The state of the economy at the street level

[wayneL]

Capital gains tax, above true CPI, is a tax on inflation. It is also a tax on taxed income.

I'm agin it, in the most profound terms; anyone who is for this should get in the ******* sea immediately.

Reduce bull**** expenditure, do not increase inequitable taxes.

 

[mullokintyre]

I'm agin getting unearned income, ie, you get a benefit for doing SFA.
Getting a capital gains reduction or exemption just because you got to own a house is not earning anything at all.
Mick

 

[Belli]

I found the relevant section regarding market value in the ITAA but I'll save you all a headache by not posting the link. I'll post the definition, however.

"market value" has a meaning affected by Subdivision 960-S.

 

[JohnDe]

I'm agin getting unearned income, ie, you get a benefit for doing SFA.
Getting a capital gains reduction or exemption just because you got to own a house is not earning anything at all.
Mick

If you’re looking at it as just owning a house, then CGT should be applied to the family home. Why? Because selling would see you get a benefit for SFA, as you put it.

 

[wayneL]

I'm agin getting unearned income, ie, you get a benefit for doing SFA.
Getting a capital gains reduction or exemption just because you got to own a house is not earning anything at all.
Mick

OK let's do a little thought experiment.

Let's say you bought a house for a hundred thousand dollars at some point in the past. At the time that hundred thousand dollars could buy you x quantity of some hard asset. EG Gold and let's just say a thousand ounces for the sake of argument.

Fast forward to today and let's say that the same house is worth million dollars. Let's say that that million dollars could still only by one thousand ounces of gold. We could use any other hard asset for this example.

Therefore you have not gained anything whatsoever. What you could buy with that money back in whenever can only buy you the same now.

Have you made a gain?

In nominal terms yes, but in spending power you haven't gained a fat rats arse. Is it then fair that the government should tax away what is effectively a debasement of the currency?

I say like @#$&!!!!

In no way shape or form is that unearned income, in fact it is not any sort of income whatsoever. It is merely keeping pace with inflation and should not be texted whatsoever.

I also hold the same view with non ppor assets, especially when transferring from one asset to another and not conventing to cash.

Inner way is this actual income and should be a subject to CPI adjustments.

 

[sptrawler]

I don't know about the Eastern States, but in W.A if you sell to family the taxman is informed and it has to be sold at actual market value, the stamp duty is worked out on market value also.
Well that is what happened to me, whether money changes hands is another thing, but tax owing is calculated at market value.

I will add to that, even if there is no money changed hands, the value of the transaction would be deemed as having happened, if you were applying for the aged pension apparently.
So be very sure of your information and implications, when doing this sort of transaction, obtain professional advice if you aren't extremely sure of your facts.

 

[Smurf1976]

In no way shape or form is that unearned income, in fact it is not any sort of income whatsoever. It is merely keeping pace with inflation

Or in other words, the "wealth" created by the property boom is nothing more than illusion.

Trouble is, the debt to fund it is very real.

 

[Smurf1976]

I'm agin getting unearned income, ie, you get a benefit for doing SFA.
Getting a capital gains reduction or exemption just because you got to own a house is not earning anything at all.

Thing is there's no real income.

It's the same land with the same house on it and, unless you've done very substantial work to it, it's real value will be going down as the building wears out.

So there's no unearned income. It's just that government devalued the money you bought the house with, that's all.

 

[JohnDe]

Let us know what your financial adviser says if proper to do so.

Self managed super fund is the recommendation. I haven't been adding to my compulsory super for a few years because I changed my pay structure, and a SMSF will allow me to drop a large bundle in at the lower tax rate etc.

 

[Dona Ferentes]

Self managed super fund is the recommendation. I haven't been adding to my compulsory super for a few years because I changed my pay structure, and a SMSF will allow me to drop a large bundle in at the lower tax rate etc.

as long as you understand it.

(I've has a SMSF for 18 years, and best pathway to security there is)

 

[JohnDe]

as long as you understand it.

(I've has a SMSF for 18 years, and best pathway to security there is)

I’ve had it on my mind for a few years, done some reading and thought about it. Tonight I will make up my mind, but it’s pretty much decided.

 

[over9k]

I am a little confused by this. Unless things have drastically changed since I sold one, the capital gains tax is calculated on the market value at the date the house is first used to gain an income, not the sale price. To be sure, we had a market valuation done at that time. If you bought on market and rented it straight away, then that would likely be accepted as the market value at that time.
The stamp duty paid (in Qld) by the buyer was payable on the sale price. They wanted to do a fiddle with the sale price to reduce the stamp duty but we wouldn't come into that.

The rules on this stuff change all the time. It's like if you had an investment property you decided to move into/live in, how long before it's counted as your "real" principle place of residence and therefore becomes capital gains exempt?

Last I checked I think you had to live in it for 6 years and I seem to quite strongly recall it using to have to be 5 years but that might have changed again.

 

[over9k]

It is merely keeping pace with inflation and should not be texted whatsoever.

Kind of wayne. You're assuming that the house has increased at the same rate as a loaf of bread or whatever. The idea with investing is to get above-market-average gains. The industry term for this is called "alpha". In a basic undergrad intro to economics class they would call this an economic profit rather than an accounting profit.

So if you stuck some money in a business (over9k's strip joint for example) and you made 5% on it, but the stock market, e.g the s&p 500 went up by 6%, you've made an accounting profit but an economic loss as you could have made more money just putting the cash in the s&p.

The brutal truth of the matter is that housing, as an asset class, has gained the most for like 25 years. More than stocks, bonds, commodities, anything, the best asset class to have been in for an entire generation now has been housing.

I think that mullok's gripe has been from the fact that housing has increased so much more than everything else, that you can now buy so many more stocks or bonds or commodities or loaves of bread or whatever for one house, that the house being CGT exempt is kind of bull****.

What people don't get about house price inflation is that it only benefits you if you realise the gains and spend them on something that isn't housing. If you sell your place for twice as much then unless you downsize the place you want to move into will also cost twice as much and so net, you've gone nowhere.


If you own more than one house however, you've made a killing

 

[Smurf1976]

I think that mullok's gripe has been from the fact that housing has increased so much more than everything else, that you can now buy so many more stocks or bonds or commodities or loaves of bread or whatever for one house, that the house being CGT exempt is kind of bull****.

Trouble is, if I sell my house in order to move to another house, I'll have to pay that inflated price on the new house as well. There's no real, useful wealth being created there for an ordinary homeowner.

Having to pay what would be a prohibitively high tax to relocate would be economically inefficient in the extreme. To the point it basically kills the entire concept of relocation for work or other reasons and also kills the idea of downsizing (or upsizing). Buy a house age ~30 and live in it until you die.

Why should anyone pay a fortune to government for a situation government creates in the first place? As an owner occupier of a single property, the gain to me from house price inflation is zero. Only if I buy more, as an investment, is there a real profit.

 

[over9k]

Trouble is, if I sell my house in order to move to another house, I'll have to pay that inflated price on the new house as well. There's no real, useful wealth being created there for an ordinary homeowner.

Having to pay what would be a prohibitively high tax to relocate would be economically inefficient in the extreme. To the point it basically kills the entire concept of relocation for work or other reasons and also kills the idea of downsizing (or upsizing). Buy a house age ~30 and live in it until you die.

Why should anyone pay a fortune to government for a situation government creates in the first place? As an owner occupier of a single property, the gain to me from house price inflation is zero. Only if I buy more, as an investment, is there a real profit.

Hence the last paragraph in my post.

 

[mullokintyre]

Trouble is, if I sell my house in order to move to another house, I'll have to pay that inflated price on the new house as well. There's no real, useful wealth being created there for an ordinary homeowner.

Having to pay what would be a prohibitively high tax to relocate would be economically inefficient in the extreme. To the point it basically kills the entire concept of relocation for work or other reasons and also kills the idea of downsizing (or upsizing). Buy a house age ~30 and live in it until you die.

Why should anyone pay a fortune to government for a situation government creates in the first place? As an owner occupier of a single property, the gain to me from house price inflation is zero. Only if I buy more, as an investment, is there a real profit.

If there were capital gains tax or no exemptions, investors would be less likely to buy a house as an investment.
If there were little or reduced capital gains on new houses, the incentive would be to increase the stock of avalibale houses eithern to rent or buy.
As for the other point, the same applies to stocks and bonds.
If a stock has gone up , you sell it, buy another stock, it is most likely gone up as well.
Finally, is CGT the real killer or is it stamp duty?
I can buy a house for X in 2005 on which I pay A% as stamp duty over and above the asking price.
When I come to sell it in 2017, the price increases by Y which barely covers the cost of inflation, so I may pay a small bit of CGT,.

However, the new buyer still pays A%stamp duty on this new larger amount, which immediately puts up the price of the house for the next buyer, if the exiting buyer does not want to sell at a loss.
This compounding of additional stamp duty is wonderful for the guvmint, but shite for everyone else.
Stamp duty on property over 960,000 is subject to 5% stamp duty.
Thats a killer, as the lenders ddeo not factor that in their calculations for loan valuations.
Mick

 

[divs4ever]

Having to pay what would be a prohibitively high tax to relocate would be economically inefficient in the extreme. To the point it basically kills the entire concept of relocation for work or other reasons and also kills the idea of downsizing (or upsizing). Buy a house age ~30 and live in it until you die.

that would depend if the relocation also included a 'tree change ' some rural locations have advantages that offset the 'isolation ' and provide a cash differential of the home swap ( lower rates etc etc ) now doing that from an investment property might have some advantages as well ( or not )

sea changes are often more expensive including ongoing costs/charges ( but if you love the scenery .. and the potential capital gains maybe it will work for you )

 

[JohnDe]

If there were capital gains tax or no exemptions, investors would be less likely to buy a house as an investment.
If there were little or reduced capital gains on new houses, the incentive would be to increase the stock of avalibale houses eithern to rent or buy.
As for the other point, the same applies to stocks and bonds.
If a stock has gone up , you sell it, buy another stock, it is most likely gone up as well.
Finally, is CGT the real killer or is it stamp duty?
I can buy a house for X in 2005 on which I pay A% as stamp duty over and above the asking price.
When I come to sell it in 2017, the price increases by Y which barely covers the cost of inflation, so I may pay a small bit of CGT,.

However, the new buyer still pays A%stamp duty on this new larger amount, which immediately puts up the price of the house for the next buyer, if the exiting buyer does not want to sell at a loss.
This compounding of additional stamp duty is wonderful for the guvmint, but shite for everyone else.
Stamp duty on property over 960,000 is subject to 5% stamp duty.
Thats a killer, as the lenders ddeo not factor that in their calculations for loan valuations.
Mick

And that is basically what has happened between my two children purchasing a property on the same street two years apart. See my previous comments.

 

[qldfrog]

If there were capital gains tax or no exemptions, investors would be less likely to buy a house as an investment.

There are no exception and plenty of CGT on investment properties...
People by a ppor , and btw, there is plenty of CGT for the non 5 acres part of a ppor on big acreages

 

[qldfrog]

If there were capital gains tax or no exemptions, investors would be less likely to buy a house as an investment.
If there were little or reduced capital gains on new houses, the incentive would be to increase the stock of avalibale houses eithern to rent or buy.
As for the other point, the same applies to stocks and bonds.
If a stock has gone up , you sell it, buy another stock, it is most likely gone up as well.
Finally, is CGT the real killer or is it stamp duty?
I can buy a house for X in 2005 on which I pay A% as stamp duty over and above the asking price.
When I come to sell it in 2017, the price increases by Y which barely covers the cost of inflation, so I may pay a small bit of CGT,.

However, the new buyer still pays A%stamp duty on this new larger amount, which immediately puts up the price of the house for the next buyer, if the exiting buyer does not want to sell at a loss.
This compounding of additional stamp duty is wonderful for the guvmint, but shite for everyone else.
Stamp duty on property over 960,000 is subject to 5% stamp duty.
Thats a killer, as the lenders ddeo not factor that in their calculations for loan valuations.
Mick

Both CGT and stamp duty are killers, as long as inflation was low, CGT was mostly taxing real value increase, this is not the case with inflation in the 2 digits...