Is it the right time for property tax reform | Property Insiders [Video]

The economic recovery from coronavirus is sure to be long and painful.

New forecasts predict the coronavirus crisis will punch a $360 billion hole in the Federal Budget but, while most economists argue the Government should not be trying to rush budget repair, many say major tax reform is urgently needed to assist the recovery.

Deloitte Access Economics predicts the economy will still be suffering a “hangover from the traumas of the moment” for years to come.

And it’s not only a problem for Federal Government, our State Governments’ budgets are also being hit hard.

Most experts agree economic recovery will have to involve some form tax reform, and many are suggesting this could include abolishing state stamp duties and raising the GST.

Watch as I chat with Australia’s leading housing economist Dr Andrew Wilson, chief economist of My Housing Market

Watch as we discuss:

Proposed Tax Changes

According to RBA Governor Philip Lowe, the best way for the nation to recover from this once-in-a-century economic crisis is for “governments to underwrite a business-led revival and do so by embracing  the Henry tax review and adopt overdue reforms.”

Lowe’s call to overhaul taxing “income generation, consumption and land” is secret code for

  1. Cutting business tax,
  2. Increasing the goods and services tax and
  3. Abandoning state-based property stamp duties in favour of land tax.

I’ve even heard a few pundits suggest we remove Negative Gearing.

Philip Lowe

Stamp duty, which must be paid as a lump sum on a property purchase, has long been criticised by economists as one of the most economically damaging and least efficient taxes, largely because it provides a disincentive to move to a more suitable home or location.

The tax has been a major source of state revenues during property booms but is forecast to fall because of the coronavirus shutdowns.

Stamp duty is still the biggest source of revenue for the states, raising about $21 billion a year, including $7.5 billion for NSW and $6 billion for Victoria.

Despite this, New South Wales Treasurer Dominic Perrottet and Victorian Treasurer Tim Pallas have indicated stamp duty on property purchases in their states could be scrapped.

But be wary…

Our state governments are looking to earn more tax income, not less.

So what some are proposing is to remove the discretionary tax of stamp duty, which only gets paid if you choose to buy a property, and to broaden land tax which then could or would affect all property owners – home owners as well as property investors.

Sure it would most likely be a progressive system with owners of lower valued properties paying little or no tax, but in my mind land tax is really a wealth tax.

If our State Governments keep talking about this, be prepared for a huge backlash similar to what occurred when the Labour Party talked about changes to the franking system which would have affected many self funded retirees as well as the many Australians who own shares.

I can’t the average Australian excited about the prospect of paying Land Tax on their home every year.

As I said Land Tax = Wealth Tax

And watch out for unintended consequences.

Of course if future homebuyers don’t have to budget for stamp duty, this extra money will be added to their deposits meaning they will be able to afford more expensive properties.

This will only push our property values, not make properties more affordable as is hoped by some lobbyists.

This week’s housing market data from Dr. Andrew Wilson.

Home Seller Growth EasesAndrew Wilson

The recent post-Easter revival in home sellers has proved to be short-lived with growth levels easing over recent days.

The National Newly Listed Homes Index – exclusive to My Housing Market that tracks the number of homes newly listed for sale over the past week on a daily basis – reports that the 67.43 result recorded for Sunday May 10 was nearly 5 points lower than the previous Sunday with an early declining trend emerging since mid-week.

Although recent growth levels have eased, the Index is now 18.9% lower than recorded over the same time last year compared to the 27.2% differential reported a week ago.

This improvement however is due to the impact on new seller sentiment of the Federal Election campaign that was formally underway at this time last year.

Despite the recent decline in new seller growth levels, the outlook for the housing market has improved with further easing of lockdown restrictions.

Nlhimay11

While the number of properties listed for sale has decreases, so have the number of property transactions occurring inMelbourne

 

Melstimay9

Not surprisingly, very few properties were sold at auction in Melbourne, but this may now change as restrictions on opening your options have been loosened.

 

Melsapimay10

The Sydney property market has a relatively stronger week than Melbourne

 

 

Sydstimay9

Sydsapimay10

Consumer confidence rises

A good sign for our property markets is the recently released Westpac Consumer Sentiment Index which showed an impressive recovery in confidence showing Australians are heartened by our success in containing the coronavirus.

In fact this turnaround marks the biggest monthly gain in the index since the survey began 50 years ago, but of course overall consumer confidence is still comparatively weak by historical standards.

consumer confidence

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

 

 

icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Michael Yardney

About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


'Is it the right time for property tax reform | Property Insiders [Video]' have 2 comments

    Avatar

    May 15, 2020 Olaf Schuermann

    Re. Land Tax debate. You and Andrew are probably unaware that the ACT is about half way through a 20 year program to remove stamp duty and replace it with higher land taxes. While this may be economically efficient for a more reliable source of revenue, the ACT has limited land taxes to investment properties (thus, one of the reasons for the lack of supply in investment properties and our very high rents) commencing at $0 property value. It has reduced the amount of stamp duty at a slower rate than land tax increases (nearly double digit increases every year). So some ‘double-dipping’ is going on during the transition period. Sadly, due to the substantial increases in land taxes (and the relatively slower capital growth in the ACT than other capitals) I will shortly be selling my last investment property here. Small development costs here are also exorbitant.

    Reply

      Michael Yardney

      May 15, 2020 Michael Yardney

      Thanks Olaf, I was aware of what the ACT have been doing, and as you say it is been a long-term project, which is different to what many are suggesting for other states.

      But as you say land tax is a wealth tax – look what it has done to you

      Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts