Australian Politics General...

[Value Collector]

When times are tough, we all have to make sacrifices.

Ok then, reduce the home owners capital gain discount from 100% to 50% to match investors, since 75% of homes are owner occupiers you will get more tax revenue that way.

Did you know if it wasn't for the capital gains tax discount, the double taxation on the retained earning component would cause me to be paying 69% tax on my companys earnings, how could that be considered fair.

 

[SirRumpole]

Ok then, reduce the home owners capital gain discount from 100% to 50% to match investors, since 75% of homes are owner occupiers you will get more tax revenue that way.

If you allow owner occupiers to deduct interest payments on their mortgages, repairs to the house etc fine.

The point about adjusting the CGT discount on residential property is to make houses less attractive to investors who make up 60% of the home lending market and more attractive to owner occupiers. I don't see anything wrong with that as I said before. Owner occupancy is a social issue not just one of economic "fairness" to investors.

I don't consider that it's fair that potential owner occupiers are being squeezed out of the market by people who already own their own homes but get a taxpayer subsidy to take someone else's.

And any way, under Labor's plan, current investors would not be affected so I don't see what you are grumbling about.

 

[Value Collector]

Let me give you an example of how getting rid of the Capital Gains tax would cause Mum and Dad Investors to be subjected to heavy double taxation.

If a "Mum and Dad" decided 10 years ago to buy some Woolworths shares they would have paid around $23.40 if they bought well.

On Friday they could have sold them for $26.50, So over the 10 year period they made a capital gain of $3.10 per share.

Do they deserve to pay tax on 100% of that capital gain, no they don't and I will show you why.

Over that 10 year period, Woolworths had "after tax" earnings of $16.37 per share, the company has already paid tax on this $16.37.

Out of the $16.37, $10.01 was paid to the "Mum and Dad" as dividends, and the company retained $6.36 to grow the business.

So that $3.10 capital gain they earned, was 100% generated by retained after tax earnings of $6.36.

Charging the capital gains tax is double taxation to this couple, firstly they paid company tax when their company earned the profit, then when they withdraw their earnings as a capital gain by selling their shares, you want to tax them again.

If we want companies to invest their profits back into growing the the economy, we can't have a system that punishes businesses for retaining and reinvesting profits, All companies require money to grow, so when an investor gets a capital gain due to growth that was funded by after tax earnings, you need to recognise that.

 

[Value Collector]

If you allow owner occupiers to deduct interest payments on their mortgages, repairs to the house etc fine.

Thats personal consumption, no one is allowed to claim things that are for personal consumption, I would like to write off the breakfast I ate this morning but I can't.

The point about adjusting the CGT discount on residential property is to make houses less attractive to investors who make up 60% of the home lending market and more attractive to owner occupiers. I don't see anything wrong with that as I said before. Owner occupancy is a social issue not just one of economic "fairness" to investors.

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only like 25% of homes are owned by investors, they only seem to make up more of the market because the homes are traded more frequently.

I don't consider that it's fair that potential owner occupiers are being squeezed out of the market by people who already own their own homes but get a taxpayer subsidy to take someone else's.
.

There is no subsidy.

 

[SirRumpole]

Let me give you an example of how getting rid of the Capital Gains tax would cause Mum and Dad Investors to be subjected to heavy double taxation.

My concern is the residential housing market. Apply your rules to investment in the share market, starting businesses, existing businesses etc, but the housing market is different because Mums and Dads are being squeezed out of it by overly generous incentives to investors.

Let's face it, you wouldn't be in the housing market if it wasn't a benefit to you would you ?

 

[SirRumpole]

There is no subsidy.

Investors get to deduct expenses from their income that owner occupiers don't. Plain and simple.

 

[Tisme]

Investors get to deduct expenses from their income that owner occupiers don't. Plain and simple.

If you kill the investor property boom, in the absence of any meaningful industry that once was, you kill what little is left of GDP.

Changing the rules is political poison for "economic managers" who have killed off manufacturing, etc in the space of 5 years .... they can't even build a broadband network better the third world countries. But then again how can we expect lawyers and cow cockies in politician's robes to know anything about industry when they have never turned their hands to it or mixed in with the working class.

 

[SirRumpole]

If you kill the investor property boom, in the absence of any meaningful industry that once was, you kill what little is left of GDP.

I don't get that.

If investors don't buy the houses then the owner occupiers will. There is supposed to be a housing shortage which is why prices are so high. If the price becomes affordable again demand will increase and more houses will be built

What developers might lose on price they gain in volume. In any case it's been shown that investors mostly buy existing homes so what is the contribution to GDP of that ?

 

[Tisme]

I don't get that.

If investors don't buy the houses then the owner occupiers will. There is supposed to be a housing shortage which is why prices are so high. If the price becomes affordable again demand will increase and more houses will be built

What developers might lose on price they gain in volume. In any case it's been shown that investors mostly buy existing homes so what is the contribution to GDP of that ?

The variables that make up the GDP is what the govt wants them to be. There is the obvious tactile component is the domestic construction sector, which is already running flat chat with the available land to it. Councils and state govts are making sure demand exceeds supply so they can garner greater fees and imposts and investors are knowingly profiting from it.

 

[Value Collector]

Investors get to deduct expenses from their income that owner occupiers don't. Plain and simple.

Thats not a subsidy

We all pay tax on our income, and deduct the cost incurred generating income, no one is allowed to deduct personal expenses though, why should they.

"Income" is profit which is, Total Revenue - expenses = net profit

Ofcourse it makes sense to when working out how much tax I need to pay I add up all the incomes streams I had, then deduct all the costs I incurred and then pay tax on the net figure.

 

[SirRumpole]

We all pay tax on our income, and deduct the cost incurred generating income, no one is allowed to deduct personal expenses though, why should they.

The government is getting a free deal then aren't they ?

A income for one entity is a cost to another, double entry.

When a bank receives interest from a business they pay tax on it , the business paying the tax deducts it.

But when it comes to an individual, all expenses are "personal" so no deduction for us, even though the bank still gets taxed on the interest an individual pays to the bank.

Just another example of where consumers are getting ripped off.

So, question for you.

Why are you an investor in residential property ? (I assume from your responses that you are, but if not that's my mistake).

 

[Value Collector]

Just another example of where consumers are getting ripped off.

All Investors are also consumers, All consumers can be investors is they want.

Some one some where has to pay tax, the fairest way to charge tax is to tax genuine income and genuine wealth creation, the current system does that ok.

Taxing gains that aren't real gains, or incomes that aren't real incomes is not fair.

Why are you an investor in residential property ? (I assume from your responses that you are, but if not that's my mistake).

Because as a young soldier (19) I was earning more than I needed to live off, and You don't get to choose which part of the country you work in, so I found myself working in and renting a house in a city I didn't want to stay in long term, so I decided to buy a house in my home town and rent it out in the mean time, and use my excess income to pay it off, so that when I eventually left the Army and could return home I would have a house mostly paid for.

Long story short, between the Army and business interests I have never returned home, but now own two properties there.

Property is not my main investment platform, but it's an ok place to store some capital where it can earn a bit more income than a bank deposit, and the capital is protected from inflation, and I still plan on eventually getting back to my home town.

In the mean time I actually rent my current home.

 

[Value Collector]

A income for one entity is a cost to another, double entry.

When a bank receives interest from a business they pay tax on it , the business paying the tax deducts it.

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Exactly, so an investor paying interest on a loan, creates a taxable income stream for the bank, taxable staff wages, and depositors earn taxable interest.

So one mans deduction is another mans declared profit, so the government. Is earning is pound of flesh from the system either way

 

[bellenuit]

No, depreciation is not "just like" raw materials, lighting etc.

I said it was a fundamental business cost, just like other fundamental business costs. Not that it is identical in nature to other business costs, just like "raw materials" isn't identical to "heating".

And it is only notional in the how the cost is allocated over its life, not on its original cost. And just because you can make adjustments to its value when sold doesn't change what it's original cost is. Raw materials and many other costs are the same. If allocated at cost value to general stock and there is a subsequent change, then that must be accounted for (spoilage, damage, returns).

And yes we are digressing. Because the real issue is that you suggested that being allowed to depreciate was some sort of benefit that would compensate for losing a capital gains discount. You are completely wrong on that.

 

[SirRumpole]

Property is not my main investment platform, but it's an ok place to store some capital where it can earn a bit more income than a bank deposit, and the capital is protected from inflation, and I still plan on eventually getting back to my home town.

Fair enough, but I think that 25% of the market owned by investors is too high.

Get it down to 5-10% to provide rental properties for those who don't want to buy and give owner occupiers a chance to invest in their own retirement by property acquisition.

 

[bellenuit]

But when it comes to an individual, all expenses are "personal" so no deduction for us, even though the bank still gets taxed on the interest an individual pays to the bank.

Just another example of where consumers are getting ripped off.

Allowing every individual to claim personal expenses is a no-win for everybody except accountants. About the only personal expense that might be justifiable is the cost of transport to and from work. Everything else (I think) would be a minefield, incurring huge compliance and monitoring costs and subject to enormous rorting.

The end result would be a drop in the overall tax take which could only be recovered by increasing the tax rate for everybody.

 

[luutzu]

Let me give you an example of how getting rid of the Capital Gains tax would cause Mum and Dad Investors to be subjected to heavy double taxation.

If a "Mum and Dad" decided 10 years ago to buy some Woolworths shares they would have paid around $23.40 if they bought well.

On Friday they could have sold them for $26.50, So over the 10 year period they made a capital gain of $3.10 per share.

Do they deserve to pay tax on 100% of that capital gain, no they don't and I will show you why.

Over that 10 year period, Woolworths had "after tax" earnings of $16.37 per share, the company has already paid tax on this $16.37.

Out of the $16.37, $10.01 was paid to the "Mum and Dad" as dividends, and the company retained $6.36 to grow the business.

So that $3.10 capital gain they earned, was 100% generated by retained after tax earnings of $6.36.

Charging the capital gains tax is double taxation to this couple, firstly they paid company tax when their company earned the profit, then when they withdraw their earnings as a capital gain by selling their shares, you want to tax them again.

If we want companies to invest their profits back into growing the the economy, we can't have a system that punishes businesses for retaining and reinvesting profits, All companies require money to grow, so when an investor gets a capital gain due to growth that was funded by after tax earnings, you need to recognise that.

hmmmm... if WOW after tax earning adds to $16.37 a share; paid dividends and retained $6.36.

But then that imaginary mum and dad investor only gain $3.10 share... arne't they then making a capital loss. That's according to your logic right?

Maybe taxpayers should pay those mum and pop for their losses.

btw, how many Aussie Mum and Dad investors are there out there? And I don't mean "investors" through their superfund. Not that many.

All these CGT business is quite simple: It's a very nice and complicated way to redefine what income is and how much each type of income is to be taxed.

The rich make a substantial amount of their income through capital gains - trust funds, inheritance, property and the stock market.

So those are obviously not "real" income, they're imaginary income with real money and should be treated differently to be fair.

The kind of income that the poor slobs earn breaking their backs... that's real income and should be tax right and proper - to be fair.

cool?

 

[SirRumpole]

About the only personal expense that might be justifiable is the cost of transport to and from work.

Yes, why shouldn't transport to and from work be deductible ? It's an expense of earning an income. It's too hard for the ATO apparently, even though they can handle all those company cars.

 

[Value Collector]

hmmmm... if WOW after tax earning adds to $16.37 a share; paid dividends and retained $6.36.

But then that imaginary mum and dad investor only gain $3.10 share... arne't they then making a capital loss. That's according to your logic right?

Maybe taxpayers should pay those mum and pop for their losses.

I guess technically they have made a capital loss, or atleast haven't had the additional capital they added via retained earnings recognised, but you win some you lose some, the 50% CGT Discount atleast prevents some of their over taxation.

btw, how many Aussie Mum and Dad investors are there out there? And I don't mean "investors" through their superfund. Not that many.

303,344 holding less than 1000 shares directly, about 66% of Woolworths share holders.

Even more in super funds (not sure why you think they don't count)

The rich make a substantial amount of their income through capital gains - trust funds, inheritance, property and the stock market.

So those are obviously not "real" income, they're imaginary income with real money and should be treated differently to be fair.

Some of the capital gain is genuine wealth creation, and should be taxed, hence why I am not calling for a 100% discount.

But surely you can't be silly enough to believe all capital gains are making you richer.

Lets say you bought a can of coke in the year 2000 for $1, and you kept it stored in a way it would never perish, and now you can sell it for $2.

Have you made a genuine gain? are you actually richer?

If you sold it for it's market price of $2, you haven't gotten richer because you would now have to outlay $2 to buy another can later.

But to make matters worse, you have to pay CGT, so you only end up getting $1.85 (with the discount) or $1.70 (without discount).

You have actually gone backwards, you couldn't even afford to replace the can, because the government has actually taken you capital, because there was no genuine wealth creation only inflation, but the tax was real.

What I am saying is that in some cases the capital gain is real, in others its not. in a lot of cases the capital gain is a mix of

1, Real wealth creation,
2, retained earnings and
3, inflation.

having the discount allows 1 to be taxed, why also allowing 2 and 3 to not get taxed.

 

[luutzu]

I guess technically they have made a capital loss, or atleast haven't had the additional capital they added via retained earnings recognised, but you win some you lose some, the 50% CGT Discount atleast prevents some of their over taxation.




303,344 holding less than 1000 shares directly, about 66% of Woolworths share holders.

Even more in super funds (not sure why you think they don't count)



Some of the capital gain is genuine wealth creation, and should be taxed, hence why I am not calling for a 100% discount.

But surely you can't be silly enough to believe all capital gains are making you richer.

Lets say you bought a can of coke in the year 2000 for $1, and you kept it stored in a way it would never perish, and now you can sell it for $2.

Have you made a genuine gain? are you actually richer?

If you sold it for it's market price of $2, you haven't gotten richer because you would now have to outlay $2 to buy another can later.

But to make matters worse, you have to pay CGT, so you only end up getting $1.85 (with the discount) or $1.70 (without discount).

You have actually gone backwards, you couldn't even afford to replace the can, because the government has actually taken you capital, because there was no genuine wealth creation only inflation, but the tax was real.

What I am saying is that in some cases the capital gain is real, in others its not. in a lot of cases the capital gain is a mix of

1, Real wealth creation,
2, retained earnings and
3, inflation.

having the discount allows 1 to be taxed, why also allowing 2 and 3 to not get taxed.

So back to what SirR was saying, why are capitalists such a protected specie?

And you can't deny that their wealth and interests are highly protected.

An average Joe earning an extra 2% on last year's aren't really earning anything extra. So why are wages not giving some sort of discount to ease the pain of inflation?

Or a depositor's putting their after-taxed earning into a bank, it earn interests but that interest is taxable at the full amount, not at a discount like capital gains.

Or why does a property owner getting the same capital gain freebie when most often, their rental yield are below their costs and the taxpayers have to give them discounts in their tax claims.


There's a whole bunch of reasons, ranging from motivating the poor to get rich [because the poor just don't have the motivation to wanna get rich]; to job creations to this and that incentives and fair go for the Aussie battlers.

All boils down to certain class of people make certain rules to benefit themselves and their friends. The rest will just have to either get with the programme [then see nothing wrong with it], or "complain" and remain poor.