Tax cuts are a bandaid approach to a tax system in need of real reform, particularly in the areas of Capital Gains Tax and negative gearing, Real Estate Institute of Australia (REIA) President, Tony Brasier, said this month.
The REIA has called on the Government to introduce a sliding scale for Capital Gains Tax (CGT), in order to help to stabilise the property market in the future and free up supply of property to improve affordability. Moreover, Mr Brasier said, there should be concessions to roll over funds from property to superannuation free of CGT at retirement, to encourage self-funded retirement.
"CGT concessions must apply to all asset classes, not just shares. Property is the only investment asset currently subject to holding taxes (land tax) and transaction taxes (stamp duty on purchase of property and on mortgages). There are no holding taxes or transaction taxes on shares. Reform to CGT must encompass property, as well as other asset classes," said Mr Brasier.
The REIA supports the retention of negative gearing on residential property to promote self-funded retirement, provide rental property for tenants, and benefit socio-economic development.
"Like CGT concessions, negative gearing assists people to invest and save for retirement. It is not possible to simply `save' for retirement. The main users of negative gearing are not high income earners: only seven per cent earn taxable income of $100,000 per annum or more. Eighty-seven per cent earn taxable income up to $80,000 per annum and claim 81 per cent of losses," he said.
"The Warburton-Hendy report found that Australia had a comparatively high reliance on property taxes - directly related property revenue received by all levels of Government exceeded $22.4 billion in 2002-03, while the net non-taxable loss to the Commonwealth through negative gearing was $1.3 billion."
"It is a myth that property investors are the recipients of generous tax breaks. Further, their investments are crucial in providing rental accommodation. The abolition of negative gearing in 1985 saw rents rise 37 per cent across Australia and by 57 per cent in Sydney. This decision was reversed in 1987 and cannot be allowed to happen again," he said.
