope there.

And 15000 oysters may be out of my league - how about maybe 10 & then a few beers while fishing off that boat of yours?

Cheers

LOL ... Big difference between black lip oysters that grow pearls and edible (Coffin Bay) type oysters. One tastes like the sole of a leather shoe that has stepped in dog excrement and the other grows a pearl. LMAO .... Anytime Buckeroo ... I will place the champagne on ice in anticipation of your arrival.

Offer is only good if the Guvmnt decide NOT to tax me any further.

 

[prawn_86]

You may not like me at the end of the experience but the rewards are handsome.

Might take you up on that offer. We are looking at working and travelling since the grad job market has gone to **** :

 

[trainspotter]

Might take you up on that offer. We are looking at working and travelling since the grad job market has gone to **** :

Open door policy when it comes to "all hands on deck". I could introduce you to the many joys of pearl farming. (especially the fire weed part) Don't let the tiger sharks scare you off either, they are friendly to a point. November 1st is our next trip to start production again. Have a boys trip planned mid September and late October (no pearl farm duties and lotsa fishing and drinking)

 

[kincella]

couple of points here....seems the conversation has moved to what one needs to do to make money from working.....how about a new thread for that topic...
agree with trainspotter....your first needs are money for living and independence.....
the next step is to gain experience in your chosen field....or just a life experience...its all good experiences for you...for life......

secondly...the heading here is a misnomer....its media rubbish....
read the true story here...about houses, wealth tax and negative gearing, and the real RBA statements....its very different to what was reported by our media

http://www.businessspectator.com.au...ument&src=is&is=Property&blog=Concrete Detail

 

[moXJO]

Open door policy when it comes to "all hands on deck". I could introduce you to the many joys of pearl farming. (especially the fire weed part) Don't let the tiger sharks scare you off either, they are friendly to a point. November 1st is our next trip to start production again. Have a boys trip planned mid September and late October (no pearl farm duties and lotsa fishing and drinking)

What a great sounding job. How the hell did you get into that career?
Totally left field of the usual nine to fivers.

 

[Buddy]

couple of points here....seems the conversation has moved to what one needs to do to make money from working.....how about a new thread for that topic...
agree with trainspotter....your first needs are money for living and independence.....
the next step is to gain experience in your chosen field....or just a life experience...its all good experiences for you...for life......

secondly...the heading here is a misnomer....its media rubbish....
read the true story here...about houses, wealth tax and negative gearing, and the real RBA statements....its very different to what was reported by our media

http://www.businessspectator.com.au...ument&src=is&is=Property&blog=Concrete Detail

Agreed.
If you read the article you can see why it (CGT on family homes) aint gonna happen.
So we might as well talk about fishing and lifestyle.
Speaking of lifestyle did you hear the latest golf news............
In the golfing world, Nick Faldo's old caddy Fanny Sunesson is to marry masters champion V J Singh.
At the press conference V J Singh commented "I'm hoping to make her Fanny Singh by Christmas".

 

[stocksontheblock]

couple of points here....seems the conversation has moved to what one needs to do to make money from working.....how about a new thread for that topic...
agree with trainspotter....your first needs are money for living and independence.....
the next step is to gain experience in your chosen field....or just a life experience...its all good experiences for you...for life......

secondly...the heading here is a misnomer....its media rubbish....
read the true story here...about houses, wealth tax and negative gearing, and the real RBA statements....its very different to what was reported by our media

http://www.businessspectator.com.au...ument&src=is&is=Property&blog=Concrete Detail

I fail to see how the article you refer to has anything to do with the possibility of a CGT on houses worth more than $2m?

The tax, as I understand it has nothing to do with 'bubbles', and supply and demand sides at all, it is simply a tax that is up for 'discussion' to be imposed on homes worth more than $2m.

Unless there is something 'between the lines' that I have missed, can you explain how that article shows this possible tax to be just 'media rubbish'?

I dont believe it will ever happen, for many reasons, yet none of them have anything, in my view, to do with the article.

 

[trainspotter]

Does the title refer to - "Whats next?" I just hope the Guvmnt decides not to tax me any further in my endeavours.

Yeppers ... Wayne Swan has denied, denied, denied any suggestion that the Guvmnt is looking at introducing the CGT on principal place of residences. I have posted previously as to "who" authorised the think tank to come up with such a ludicrous vote losing proposal? Nearly as dumb as the Australia Card that Hawke wanted everyone to have to keep track of the good citizens of Banana Republic Land.

LMAO at the Vijay Singh joke from Buddy. Very funny indeedy.

Thanks Kincella for the vote of confidence in my theory of "money is required to necessitate the ends to the means"

Hey Moxjo ... It all looks very good on the surface but it required a HUGE capital outlay and ongoing expenses are demanding on the hip pocket. It is fantastic when the sun is shining and the water is warm and the oysters are coughing up perfectly round pearls. It is not much fun when it is blowing 30 knots and raining and the oysters have gone into "stasis" (kind of like a hypersleep) To answer your question as to how I got into the industry would take many beers to explain.

 

[kincella]

it is obvious you did not read the article in full......so here is an extract.......

On Saturday many of us woke up to breathlessly read in The Australian that the government was looking to levy capital gains tax on luxury homes while at the same time allowing mortgage interest deductibility along the lines of the US housing market (which begs the question as to why Australia would want to benchmark itself on US housing policy right now).

The net effect of these changes would have been little-to-no incremental tax revenues and possibly higher house prices (think of the impact of CGT and mortgage interest deductibility on the investment property market). In any event, the Treasurer, Wayne Swan, categorically ruled out any such policy to the relief of aspiring home owners. This is important news for households since there had been some talk that the Henry Review would consider just such an approach. Here it is best to reflect on the Treasurer’s specific words:

“The story published on the front page of today’s Weekend Australian in relation to capital gains tax on family homes is factually incorrect. There has been no request from the Government to the Australia’s Future Tax System review to model such proposals, we are advised that no such modelling is being carried out by the review, and therefore no recommendation of this sort will be made to us by the panel. The Government is not considering and will not consider the policy outlined in that article today.”
While the proposed policy has been jettisoned by the Treasurer, it is nevertheless instructive to highlight some of its prospective nuances.

First, if the government did levy CGT on owner-occupied housing they would, as the article canvassed, likely allow mortgage interest deductibility as is the case in the few other countries that impose CGT in one form or another. If for some politically suicidal reason they did not, they would be exacerbating the existing tax distortions and position Australia’s housing market as the most heavily taxed in the world (note that this is an entirely abstract discussion since the Treasurer hit the policy for six). The table below, which I have extracted from a 2006 RBA research discussion paper by Luci Ellis, shows that no developed economies impose CGT on owner-occupied housing without also permitting interest deductibility. (And for the policy wonks, I am not aware of any nations that currently tax “imputed rent”””I think Switzerland once did.)

 

[kincella]

trainspotter,
the best idea the children need to learn is....firstly to acquire independence, and the easiest way to do that, is find the money to provide for their independence...
most take a job...any job to start with, well one that they feel they can handle...
once they acquire some independence.....they can then grow far quicker to achieve other goals...
its just a means to an end....
I find the younger the child is, if he/she has the nous to earn money, have gone on to become very successful in their lives.....
you know the kids with their own stalls, selling vegetables etc at age 10 or so, they become very savvy with money.....wheeling and dealing etc...

compared to the kids that sit around waiting for handouts from parents, begging for money....

 

[stocksontheblock]

“The story published on the front page of today’s Weekend Australian in relation to capital gains tax on family homes is factually incorrect. There has been no request from the Government to the Australia’s Future Tax System review to model such proposals, we are advised that no such modelling is being carried out by the review, and therefore no recommendation of this sort will be made to us by the panel. The Government is not considering and will not consider the policy outlined in that article today.”

Yes, I did read this in a number of publications - which is Mr Swallows reply to being asked about the Oz's headline story.

However, I am still to see from Mr Swallow what is factually incorrect – what was correct? And just yesterday in parliament when he was asked to categorically rule out implementing such a tax, he categorically ruled out asking for such a tax to be considered. To me there is a difference.

While it may all be semantics and words going around in circles (if such a thing can happen ) I would like, as I said in a previous post, is to hear from Dudd & Co. the following:

"We stand before our loyal subjects, and proclamate (no such word I know, yet hasn’t stop Dudd making up a few so far) that we have not asked for, requested from, sort, or instructed anyone to consider, deliberate, discuss, or make any overtures in the form of a CGT or tax of any other kind on homes worth over $2million, or any other value. The articles that have been floating around are false, have been made up and have no basis whatsoever. So my people, I tell you now, THERE WILL NEVER BE a tax on the family home”.

Still means nothing, think a similar thing was said about no GST? However it would go a long way to me believing this wont ever happen.

 

[Captain G]

Whether it happens or not time will tell. But, when people hear about a $2 million home, they tend to think of some rich/well off person etc.
Well, a lot of people who are not rich will be unjustly hurt. Eg. I have a relative that lives on his 7 acre farm which he's owned for the past for 43 years, in Sydneys West. The property is now not far off from being released for urban development.

He and his wife have worked there guts out as market gardeners nearly 7 days a week and just got by all those years with an average yealy income in todays terms of about $30,000 between them & raised 2 children. They live in a very small 60yr old fibro house that the size of a shoe box. They drive a 35yr old holden ute and could never offered to do much - never been on a hoilday etc. They're in their 60's & still work the property. They have been waiting for years for urban release and now have a property value of about $5 mill. Why should people like these be subjected to CGT ?? It's criminal & wrong!! The hard working get smashed again !!!

 

[Buddy]

Whether it happens or not time will tell. But, when people hear about a $2 million home, they tend to think of some rich/well off person etc.
Well, a lot of people who are not rich will be unjustly hurt. Eg. I have a relative that lives on his 7 acre farm which he's owned for the past for 43 years, in Sydneys West. The property is now not far off from being released for urban development.

He and his wife have worked there guts out as market gardeners nearly 7 days a week and just got by all those years with an average yealy income in todays terms of about $30,000 between them & raised 2 children. They live in a very small 60yr old fibro house that the size of a shoe box. They drive a 35yr old holden ute and could never offered to do much - never been on a hoilday etc. They're in their 60's & still work the property. They have been waiting for years for urban release and now have a property value of about $5 mill. Why should people like these be subjected to CGT ?? It's criminal & wrong!! The hard working get smashed again !!!

Why? Because the socialist class of envy have to finance their midguided socialist dreamtime. More money for the bludgers.

I hope your relatives make a killing, buy a merc and a big boat, go for trip around the world, buy a nice penthouse somewhere with a good view, and live a long enjoyable life of retirement. Maybe with a little garden to keep the interest going.

 

[kincella]

Buddy, your family have nothing to worry about, it was a pre CGT purchase, so its not subject to capital gains tax...
and the govt will not bring in a tax on 2 million dollar houses....

 

[lianeisme]

Whether it happens or not time will tell. But, when people hear about a $2 million home, they tend to think of some rich/well off person etc.
Well, a lot of people who are not rich will be unjustly hurt. Eg. I have a relative that lives on his 7 acre farm which he's owned for the past for 43 years, in Sydneys West. The property is now not far off from being released for urban development.

He and his wife have worked there guts out as market gardeners nearly 7 days a week and just got by all those years with an average yealy income in todays terms of about $30,000 between them & raised 2 children. They live in a very small 60yr old fibro house that the size of a shoe box. They drive a 35yr old holden ute and could never offered to do much - never been on a hoilday etc. They're in their 60's & still work the property. They have been waiting for years for urban release and now have a property value of about $5 mill. Why should people like these be subjected to CGT ?? It's criminal & wrong!! The hard working get smashed again !!!

I totally agree with you there are going to be thousands of people like this that will be hurt. And for what to give to the have nots that have never done anything to grow their own wealth. This will be the end of the Rudd Government.
Come to think of it has anyone met some who actually voted for them. I haven't nor has anyone I have spoken to.
I am in finance so meet people from all facets of life the governments come up a lot in conversation. No one seems to have voted for them in sunny QLD

 

[Captain G]

Buddy, your family have nothing to worry about, it was a pre CGT purchase, so its not subject to capital gains tax...
and the govt will not bring in a tax on 2 million dollar houses....

Thanks Kincella for that !! This is very pleasing to hear.
I'll have to tell this to my Uncle & Anut, for I'm absolutely certain if they hear of this CGT proposal they'll truly become very upset & distressed.

What bugs you this is why my parents & relatives moved to Australia from the then Yugoslavia, to get away from the Communists !! Freedom from the State etc !! It could of been like the bad old days for them again.