Tax Inequality

[willedoo]

I was just reading this article about inter and intra generational tax inequality. In the article the ANU Tax and Transfer Policy Institute director is calling for the primary residence family home to be taxed and included in asset testing to qualify for a pension. Note that he keeps referring to means testing, but I think he means asset testing.

I don't think his idea would be too popular with pensioners. Under the current system the family home is exempt along with two hectares of land. For example, if you have a house on four hectares, two hectares of it is taken into account as assets. Under this bloke's plan, every pensioner living on a suburban block in town would be shafted. I can't see how any government would survive politically if they introduced a system like that. A lot of retirees are not rich and own their house and not much else and are cash poor.

https://www.afr.com/politics/federal/4m-pensioners-how-australia-s-tax-system-subsidises-wealth-over-work-20260227-p5o666

[facthunter]

Houses that you Live in are Paid for with After tax Money and no deductions for anything, That Would be daylight  robbery  Inflation should be allowed for in ANY capital Gain.. Nev

[Jerry_Atrick]

One of the big tax perks that is gaining a lot of attention lately is the directors loans. The more you make and the more you borrow, the more you save in tax. In many jurisdictions there is (or was) a threshold for converting directors loans to dividends. It typically was about the same as the zero tax rate. For the rest, you set up a commercial rate between the director and the holding company; the loan will cover the repayment agreement, which can be very minimal. As you receive this money as a loan, there is no tax payable. The tiny repaymnent terms, just enough to be considered a legal contract, mean that the interest earned by the company and tax paid is minimal or the income from interest is offset by the admin costs. 

 

When you finally die, you have no assets in your name to repay the loan, your estate is bankrupt (your ownership of the coompany is returned to the company and distributed to  the remaining shareholders, usually your family. Voilla! Virtually no tax paid. 

 

Blind or secret trusts are another good way as they often benefit from tax deductions not available to private people and you can't tell who is the beneficiary to loob tax against when they exit the trust (either through death or some other form). Apart from some family trusts, which now attract dfifferent tax treatment, the UK has effectively limited the life of any trust to 80 years, after which the lessor of capital gains, probate taxes, stamp duties, etc must be paid.