5 tax tips to max cashback on your property investment
With tax season knocking at the door and the economy sailing into rougher waters, here are strategic ways property inves...
Australians looking to move up the property ladder are being hindered by a population spending too long in the wrong-size homes. To have a meaningful impact on housing affordability, Australians need to be living in the right house. To achieve this, the government must step in and decrease stamp duty.
As the dust settles on the surprise Liberal re-election, many of those following the property market are now expecting an upturn. Labor’s strong preference for reform in the months leading up to the election had shaken a weakened market, but with confirmation of no change to negative gearing or capital gains tax, things should start to bounce back.
Whilst investors are left smiling with the result, little has been done to address housing affordability, and first home buyers are unlikely to find much relief in the scheme outlined by the Scott Morrison government.
Whilst policy specifically targeting first home buyers is a novel idea, it only impacts a very small percentage of the market and its actual benefits are limited, even on first home buyers. The way to truly address housing affordability is to impact the entire market and the best way to do this is to focus on “rightsizing”.
The latest ABS data shows that 49 percent of Australians are living in “under-utilised” dwellings – in houses with two or more spare bedrooms. With uncertainty in the market since the downturn started 12 months ago, this number is only going up.
Much of this can be put down to people living in their homes years longer than is suitable for their stage in life. Whilst sentiment is a factor here, high transactional cost is the key driver, and even more impactful in such an uncertain market.
I recently read that we have 100,000 underused houses in NSW and Victoria alone, and there’s more than 2,000 six-bedroom homes across Sydney and Melbourne occupied by just one person. These figures are alarming, considering we are in a housing crisis.
The transaction costs for an $800,000 property in Australia is around $55,000, and, in fact, an Australia study revealed that 33 per cent of seniors reported stamp duty as a discouraging factor when considering downsizing.
By decreasing transaction costs as a barrier to moving, there is more liquidity in the market, and it becomes easier for those entering the market for the first time to do so.
Not only does increased liquidity help first home buyers, but the actual cost of transacting (remembering they don’t have to worry about selling costs) decreases substantially, making it much easier to afford a deposit.
The final piece of the puzzle is the impact on tax revenue. By increasing liquidity, the decrease in tax per transaction could easily be made up by the increase in number of transactions. In my mind, decreasing stamp duty is a no-brainer.
Affordability refers to a product or service that is inexpensive and accessible for people with limited means.