Budget 2016/17 – is it time to end CGT discounts?

The Greens have unveiled a plan that would raise $119.5 billion over 10 years.

Two men shaking hands over a property investment deal

The political appetite for changes to capital gains tax (CGT) continues to grow with the Greens unveiling a plan that would raise $119.5 billion over 10 years.

Currently, investors receive a 50 per cent discount on CGT when selling assets, such as investment properties. This costs the country’s budget $6 billion a year in missed revenue. Labor has announced that it would cut this discount to 25 per cent for assets bought after 1 July 2017, generating $32 billion over 10 years, but the Greens’ proposal would benefit the Federal Budget by almost four times that amount.

The Greens suggest cutting out the 50 per cent discount altogether, reducing it by 10 per cent each year over five years. This would run in parallel with Labor’s plan.

And it’s not just property that will be affected, with the Greens proposing that any asset subject to capital gains, be it art, housing or investments, would be included in its plans. Senator Scott Ludlow, co-deputy leader of the Greens and housing spokesman for Western Australia, said, “This is because tax on other forms of income, such as weekly earnings and interest on savings, receives no such discount, so we can’t see any justification for any part of capital gains to be tax-free,” he said.

The plan has been costed by the parliamentary budget office and would raise a little over $7 billion by 2019 and $119.5 in total over the next 10 years.

While both parties also state that their plans would lead to the slowing of growth in housing prices, making homes more affordable, Prime Minister Malcolm Turnbull believes any changes to CGT would hamper investment and slow economic growth. He also states that adding the end to negative gearing to investment properties into the mix would “amount to a tax on investment” would end investment in the economy.

However, chairman of the Committee for Economic Development of Australia (CEDA), Paul McClintock, said any impact on investment would be marginal and manageable. On increasing capital gains tax he said it, “doesn’t mean it is a bad activity, but you can say there is too many billions of dollars going into that activity and we cannot afford that”. “How much support are we prepared to give to a particular activity?”

“With things like negative gearing, a system that was designed to compensate people for high inflation rates, the inflation rates are lower, there is a strong argument to suggest you can lower that and still produce an environment where people are willing to invest,” he said.

“Our judgment call is that, yes, of course it will have some marginal impact, so will everything, but it’s a manageable impact.”

Despite progressive policies to raise revenue, the Government insists that the greater issue is cutting costs to meet shortfalls on funding for health and education.

Read more at Theguardian.com 

Opinion: Don’t write anything off

Whether revenue raising or cost cutting, every possible means to help balance the budget should be considered by the Government in the lead up to the Federal Budget 2016/17. And with the two other parties on board, surely CGT and negative gearing changes are a no-brainer?

Of course, the finer details would need to be ironed out; especially the actual effect changes would have an investment in an already shaky economy. But when so many people are saying they are essentially good ideas, then surely they’re worth more consideration?

Taking money ‘away’ from those who can afford to invest in property may be seen as political suicide for a Government whose economic principals appear to be looking after those with cash to splash. But if houses became more affordable, the investment by those currently unable to get their foot on the property ladder, may just be enough to give the budget the boost it needs.

Balancing the budget of a country that has pinned all its hopes on a resources boom, only for the boom to end without capitalising on any future benefits, is no mean feat. I get that. But failure to fully examine and consider proposals that could not only help to balance the books, but also give a much needed boost to those people who are desperate to invest in this country by buying their first home, is just foolish.

It may well be an election year and yes, increased taxes do not make for palatable politics when on the campaign trail. But if the Government is indeed committed to the future of this country then it’s time for it to have the courage to make the hard decisions and to be judged on those actions.

Do you think changes to CGT and negative gearing should be included in the Federal Budget 2016/17? Is it a risk to investment in the economy to cut such ‘incentives’?   





    COMMENTS

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    4th Apr 2016
    10:13am
    I don't have any issue with abolishing the CGT discount, in principle, but again it's not something to do in isolation to other changes. It would be grossly unfair to those who suffered under the assets test changes to now hit them again with a massive additional reduction of their income. Many of those people will have investments in managed funds (directly or indirectly) that sell shares and they will have no control over the extent of impact of a change to CGT concessions. They have already suffered having their incomes slashed in half (in many cases) by falling investment returns, then lost up to $15,000 in pension and benefits per annum, and now face yet another cut to their livelihood? With many earning far less than their pensioner friends, it's just not reasonable to keep hitting the same people over and over again. We are not talking about the wealthy now. We are talking about battlers who struggled to save and have significantly less than $1 million in income-returning assets. And some of them have very modest homes and no other assets to speak of, and might be looking at trying to make their savings last through 30 years or so of nil earnings and high inflation.

    If the government keeps bashing the incomes of those who have worked hard to save a modest nest-egg for retirement, the net wealth of the nation will fall and government costs will rise as more and more people need government support to live. Hitting battlers with modest savings will also discourage younger folk from saving and investing for retirement, lifting the number of people claiming aged pensions and thus increasing the burden on government.

    There are solutions, but they should be implemented with care so that they place the burden on those who can genuinely afford to pay more and who, by paying more, don't see a massive incentive to reduce their savings and assets.

    To date, the changes have been totally counter-productive and economically damaging. By hurting the frugal sector of the upper working class, rather than the affluent, they make it financially more beneficial to NOT SAVE AND INVEST but to spend up big and rely on government handouts.
    Hasbeen
    4th Apr 2016
    12:05pm
    Rainey reducing the capital gains rebate would not affect any ones income at all. It would only affect the amount of tax they pay on any capital gain they have made on their investment when it is sold.

    When an investment is structured to not earn income, & only make a capital gain, it is the investor who is reducing their income, not the government. They are specifically postponing any earning to the future to gain a tax advantage today. Reduce the discount on capital gains, & it would encourage these people to invest in current income generating investments, giving them more income now, with less for their airs. This is surely a better plan for them & the economy.
    peedee
    4th Apr 2016
    12:24pm
    Well thought out and written Rainey. Pretty much spot on.
    Hasbeen is not quite correct in his statement. Many of the now retired bought shares along the way as part of the overall retirement plan.
    Now that they are selling down the shares to live they will be hit with full CGT if there are changes.
    Shares bought over the last 20 years will be hit although there is most likely a provision to allow for inflation over that time.
    If my memory serves me it was for this reason that the 50% discount was brought in i.e. to save on the complicated calculations which when applied over the longer term averaged out at around 50% discount, given that the value of money decrease by about that amount every 10 years.
    If the full CGT amount is applied it will deplete their savings more quickly and put self funded and part funded on to the pension earlier and they will come back in at the faster taper rate which will cost the government more.
    So I think Rainey's conclusion that it is probably an OK policy but part of a package, not just in isolation is correct.
    The asset test policy settings to be applied from Jan. 1st 2017 discourage saving beyond $400,000.00
    Dan
    4th Apr 2016
    2:10pm
    thanks Rainey and peedee I think your memory is fairly reliable peedee as I am of the understading the 50 % discount is still a current ATO option in calculating the CGT on any Capital Gain event . The purpose is as you say to adjust and compensate for CPI inflation over the life of the investment the CGT should be completely abolished as the capital raised to buy the investment has already been taxed personally and some people think that any borrowings to fund investments do not have to be repaid
    Those who are forever wanting to increasingly tax investors and property owners sometimes think money is not earned by people who have saved their earnings and gone without for many years . The NSW state also slugs property owners with land taxes which are much higher than those in Victoria. Most people are paying a fair share of tax but I exclude the cash building tradesman and some small business who do not even charge GST
    Grateful
    4th Apr 2016
    3:31pm
    There is no capital gains tax on any investment purchased prior to 20 September 1985.
    The discount could, maybe, be cancelled or reduced further (it has already been reduced to 50% if investment held over 12 months) specifically on only negatively geared real estate. Surely, it is the negative gearing on homes that,in many peoples' view, is "the problem" and not investments such as equity portfolios, businesses or commercial property.
    The whole question of all taxes should be the subject of a major review and overhaul, currently it is an absolute shemozzle and decisions should be bi-partisan politically.
    But, that WILL take much time, however, negative gearing of residential property, especially established homes, should be a totally isolated discussion and one that can be resolved by this year's Budget. It IS a very urgent problem.
    Misty
    4th Apr 2016
    3:42pm
    Grateful watch 4 Corners on the ABC tonight for an eye opener about how people avoid paying the proper amount of tax, not just here in Australia but all over the world.
    Anonymous
    6th Apr 2016
    10:49am
    Thanks peedee for backing me up on the CGT and retirement incomes, and for adding extra clarity.

    Yes, Hasbeen was mistaken. Retirees have to sell shares to fund living costs, especially after the cruel changes to the assets test cut in and slash the incomes of many to way below the pension level.

    Further, many retirees who have investment in managed funds and institutional super will see their income affected because the funds themselves will sell investments and pay more CGT. Please don't try to tell me they won't pass on the impact! Of course they will. And that could result in quite substantial income reductions for investors.

    This constant demand to slug the upper working class and the middle class, PRETENDING they somehow were ''lucky'' and achieved savings without earning them, is doing serious social and economic damage. Misty mentioned the TRILLIONS hidden in tax havens by the rich. That is the area we should be targeting. If we want a healthy economy, we have to stop bashing people who worked, went without to save, and only achieved modest comfort. Destroying all the rewards and incentives - as the stupid change to the assets test did - will only do more damage to our economy.
    Travelling Man
    4th Apr 2016
    10:23am
    I am struggling to comprehend that the normally iconoclastic Greens have come up with a plan to abolish the CGT discount that seems viable and worthy of consideration!
    bro
    4th Apr 2016
    10:59am
    After most of a lifetime's experience with a strong commitment to environmentalism and devotion to operating using an evidence-based approach there is nothing new in hearing people express surprise that "the normally iconoclastic Greens have come up with a plan to abolish the CGT discount that seems viable and worthy of consideration".

    Such judgments are best placed on considering the plans put forward rather than relying upon what vested interests may say negatively about the messenger, often with little analysis of the content. To the extent that life has ever been thus, any change for the better is welcome. The Greens actually stress their commitment to an evidence-based approach so if people want to destroy their credibility it should be attempted on the evidence rather than the name call.
    Happy cyclist
    4th Apr 2016
    11:13am
    Well said, Bro.
    Anonymous
    6th Apr 2016
    11:24am
    The Greens didn't use an ''evidence-based'' approach when they STUPIDLY AND BLINDLY supported the dumb change to the assets test that leaves retirees who saved a little extra far worse off than those who spent more freely and only have around $400,000 in the bank.

    Interesting article I read recently SHOULD have been studied by all politicians prior to the change being approved. It clearly evidenced that even if you have $800,000 in assets (plus just $25,000 in personal/household and liquid cash) delivering 7% return (almost impossible in today's environment), your income áfter Jan. 2017 is less than a pensioner with $300,000 in the bank unless you deplete your assets substantially, which will mean that you will be more reliant on the pension in the future. This is because you have to allow 3% of your income for inflation, so you only have 4% ($32,000) to live on, whereas a pensioner couple with $300,000 in the bank receives nearly $34,000 pa + pension benefits (valued at around $2500 p.a.) + any return they achieve over 3% on their $300,000 invested. All up, the self-funded retiree is likely to be $10,500 p.a worse off for having sacrificed to save an extra $500,000.

    Obviously if the self-funded retiree can't achieve 7% return, they will be far worse off. At just 3% interest, having saved an extra $500000 will cost them up to $40,000 per annum. At that rate, it won't take long for their savings to evaporate, especially if they have to sell assets at a loss in a down market to get cash to live on.

    There is a massive incentive here for people to reduce their savings for retirement, and of course that will drive pension costs through the roof.
    tasmainia
    4th Apr 2016
    11:02am
    Why Punish those who have saved their $$ during their working life.
    Will the Government provide homes for those who can't afford them when us private home landlords pull the plug due to lack of return.
    Misty
    4th Apr 2016
    11:16am
    I don't mind abolishing or reducing the CGT for investment purposes but with some amendments, the family home should be exempt and maybe allow 1 investment property CGT discount but abolish the discount for any others.
    Anonymous
    6th Apr 2016
    11:33am
    Again, Misty, that's a simplistic response that ignores the real impact of changes, even though it sounds good on the surface (like the assets test change did, but in fact analysis proved it very damaging).

    Increasing CGT will mean investors in managed funds and institutional super and those who have to sell assets to fund living costs (because they can't get a pension) will have their income further slashed. Many of those affected will already, after January 2017, be far worse off than aged pensioners. How much more income-slashing can they stand?

    ENOUGH IS ENOUGH. Stop bashing the battlers and start addressing the trillions in tax havens.

    I don't object to a CGT change IF it's part of an overall review of the tax and pension system. In isolation, it's yet another potential disaster.
    Dan
    4th Apr 2016
    11:29am
    Capital Gains tax should be abolished entirely ie zero tax' People have already paid personal income tax on their savings to enable funding for any investment and that is more than enough They also pay state land taxes on property investments and stamp duty on probate when they die ie Death taxes it is only those who are envious of people who accumulate their savings who want to tax them out of existence its called socialism also leave negative gearing for deduction of legitimate expenses and interest etc as it is The socialist seem to think all these expenses are made up and do not realise it is paid from investors hard earned
    buby
    4th Apr 2016
    11:37am
    I"m sure your right too Dan.
    We are taxed in live then in death too....hell, is there NO end.
    When do we actually get to enjoy life!
    Without the banks also putting out their hand as well for their cut, and i think the gov's also putting out their hand on parts of your saving too...... Geez greedy little suckers.
    And now they wanna survery us....
    I don't think i'd eve be bothered to respond!!!

    YourLifeChoices Federal Budget 2016/17 Survey:
    What do you want?
    Torch
    4th Apr 2016
    11:52am
    Spot on Dan . Too many here sound like takers and want government to provide all .Bottom line CGT is theft by government . They need more because they spend so badly . No thought to spending only what they can collect so they think up new ways to increase the take . In my book they legalise theft .
    And for those here always having a go at the rich (of which I am not one ) , the rich already contribute way more than most . They pay higher taxes , employ more people ,spend more and thus pay more GST and become the target of ever increasing ideas or new taxation .
    For those who want to live under socialism , find your favourite working socialist country and emigrate . Oh , sorry , there are none !
    KSS
    4th Apr 2016
    12:48pm
    Torch the real problem here is that if the Government (of any hue) tries to curtail spending up go the howls of protest from those who perceive they may 'lose-out'. On the other hand if the Government attempts to raise more revenue, up go the howls of protest yet again from those who may 'lose-out'. And often its the same people doing the howling on both sides of the equation.
    Happy cyclist
    4th Apr 2016
    1:57pm
    Dead right KSS. You've nailed it. If people would stop reacting out of self-interest and start thinking about the good of the country and all who live in it, I think we might all actually be better off. But the political parties carry much of the blame for this behaviour, the way they encourage hate and dissatisfaction among "the Australian people". (I preferred it when we were just Australians).
    Anonymous
    6th Apr 2016
    11:37am
    Agree Happy Cyclist - but we need to determine properly what is self-interest and what is in the nation's interest. For example, removing all incentive to save and all reward for saving for retirement isn't in the nation's interest. The changed assets test is destructive both socially and economically, and those impacted had every right to scream.

    Tinkering with the CGT could well have similar detrimental effects. I don't necessarily agree with abolishing the CGT, unless there are other measures to compensate. For example, we know that people negatively gear property to benefit from CG and CGT concessions. Abolishing CGT would increase the propensity to do that unless negative gearing were also abolished.

    Nothing is as simple as it looks, and the real problem we have is that the government constantly tinkers, instead of instigating a comprehensive review and overhaul, and every change has an undesirable side effect.
    Grateful
    4th Apr 2016
    11:43am
    Abolishing the CGT discount is NOT "raising taxes" as some self interested people claim, it is removing a distorting RORT!!
    Why do 63% of people interviewed consider that their chikldren will NEVER be able to afford a home??
    Why have house prices that sold for $120, 000 in 1996, $200,000 in 2012, now sell for a minimum of $600,000??? Supply and demand?? Garbage!!!
    Two elementary basic CAUSES, the highly generous taxation benefits incorporated in negative gearing, compounded and exacerbated by the removal of the law that previously prevented money to be borrowed in superannuation funds to purchase real estate.
    Housing changed from being for housing, into a highly lucrative investment commodity as a result and we then saw the "supply demand" ratio alter dramatically with genuine home buyers having to compete with cashed up (borrowed) investors using tax payer subsidies to gamble with real estate, thus, virtually eliminating first home buyers from the bidding "war".
    Now, the opposition's suggestion of changing the rules to only be able to negatively gear new houses has at least a three pronged immediate benefit. It will create more new homes and by increasing the supply will balance the supply demand ratio and will keep down costs AND create more jobs in the building AND building supply and furnishing industries!! What jobs are created when someone buys an established home by comparison????

    This is not an anti negative gearing policy, or will raise rents. Genuine investors will in fact be able to negatively gear TWO first homes for the same price that they now pay for one. Simple example:- Now one has to borrow around $600, 000 to pay for a $700,000 (AVERAGE priced) home, paying around $33,000 per annum interest on top of $33,000 stamp duty. They would need to rent the property for, say, $500 per week to "suffer" a loss of $7,000 just on the rent (the negative gear).
    But, for that same $600,000 borrowed, the could by two new homes, using the required personal collateral rules in both cases, costing around $36,000 p.a. on top of $35,000 in stamp duty, but, renting each of them for, say, $300 per week each, and "suffer" a smaller loss for taxation purposes.
    Win/win/, investor has two properties instead of one, the there are two properties available for rent and that rent is $200 per week LESS. The taxpayer also has less to subsidize!!
    And that's just one example. How the government argues against doing ANYTHING against the current negative gearing rules beggars belief!!!!!!!
    Torch
    4th Apr 2016
    12:03pm
    My kids are buying houses . They worked and saved and earn way more than wages in the 90's. My first home in the 70's was a real stretch too . wandered how the heck I would keep up the payments . So I worked 3 jobs and the kids mum stayed at home .
    You make lots of ascertains but they are not facts , just your unsubstantiated opinions .
    By the way there are no negative gearing rules just for property . It is long held that the costs involved in earning an income are tax deductible . All income ,which includes the costs involved in gaining rental income . Not just a wrought for the rich .
    Misty
    4th Apr 2016
    12:19pm
    Sorry Torch but not all costs involved in earning an income are tax deductible these days, unfortunately.
    Grateful
    4th Apr 2016
    12:42pm
    Torch. I paid for our home on very basic wages, my two children both own their homes outright and are on average incomes, but, they purchased them before 2000. I bet my grand children will never be able to do that under the current rules. A no brainer, BUT, can be remedied!!!
    There will be FAR more winners than losers if something was done to reduce the cost of housing!!! How many family breakdowns are occurring due to financial problems mainly brought about by mortgage stress or rent affordability?
    Time to start looking at the bigger picture and to start being less self interested. Everyone needs to help to get us out of this, what I call, major community disaster.
    Anonymous
    7th Apr 2016
    6:49am
    Grateful, CGT doesn't only apply to real estate. You would be surprised at the effects abolishing or reducing concessions might have. For example, almost everyone would see the growth of their superannuation fund reduce, because most super funds are invested in managed funds that trade shares, or trade shares directly. Many low-income retirees would find their incomes reduced yet again, and those who have to sell shares to fund lifestyle would suffer substantial losses, which would put more pressure on the pension system.

    That is not to say the concessions shouldn't be changed or even abolished, but not in isolation to examination of the impact and changes elsewhere to compensate for detrimental changes.

    It's a bit over the top to suggest that CGT concessions are always unfair or benefit the wrong people, or that there will be far more winners than loses by changing them. If you look at the bigger picture carefully, you will see that things aren't as simple as you paint them.

    Here's just one example of how things are NOT simple: Two decades ago, I started a campaign for reform of a particular area of taxation. It was based on knowing a couple who sold land at a profit and faced a huge CGT bill. Now, that couple had bought the land to build on, but were later transferred in their jobs and had to sell to by elsewhere. Because it was a private purchase, not business, at the time they were unable to claim deductions for rates, lawn mowing, water charges, etc. Although they sold at a profit, the land in the area where they were buying a replacement block was the same price as the land they sold, but because of the CGT, they couldn't afford to replace their land, so their plans to build a home were set back 3 years. In that situation, CGT is clearly cruel and unfair.

    This is why I say you cannot ''tinker'' here and there with the tax and pension system. It needs a total rethink and restructure from the ground up. The pension system is now a total disaster, with a million inherent flaws that encourage dishonesty and planning that is against the national interest, and discourage saving. And the changed assets test made it a thousand times worse. The tax system is a similar mess, due to decades of irresponsible ''tinkering'' - changes here and changes there that have impacts nobody considered.

    4th Apr 2016
    11:55am
    The way it used to be, when I was in the investing mode, the easy rule of thumb to estimate your CGT was to halve the profit and add the rest to your taxable income. This "updated" income figure was what you would be taxed on, the difference in your unrevised tax figure and your new tax figure being your CGT. Should this still be close to the way CGT is paid, by simply reducing the amount exempt from tax will certainly help fill the trough, and those helping to do this would be those in a position of monetary capability - the property investors, share market dabblers, money market mongers, and NOT extra-income pensioners.
    Sandgroper
    4th Apr 2016
    12:04pm
    If you are trading stocks and shares daily, capital gains are profit. If you bought a house in 1996 and then sold it in 2016, you have not made a profit. Inflation has increased the value on paper, but it remains the same house. For example, I bought my house in 1996 for $83000 and today it has a value of $500000. Following the Greens' logic, I would pay tax on $420000 as a profit, which is nonsense.
    When John Howard introduced the 50% discount, it was to simplify the capital gains system where adjustments were made for inflation, before calculating any profit. If the 50% discount were to be scrapped, then the old inflation calculations must be reintroduced, and the government might get less tax than they do today.
    KSS
    4th Apr 2016
    12:42pm
    Sandgroper, under current rules the house you buy that is your principal residence i.e. the home you actually live in, is NOT an investment and not subject to CGT at any rate. However, that little holiday shack by the coast, or the studio apartment near the university originally intended for the student offspring and no longer used by them etc ARE investments. As I see it, the only way your home could be seen as an investment is if you bought it with superannuation and it remains in your superfund as an asset - much like that share portfolio or the artwork on the walls.
    Anonymous
    7th Apr 2016
    7:28am
    So, KSS, if a couple buy land to build on and then can't because they are forced to move due to employment, it's okay to apply CGT to the ''profit'' made from inflation, even though the real value of their asset didn't increase at all and in fact they suffered huge loss due to having to pay stamp duty and legals to buy elsewhere?

    It would be nice if the system was a simple as some seem to want to think, but it isn't. That holiday shack might have been bought with the intention that after the kids stopped using it, it would fund retirement. Forced to sell because of pension changes, now the retiree faces a massive loss due to CGT changes. How much punishment should the responsible, hard-working, careful planner have to stand? A lot of them are really struggling now - with income cut in half due to falling investment returns and loss of pension benefits. If we just keep on taking from the battlers who work, save and invest for their future, we'll have a nation of bludgers and big spenders who need full pensions in retirement and government funded aged care. The next step, then, will be to abolish or slash benefits so poverty increases.

    Sadly, this is what the self-righteous green-eyed out there are pushing for - a world where there is no reward for working, saving, planning and investing, so no incentive to do what's good for the nation.

    CGT concessions are a major driving force behind the profits of most super funds. The impact of abolition would be much greater than most here can imagine. And there are many situations, such as the one described above, where to levy CGT would be patently unfair and cruel.
    Tom Tank
    4th Apr 2016
    12:10pm
    We are in a situation where the nations budget is out of balance. Forget about the blame game as to whose fault it is as both parties have to carry their share of the blame.
    The question is how is it to be fixed and we cannot get a reasoned approach from the LNP are they are locked into the Institute of Public Affairs mantra of lower taxes.
    The countries that are managing best in these difficult times are the Norway, Sweden etc who are actually high tax countries. Compared to Australia they are very high tax countries BUT the taxes are, largely, well spent on their citizens.
    Excellent health care, education, welfare and other services. Yes they have their problems but not to the extent we have as we follow the American path toward unrestrained capitalism with its dog eat dog approach and only the wealthy win.
    As long as this mania of lower taxes persists it will be impossible to get a reasoned debate on the economy and we will all suffer.
    Grateful
    4th Apr 2016
    12:46pm
    Yes Tom. Wonder how this forum would have been if it started after tonight's Four Corners?????
    Misty
    4th Apr 2016
    1:07pm
    Well Grateful we can check in tomorrow and see if anyone's opinion has changed or though I doubt it will make any difference to a lot of investors.
    Janran
    4th Apr 2016
    1:40pm
    Well said, Tom Tank.
    Our Liberal/National Govt is hell-bent on tax cuts, but the budget deficit is what they promised to fix. So if there are any savings to be made then that's where the money should go.
    However, they tell the public they are all for cutting income taxes, (and any party left of Malcolm, the "socialists", won't!), knowing that the rich and poor, working or otherwise, will be suckered in to voting for them to get a tax cut.
    Unfortunately, the tax debate has deteriorated into a screen for the upcoming election, and electors are notoriously naive to such manipulation.
    If the Govt is serious about savings, why doesn't it save us $500million+ right now, and ditch the plebiscite on same sex marriage? The Libs can't sack Malcolm as PM, because then they'd be as bad or even worse than the Labor "knives in the leaders' backs".
    Show some guts and soul, Malcolm!
    Radish
    4th Apr 2016
    12:45pm
    To many vested interests for this to get any legs. Probably just a thought bubble!
    Not a Bludger
    4th Apr 2016
    12:49pm
    What specious logic - again the moaning commentariat are trying to get into my (and most other Australians') wallet.

    What is NOT stated is that the $7 billion that would be raised by 2019 and the $119.5 billion in the next decade is my money from my hard earned assets and it is money that we (collectively) would NO LONGER have to spend.

    Nick off all of you "experts" and politicians - stay away from my assets.

    4th Apr 2016
    1:20pm
    In regards to giving tax breaks to those investing in something which will boost the economy you mention first homes. This is probably the best example of where government "discounts" should be given and incentives granted. Not only should fist home buyers be given a housing grant, taxes on the purchase of that house should be greatly reduced or eliminated altogether. I can't remember the exact number of people who are guesstimated to be employed in all industries for the building, furnishing, and fully equipping a house to be inhabited, but it was very large and considered everything in the home and on the property (carpeting, tiles, lighting, plumbing, appliances, furniture, gardening tools, etc, etc, etc). The building and purchase of a house has a flow-on effect to an enormous number of industries and people, but the government is totally ignorant of these positive implications for the country's economy. Again, the politicians are only interested in themselves and their bank accounts and are anything BUT visionaries, with their eyesight extending only from one payday to the next. Disgraceful, pathetic, and disgusting, and we are the ones suffering because of their selfish attitudes.
    Misty
    4th Apr 2016
    1:32pm
    Good comment Fast Eddie, why don't you run for a seat in Parliament
    Anonymous
    4th Apr 2016
    3:04pm
    Thanks, Misty, for your comment, but I'm too old, too cynical, and have seen too much hypocrisy, theft, dishonesty, and deceit during my working life and have more self-respect than to subject myself to it again, especially when the government seems to be the leader in these malpractices.
    Grateful
    4th Apr 2016
    4:02pm
    Isn't that part of the "no brainer" that we should be addressing. How bleeding obvious that FAR more people and industries benefit by the construction and fitting of a new home than the VERY few that benefit from the sale of an existing home.
    Yet, how many billions were wasted in the so called "first home owners" grant that virtually all went to the vendor and estate agents and poured fuel on an already hot market and when combined with negative gearing and legalizing borrowing for real estate for super funds, we now have the disaster that may not ever be resolved.

    Just imagine what will happen if (when) interest rates increase? No, "the markets" want them to stay low and actually cheer when there is bad news for the economy. Good news is now bad news for speculators using borrowed money (nearly all of them).

    And that old chestnut of an argument that they should not touch our assets that we have earned and have paid our taxes for all of our lives. Try telling that to our kids and grand kids who now have to pay for the huge debt that we have used to pay for them and the fact that WE have received huge benefits from our taxes ALREADY!!!!!
    LiveItUp
    4th Apr 2016
    1:39pm
    I feel sorry for those who rent with such changes as rentals will atleast double and become very scare with such moves. Property investment today is already marginal and these changes will make it not worth while. I'm glad my property investment days are over.

    I also hope that no one has Aussie shares because they too will underperform to the rest of the world.

    If ths happens welcome to the third world Australia with negative growth and negative wages growth. No one in Australia will be able to afford housing even if it cheaper.

    No stamp duty and capital gains will mean that welfare as well as other spending will be severely curtailed.

    I'll manage but will you.
    Janran
    4th Apr 2016
    1:47pm
    Luckily, many of those renters will be able to buy their own homes and stop having to pay rent, as negative gearers shed their property portfolios.

    The resultant reduced number of people in the rental market will keep rents competitive for remaining renters. Supply and demand goes both ways.
    Happy cyclist
    4th Apr 2016
    3:11pm
    Thanks Janran for some common sense. Where does Bonny think the current rentals will go? If people who already own them also own their own house, then the rentals will either remain rentals, or as you say, be bought by those currently renting thereby reducing the number of rentals needed and life goes on.
    Grateful
    4th Apr 2016
    4:08pm
    Spot on Janran!!!! More new homes, more supply, much cheaper than established houses, more jobs, more buyers and less renters as they will afford to become buyers.
    Rent of an average $400 per week can pay off a mortgage on a very nice new home in a new development and even less for a basic one like most of us started with.
    LiveItUp
    4th Apr 2016
    6:27pm
    Growth in rentals needs to keep up with demand for rentals and this will not happen.

    Wages will fall like they did in US which means pensions will also fall. Renters will not be able to buy there own homes as the supply of housing will also dry up. Prices of housing will not fa?l as no one will sell.

    Current rentals will go up in price as people try to make money from them.

    No growth will lead to a recession.
    Grateful
    5th Apr 2016
    10:17am
    Bonny that is such a pessimistic view. Can't you see that by factoring negative gearing specifically to new homes and nil to established homes, that we should see a significant number of new homes being built thus boosting the supply and seeing more young people being able to afford to become home owners with those significantly cheaper homes to the grossly overpriced established ones?
    It will have a very large impact on supply coupled with a probable decrease in renters who can then afford to be owners for less than they are now paying in rent?
    And that's not taking into account the boost to employment that all of those new homes will create right down the supply chain.
    Those new jobs will also create new home owners!!!
    LiveItUp
    5th Apr 2016
    11:08am
    People will not invest in new homes if they have to pay full tax on the proceeds. I certainly would not.

    I also certainly wouldn't buy some of the rubbish homes being built today either. Blocks are so small you are able to smell the breath of your next door neighbour. Not thanks.

    Abolition of the CGT will make it not worthwhile for people to invest especially those who can afford to.
    MiteMike
    4th Apr 2016
    2:45pm
    If the tax benefit of investing in property for rental housing were reduced or removed, would this not make renting unaffordable for low incomes ?
    Janran
    4th Apr 2016
    4:23pm
    If I owned a rental property and asked for more rent than the market will bear, then I'd lower the rent and at least have a tenant rather than leave it vacant and get no return, wouldn't you?
    LiveItUp
    4th Apr 2016
    6:33pm
    No I'd leave it until I got a decent tenant rather than someone who would make life difficult for me.
    nena
    4th Apr 2016
    4:16pm
    Why is it that government always do help those who are financially better off. Yes, the economy may grow but at the expenses of the less fortunate such as the low income workers and aged vulnerable people like myself. By taken less tax from those who could afford, without going "hungry" like many others, there would be less money to do the humane thing for all.
    Anonymous
    6th Apr 2016
    11:45am
    WRONG Nina. Those with a little more are being bashed to death at present. A retiree who battled and went without to save is now being denied a decent retirement income and forced to drain their savings. And there are threats of yet more cuts to their income. They have suffered seeing their income more than halved due to falling investment returns and pension changes, and now they are threatened with CGT reductions and further cuts to their lifestyle.

    And the worst of it is that this approach is economically devastating. It removes incentive to work and save and invest, which is all that was keeping Australian living standards higher than the rest of the world. We will collapse into 3rd world status if it continues.

    The super-rich need to pay up. That's the ONLY solution. Stop slugging the middle class and upper working class, because that is a recipe for economic collapse.
    Misty
    6th Apr 2016
    1:47pm
    I agree with you to some extent Rainey, stop slugging the lower and middle income and concentrate on the upper income and super rich who we now know, not all of course but many, are tax dodging their incomes.

    4th Apr 2016
    5:33pm
    Like a lot of the Greens ideas, they sound good in theory but it's the implementing of them that's the killer. To do all of these things will invariably raise another department to implement the scheme and it may well be that the cost of collecting the additional revenue will outstrip the amount received.

    As regards getting rid of negative gearing, the short term gain will only produce long term pain in the loss of rental stock. Labor tried this in the Hawke/Keating government and available rental properties were reduced as a percentage of renters. The rental market is a very volatile one and small changes can have major effects. When Howard/Costello allowed a once only payment of up to $1M into super with no extra taxation, some landlords sold up and the rental market was affected. It has since recovered but the high rentals remain. Negative gearing has been in place for over 100 years but to hear some politicians talk, it is a new thing designed to rip off renters.

    If we allow the status quo, the end result could be that those who buy properties for income, negatively geared, will either sell up on retirement, pay 50% CGT and have a reduced age pension because of assets. Should they choose to keep the investment properties, they will also have a reduced age pension but the income will further reduce it and the asset base will be greater as no CGT has reduced the value of the property.
    Anonymous
    4th Apr 2016
    7:39pm
    Implementing the Changes to Capital Gains... is so very easy. You just change legislation and there it is changed!

    No problems with implementation.

    In regard to Negative Gearing... this is double dipping and the propaganda surrounding the removal of this item, is just that propaganda.

    The removal of Negative Gearing, except for new builds will be good for the housing market. Rents and property prices will come down because more houses will be built and surprise, surprise, economic basics of SUPPLY & DEMAND come into play.

    The more SUPPLY you have waters down the DEMAND and the prices decrease to reflect that.... for both rentals AND house prices. End of Story. The rest represents the squealing of greedy piggies being pulled out of the pig trough.
    Anonymous
    4th Apr 2016
    9:04pm
    Thank you Mussitate, CGT applies to much more than just housing although if it did I may agree with you that changing the legislation is a simple preocedure.

    Negative gearing is not double dipping. In its simplest form it means that you add up all your income and deduct from that total all of the legally allowed costs associated with earning that total. You might note that this applies to any entity running a business, not just housing investors.

    If you only allow negative gearing to apply to new housing, you will create a false market because of the large number of investors bidding for a lesser number of new properties. New properties can't just appear because land is needed to build on and there is a shortage of suitable building blocks in most of the major cities. On the other side, the cost of existing properties will fall because there will be a reduced number of purchasers. To then make a decision that rentals will fall cannot be justified.

    Your comment about 'greedy piggies' is offensive to those mums and dads who may own just one other property which is hardly excessive. By making statements such as that, you have also dragged in most of the MP's who also own more than one property. May I suggest you Google register of members interests-parliament of Australia.
    Grateful
    5th Apr 2016
    10:31am
    Old Man. Negative gearing and CGT deductions certainly is double dipping when superannuation funds are involved.
    SMSFs are nothing more than governments (taxpayers) subsidizing gambling. Super contributions were designed to have individuals provide for their own retirement thus the subsidy, but, what is the difference between a person using that money to buy shares and other "risky" assets (and no one can tell me that real estate is not risky, just wait for the next interest rate rise) and someone having a punt on a racehorse.
    Both are gambles, but, the punter doesn't get any subsidies.

    There is certainly no shortage of land in Victoria and all land released is sold in hours and houses built immediately and occupied immediately upon completion. We haven't seen the start of the new homes boom that will result from that policy, just watch all of that tied up land suddenly being released onto the market, Councils, will be working overtime to grant approvals thus also boosting their depleting income sources.

    4th Apr 2016
    7:31pm
    I don't agree with the removal of the 50% discount to CGT .... per se.

    My reasoning:
    Capital Gains are gains that have accrued over the lifetime of the asset from the time of purchase to its disposal. It is truly unfair that the this gain should ALL be taxed as a lump sum at the time of disposal, creating a huge tax bill.

    Even Primary Producers, Athletes and professional sports people, etc are allowed to AVERAGE their income over 5 years because of the spasmodic way they receive their income... to even it out and make it more fair.

    When Capital Gains was introduced, rather than the 50% discount, it had a much fairer method of allowing an indexing system that took out the effects of INFLATION and left you with a gain that more accurately reflected its worth. However, this was changed by Howard (from memory) to 50% discount, so that he could obtain more money from the taxpayer (inflation was relatively high in those days).

    Additionally, it should be corporations that pay more in taxes, as they pay so little and they will not be affected because Corporations can't apply the 50% discount - it ONLY affects:
    - individuals;
    - super funds;
    - charities; and
    - trusts (pass CG discount on to individuals)

    The removal of the 50% discount, without re-introducing an indexation system OR a system that allows you to allocate a proportion of that GAIN over the same number of years you owned the property is unfair to individuals/trusts AND it disadvantages SuperFunds & Charities both are not for profit but to PROVIDE for retirement and those in need.
    Fready
    4th Apr 2016
    7:32pm
    Now that compulsory superannuation has been in place for about two decades the time has come to start reducing the pension. It is ridiculous that a couple who never saved now receives more income than a couple who went without and saved in the order of a million dollars. Equally ridiculous is that others who arranged their affairs to buy the most expensive house that left them with about $300,000 can claim a full pension. We have neighbours in houses worth about $1.5 million getting the pension.
    Anonymous
    4th Apr 2016
    7:51pm
    Fready

    UNFAIR: Some people can't save because they EARN very, very little and can not afford a home. They are the undereducated that work their A*SES OFF just like everyone else but don't get far.

    The Liberal Party is promoting Less PUBLIC education, less training, less everything which may allow people attain a higher level. Even TAFE now has been turned into a money making exercise, when it used to be the stepping stone for those that wanted to educate themselves and get further training.... it was free!

    There are inequalities throughout our system and usually led by the wealthy, so that they can put more of their noses in the trough.

    So I do understand what you are saying, I just disagree that those that are 'WITHOUT', are 'bludgers'. Like everything only a small percentage are real bludgers and MANY of those are in the top 5% ($$ wise). That doesn't mean that in a country like Australia, we leave them on the streets to starve and hence, turn to crime to survive... we are not America, yet.

    Besides, have you tried living on the pension or unemployment benefits... no, I haven't either BUT I would have no idea how to live on such a small income... no clue whatsoever!
    Anonymous
    6th Apr 2016
    11:41am
    Sorry, Mussiate. The number who couldn't save is very small. My partner and I had massive disadvantage, earned minimum wages all our lives, had a lot of ill health and a special needs child who cost a fortune, and we STILL saved enough to not qualify for a pension in 2017. I don't know a single retired couple who earned less than us, but neither do I know more than a handful who have saved as much.

    I agree that some experience crisis and if people have a serious disability etc. they may have a genuine reason for not having saved, but most lived far, far better than we did, and that is the SOLE reason we have more now.
    Misty
    6th Apr 2016
    1:54pm
    The way you choose to live Rainey was your own choice not everyone wants or can live the way you must have to do what you say and save what you did, good on you for doing that but you can't expect everyone to live up to your standard or punish them if they can't.
    Anonymous
    7th Apr 2016
    6:56am
    No, Misty, I don't expect others to live as we do. But I DO expect that those who do choose to save shouldn't be punished for doing so.

    I have never supported reducing the pension, but I'm astonished at how many here think it's perfectly fine to deny people who saved any benefit from their sacrifice. Did you support the cruel changes to the assets test - despite them leaving many self-funded retirees worse off than pensioners?
    Macca
    4th Apr 2016
    7:35pm
    Theres a lot of people who make comments who obviously have never borrowed money to make investments and risk losing it all.the problem is Govts should come up with a set of rules to encourage investment and risk and then not change rules .Most people like me invest to provide for the future retirement and for family.Macca
    Misty
    4th Apr 2016
    8:21pm
    Nice to be able to have the money and know how to invest but a lot of people do not so don't judge them too badly please, they may not have had the start in life or the opportunities a lot of other people have had.
    In Outer Orbit
    4th Apr 2016
    10:11pm
    Seems to be a lot of confusion about CGT and negative gearing.

    If you make a capital gain on an asset, typically this is an unearned income. It is not unreasonable for a Government to tax this, given they tax any other income? You would only have to pay a % of the gain, and keep the rest. With 'tapering', the longer you have held the asset, the less tax you would be expected to pay. Seems fair enough.

    Secondly, if you borrowed the money to make your unearned gain, why should that interest cost be a tax deductible expense? You're making money for nothing after all.

    Looking at the rest of the world, which is always a useful comparison to where Australia really stands, CGT is often payable on any property other than your main residence. That's certainly true of the UK, where they have also just scrapped loan interest as an allowable 'business expense' for landlords - ie the negative gearing rort. Interestingly, it hasn't made a blind bit of difference to escalating UK house prices or the rush to be a buy-to-let landlord.

    House prices reflect supply and demand, end of story. Australia has people and investors pouring in from all over the world, the demand consistently outstripping supply. As a result, and as reported in this weeks Economist , Australia's housing stock is currently estimated to be amongst the most seriously over-valued in the world, in comparison to incomes and rental returns. That means property owners have been making eye watering capital gains, and leaving many non-property owners at a significant disadvantage economically. Sounds like a perfect cue for taxation to even things up.

    I think the whole area could and should be simplified. End all the bureaucracy and just do away with the assets test and the income test altogether and give everyone a state pension. That would end all the unfairness of asset-rich property owners taking a full state pension, and end all the uncertainty linked to unstable policy and end all the attempted fiddles. The housing market would no longer be distorted by pensioners clinging onto oversized homes to escape the assets test threshold. What I'm describing works fine in other parts of the world, so why does Australia have to over-complicate things and tie everyone up in knots. One of the richest countries in the world with one of the meanest pension systems in the OECD. Why?
    Dan
    5th Apr 2016
    10:39am
    You have not mentioned that most owners of investment properties in the capital cities Sydney and Melbourne and are not owner occupied, incur punitive Land Taxes for which there are no return services or benefits whatsoever., just handed over to the States
    Governments legislating for more and more taxes only results in rents going up to recoup the tax and unfairly impacting on the tenants disposable incomes
    I for one would not entertain receiving a state pension sound every bit like socialism in a pure sense I am surprised you have not promoted the ides of us all living in state owned housing
    Misty
    5th Apr 2016
    12:10pm
    Just be careful what you wish for Dan you never know when your circumstances could change or that of your family and who knows then maybe you would welcome the chance to receive a Govt pension.
    Anonymous
    7th Apr 2016
    7:07am
    Misty, Dan isn't wishing to abolish the state pension. He's saying it should be paid to every retiree, without a means test.

    What he's asking is ''why should someone who worked, saved, and declared assets honestly, and didn't tie up their wealth in a very expensive family home to cheat the system, be punished by receiving no pension?''

    The system creates huge incentives for plunging money into an expensive family home - and even couple separating and buying two houses (maybe next door to each other!!!) It creates major incentives for hiding wealth or gifting it to children 5 years before retirement, or even splurging on a luxury cruise. The only things it DOES NOT encourage are responsible planning and saving and honest declaration of assets.

    You talk about lifestyle choices, but anyone who makes a lifestyle choice to save for a higher standard of living in old age rather than enjoying a higher standard in earlier life is punished harshly. Only those who choose not to save have their right to a lifestyle choice recognized. Apparently saving and investing is a BAD choice and those who do it must suffer. But then how come the Treasurer is always saying it's what we have to do for the economy to prosper?

    Be careful what you wish for. If taxes and the pension system are constantly tinkered with to remove all incentive and reward, the economy will collapse. A degree of socialism is essential, but there are major risks in taking it too far.

    Tax reform has to be effected so that the rich pay their dues. But we have to be very mindful of continuing the current attack on the middle class and upper working class. It has to stop!
    Macca
    4th Apr 2016
    11:14pm
    To Misty Worked full time job plus 2nd job !1 day off a month for 5years plus Wife worked casual .Would call that hard work but paid off.Went through Keating error of high interest rates but survived through hard work.Like a lot of other workers trying to build for family.It's incentives to invest that that help reward that effort and hopefully pay off in the end .Survived gfc and hoping Govt doesn't start changing rules to suit the ones who have not saved or had a go.May still have to work to support those who don't or want to work.But that's the price of lifestyle and Govt welfare programs.Macca
    Misty
    5th Apr 2016
    12:05pm
    Your story sounds very like mine Macca, my late husband worked as much overtime as he could and worked until he was 70, I also worked all my life, part time in later years, we owned our own home and had a small super left after the GFC wiped out half of it, I am not complaining but I know a lot of people never had the opportunities or the education I did, through no fault of their own, so I don't judge them.
    In Outer Orbit
    5th Apr 2016
    8:21pm
    I'm with you Misty, no 'us and them'. The UK has one state pension for all, is not socialist and has one of the fastest growing economies in the OECD, so it's demonstrated there is another way. Why Australia needs an over-complicated pension system is beyond me - it distorts the housing market to nobody's advantage, and with a third of pensioners categorized as facing poverty the status quo is obviously not working adequately for a large slice of the population. I'm no socialist but acknowledge that consistent evidence globally says that more unequal societies are less happy. Unless we're smug, there's little satisfaction in being 'OK' when so many around us are not.
    Anonymous
    7th Apr 2016
    7:16am
    Those who supported the assets test changes are blind to economic realities, In Outer Orbit, and we are seeing here that many don't consider the broader application of some taxes and the wide impact of changes. It's just NOT as simple as ''unearned money'' or ''only the lucky have it so take it off them''. Abolishing the CGT discount, or reducing it, will impact on nearly EVERY Australian, because most super funds buy and sell assets to make profit.

    Our over-complicated pension system is a disaster that motivates damaging behaviour and destroys incentives for responsible planning and saving. Our over-complicated tax system is an even bigger disaster, and tinkering at the edges with changes to this or that, as the Greens seem intent on pushing, will make it worse.

    I think the CGT discount is problematical in many situations, but in other instances it is essential to promote fairness and to stimulate economic growth. Be very careful what you wish for, because you might be shocked at the impact of measures that APPEAR to be beneficial. The Greens are notorious for looking through rose-coloured glasses and ignoring the broader effects of the measures they support.
    Chris B T
    7th Apr 2016
    10:13am
    CGT is taxed but a discount rate of 50% CGT after 12 months.
    This discount could be halved to 25% @ 24 months
    50% @ 48 months
    The super funds and a like still enjoy a discount of 50% but not this quick turnover of assetts.
    Super is a long term asset shouldn't be affected.
    Short term sellers are a problem, even though it's 12 months before the 50% discount accrues.
    This is after all deductions are made, but not earnigs from asset which they combine with other income and tax reductions.
    To gain negative gearing.
    This is a very generous discount as it Stands.
    Oars
    26th Apr 2016
    2:27pm
    most progressive Countries have scrapped Capital Gaind tax to allow the "hidden money" to come out of the mattress and place it inbto projects that are benefitial to everybody- not the least employment. Why we still moan about the few positive people "gettin' ore than me" stuff amazes me. This great country was built by energetic people who created jobs, wealth and afuture. The only reason i can see that the super wealthy are taking their money offshore, is that they don't see this place going anywhere fast- least of all with a "spend-up-fast" Labour party. God help Australia if another group of commos get back in power.
    Misty
    26th Apr 2016
    2:55pm
    What rubbish you write Oars, what makes you think Labor hasn't learnt a lesson from last time in government?, and who has wracked up an even bigger debt since winning the last election?, the Coalition Government that's who and they haven't learnt anything from Labor's past mistakes, knifing their previous leader who is still causing disunity in the party, scandals galore, Bronwyn Bishop, Sophie Mirrabella just to name a couple.
    The Laird
    26th Apr 2016
    4:15pm
    You can't just have a band aid approach delivering a patchwork quilt of minor, unrelated changes. We need a root and branch review of taxation & retirement income.
    People are using superannuation schemes for wealth preservation rather than providing a retirement income stream.
    Current taxation concessions are unproductive, with >80% of the deductions going to 10% of income earners.
    People (especially renters) on the basic old age pension are living below the poverty line.


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