Fast Facts:
- Self Managed Super Funds: since mid-2010 SMSF’s have been able to sell residential (and commercial) real estate with an exemption for capital gains tax – if in the pension phase (aged over 55).
- Further encouragement is given by the ability of SMSFs to borrow against the equity in their retirement vehicle. Risky.
- Relaxed foreign investment laws: another tool to keep the property juggernaut bubbling along, foreign investors can buy residential off-the-plan with significant Stamp Duty discounts.
- Land Tax thresholds: Over the last decade in Victoria, Land Tax thresholds (the value at which Land Taxes kick in) has increased from $85,000 (2001) to now $250,000. This sees a once affordable piece of land, now valued at $330,000, pay barely $400 in Land Tax. This, when combined with the low rate of Land Tax, delivers low risk, high profit returns for investors.
- Land Tax exemption of the family home: estimated by the ATO to be at $30bn p.a.
- Loopholes such as : property spruikers encouraging smalltime investors to move their electoral address and one utility bill to their new purchase, hold it for over one year and then sell it with no Land Tax or capital gains tax due. Little is done to monitor this behaviour, nicknamed ‘post code hopping’.
- Capital Improved Valuation: This form of council rating sees the family home (with the improvements – the home) paying some 30% more than the neighboring land banker. Site Value Rating is fairer.
- Infrastructure: financing new highways and train stations via Public Private Partnerships (adding additional taxes on production) delivers huge windfall gains for owners near the new developments.
- Negative gearing: Since 1993 this has cost Australian tax payers over $33.5 bn. More investment on a finite earth is destined to push prices higher. Why are economic policies operating as if we live on a flat earth? Read Philip Soos on Written Off: Negative Gearing