Call for reforms of tax lurks as negative gearing frenzy hits
http://www.news.com.au/business/money/story/0,28323,26029676-5017313,00.html
LANDLORDS are claiming $11 billion in tax deductions a year as a negative gearing frenzy grips the property market.
The tax grab from property "losses" - the richest potential deduction for individuals - is about
four times the amount claimed 10 years ago.
As the Henry Review examines how to reform our tax system, the Herald Sun also revealed more than half of Australian companies pay less than 5 per cent tax.
Treasury figures reveal only a quarter of companies, or about 92,000 businesses, pay more than 15 per cent tax on their total earnings.
Property investors whose interest bills exceed the rent on their investment can use the losses to reduce their tax.
Deductions by
individual property investors hit $11.7 billion in 2007-08, up from $3.1 billion in 1999-2000.
That's more than double the $5.2 billion in taxable capital gains reported by the same group.
The Brotherhood of St Laurence said the system inflated housing prices while rewarding higher income earners.
The new tax figures, provided to a Senate committee, paint a staggering picture of top-end tax lurks used by individuals and companies.
The corporate tax rate is 30 per cent, yet 182,000 companies pay less than five cents in the dollar on their total earnings. And thousands pay no tax at all.
Taxwatch spokesman Julian Disney said the figures, published for the first time, showed the opportunities available for corporate Australia to minimise tax liability.
"It shows the importance of closing off unjustifiable tax concessions and loopholes, which enable companies to avoid paying their fair share of tax," Prof Disney said.
Greens leader Bob Brown said there was a clear case for change.
"Everyday taxpayers I know would be delighted to pay less than 5 per cent tax on their gross income," Senator Brown said.
"The Government must publish a full and open exposition of the tax deductions available to the business sector to explain these figures."
Treasury Secretary Ken Henry is conducting a "root-and-branch" review of the tax system on the orders of the Rudd Government.
In its submission to the review, the Business Council of Australia argued for the business tax rate to be slashed.
A spokesman for Treasurer Wayne Swan said the Government was awaiting the results of the Henry Review before considering changes to the system.
The tax take in 2007-08 was about $286 billion.
Individuals paid $129 billion and companies paid about $78 billion, with GST and sales taxes making up the difference.
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So individual property investors are claiming $11.7 billion, yet only make $5.2 billion in taxable capital gains. How long can this keep going? And more than half of Australian businesses are paying less than 5% tax? WTF?!