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New modelling reveals how much investors pay in taxes

By Sasha Karen 14 May 2019 | 1 minute read

New modelling of how much tax investors pay to the government under current negative gearing and capital gains tax rules has further shown the impact of Labor’s proposed changes. 

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Analysis by the Property Investors Council of Australia (PICA) has shown that investors pay over $167,000 over the life of a 30-year loan on a federal level, an amount that PICA chairman Ben Kingsley has said was extraordinary and surprising.

“That’s before state-based stamp duty and land tax costs are included, adding tens of thousands of dollars more to the bill,” Mr Kingsley said.

“If fact, their net tax payable from rental income over the life of the investment will be over $138,000 under current negative gearing rules.

“It is clear that property investors do pay well above their fair share in taxes, and our concern is that impost on investors is set to blow out even further if Labor’s policies see the light of day.”


Coughing up

Mr Kingsley compared how much investors receive for an investment to how much first home buyers are entitled to through grants, stamp duty concessions and other benefits.

He said investors pay a lot more extra tax while home owners do not.

The impact of CGT, Mr Kingsley continued, also gives the government a considerable amount of money.

“Our data showed, for example, if the average investing couple sold their asset in the 30th year, under the current 50 per cent exemption rule, they would be paying over $611,000 in CGT,” Mr Kingsley said.

Therefore, Mr Kingsley said Labor, along with the Greens, has been “unfairly” targeting property investors in the lead up to the federal election.

“With the majority of the nation’s 2.2 million property investors earning less than $80,000 a year, Labor’s claim about tax loopholes being for the big end of town are, frankly, insulting,” he said.

“It’s totally deceptive to characterise landlords as ‘the big end of town’ in the lead up to election day.

“Mum and dads are tired of being branded as ‘greedy property investors buying their fifth or sixth property’ when almost 72 per cent only own one.”

'Mark my words'

Mr Kingsley said the purpose of releasing this modelling was to stress how vital property investors are to supplying the country with tax money to pay for essential services, such as hospitals and schools.

If Labor’s proposed changes to negative gearing and CGT are enacted, average mum-and-dad investors will be forced out of property, which would reduce demand and then negatively impact on prices, Mr Kingsley continued.

This is opposed to the fallacy that blames investors for high prices of property, when investors consist of three out of every 10 buyers in the market, he claimed.

“In addition, the policies will also reduce construction over time, which will force up rents when rental supply tightens,” he said.

“Mark my word, property prices will fall nationwide and rents will rise if Labor proceeds with its foolhardy policy that will see the wealth of everyday Australians erode overnight.”

As an alternative to changing negative gearing and capital gains tax, Mr Kingsley said the recent announcement of the First Home Loan Deposit Scheme by the Coalition government, which Labor then said they would match, would be a better way to bring in new buyers into the market.

“The scheme will assist thousands of people to achieve their dream of home ownership, without drastically reducing the value of that same property, which is the undeniable outcome if negative gearing is restricted to new property,” he said.

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New modelling reveals how much investors pay in taxes
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