The Government is looking for a way to stimulate the economy by increased spending, and tax cuts. How about granting tax deductibility on borrowing costs for the family home to make it more equitable.
Investors receive deductions for investment properties, so why not grant this right to home owners to allow for a stimulus to the construction of new homes, and reduce the shortage of rental property situation, and the potential for demand on public housing.
Win-win all round, with a boost to employment, and a reduction in people falling victim to the housing affordability crisis.The investor does receive a tax deduction however the investor may not be eligible for the first home owners grant as they may already own property. Also if the investor sells the investment property they pay capital gains tax which the non investor doesn't pay due to the PPOR exemption. If the investor owns a lot of land in one state they also get hit with land tax.
Talking about that great tax deduction you have to look at the marginal tax rate of the investor.
Say they are on 30% tax then they have to lose 100% to get a 30% tax refund. So they are actually losing 70%.
On a 40% tax rate they have to lose 100% to get a 40% tax refund. So they are actually losing 60%.Also under the credit regulations home owners get certain protections if they can't pay the loan where as investors do not.
To make it more equitable I think that tax payers money should only be lent to first home owners rather than granted freely as some investors purchased property before 1999 and had to save up the 20% deposit themselves. Also capital gains tax should not apply to investors that are trading up to a more expensive house as it is done in the USA.
Dale Lynch wrote:The Government is looking for a way to stimulate the economy by increased spending, and tax cuts. How about granting tax deductibility on borrowing costs for the family home to make it more equitable.Investors receive deductions for investment properties, so why not grant this right to home owners to allow for a stimulus to the construction of new homes, and reduce the shortage of rental property situation, and the potential for demand on public housing.
Win-win all round, with a boost to employment, and a reduction in people falling victim to the housing affordability crisis.How do you know plans for this, in the event of a big enough price downturn, don't exist?
I agree with some of "duckster's" assessment in part. My thrust is towards home ownership, and by achieving this, more people may then be enticed to further invest into property and other investment strategies to provide for retirement. The immediate problem of market stimulation has no relation to pre 1999 purchases, and as for structuring investments to achieve appropriate tax breaks, that is an individual situation that can be modified.
Yes there should be a facility to roll over capital gains into another investment unit.
If plans exist for this type of reform, then that is great – let's tell everyone……..and do it now – not sometime in the future.
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