Here’s how Labor’s $200 million tax slug will impact you

Labor has proposed $200 Billion worth of new taxes. 

That’s a staggering amount – almost unfathomable.

The numbers are so large they are almost meaningless unless of course they are explained, so I’ll try and break them down.

 

• Loss of negative gearing benefits

 

This has received a lot of publicity recently and it has been revealed that Labor has made a number of incorrect basic assumptions in formulating the potential benefits of the proposed taxes.

Plus, they seem to have forgotten how ordinary mum and dad investors are providing housing for renters. 

Some other things they seem to have forgotten include:

• Many property investors are ordinary Australians earning about $80,000 per year. These are not “greedy investors.”
• The Government spends about the same on Public Housing ($4.7 billion) as they do on Recreation and Culture and the trend is less and less each year. Someone (you and me) has to take up the slack.
• It is said that the loss of negative gearing will benefit the government by $3 billion per year (and this figure now seems to be significantly overstated); but p investors spend $44 billion per year to own and maintain these properties.
• In most businesses the initial years start off with losses and this is the same for property investors. The benefit of negative gearing is what all investors and business owners receive when they spend more than they receive to build up a business which will become profitable and pay tax.
• There are 400,000 public houses in Australia compared to over 3 million properties owned by investors. If 10% of investors leave the market, then the Government will need to step in and spend more than the tax saving from disallowing negative gearing.
• Loss of this tax benefit to investors could add over $5,000 to a property investor’s cash flow which would require them to increase rents on average by over $100 per week.
• • Just talking about this policy has reduced house prices due to the uncertainty. So who knows what eventually implementing the actual policy will do. The policy by Labour is specifically designed to help reduce house prices (your home) so that 10% of housing buyers, being first home buyers can afford to get into the market. The Labour Government is punishing 90% of home owners so 10% first home buyers may be better off.

 

• Electric cars 

Labor wants 50% of all cars to be electric within 10 years.

Assuming many cars will not be suitable for electric drive i.e. farm vehicles, long distance driving, Utes and 4-wheel drive cars then over 75% of passenger cars will be taxed if not electric.

The proposed tax on petrol cars will be over $2,000 per year as they emit more than the 105 grams of carbon.

 

• The loss of the cash back on Franking Credits

 

Australian who own shares in public companies have their individual tax on dividends pre-paid by the company.

When these share owners receive their dividend (their share of the profits in the companies they partly own), they have the value of the pre-paid taxes (paid by the company) taken into account.

If the shareholder’s tax rate is higher than the tax taken by the company (and paid to the government) they will pay a top up tax. If below they get a refund. It is proposed to take this refund away.

This is the same as denying you a tax refund if you overpay your PAYG on wages.

In summary:

Labor proposes to tax an additional:

• $57 billion to retirees
• $31 billion on property investors
• $30 billion on businesses using trusts
• $34 billion on higher superannuation taxes
• $5 billion from halving the capital gains tax discount
• $2 billion by limiting what you can spend on accounting and tax services.
• Plus, many more

What’s next?

The Greens and the ACTU would like the introduction of an inheritance tax.

What’s left? How long before your family home will be taxed?        

Links and Resources:

Michael Yardney

Metropole Property Strategists

Ken Raiss – Metropole Wealth Advisory

Why not learn more about Ken Raiss’ services  at Metropole Wealth Advisory by clicking here

Some of our favourite quotes from the show:

”If they follow the guidelines that Labor is proposing and they only buy new or off-the-plan properties, they’re going to suffer because we know the track record of new and off-the-plan properties has been horrific.” –Michael Yardney

“Here the government hasn’t really been providing much public housing, and they have been depending on people like you and me to do that.” –Michael Yardney

“People have got to make their own decisions about what they want for their life and for their country, and it’s not just how much money you’ve got in your pocket, it’s what you’re doing for the community and the country as well.” –Michael Yardney

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