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. 

 

 

[nomadpete]

I am helping my mother-in-law into a nursing home.

We are struggling to rearrange her "wealth" to provide aged care (dementia) in a manner that the funds from sale of her home will last her life out.

And that is with the present CGT rules.

 

I object to people  blaming the oldies for the present housing crisis.

 

When an average person has struggled to pay off a home with tax paid worker's  income why do they have to pay tax on the sale of the home? It may look like a profit but it isn't enough to buy an equivalent home at today's prices. So there is no real 'profit'. Even though the numbers of the cheque are massively bigger.

 

As for redistributing this ficticious wealth, my mother-in-law's estate won't pass on enough for any of the younger generation to even put a deposit on their home. The bank of mum and dad (in this case of grandma), is empty.

 

However, owners of multiple properties are investors, and should pay tax on those financial gains.

[willedoo]

People like myself get caught up in the CGT trap if we sell. I've owned my place for 38 years, principal place of residence only, no business ever run on the property. I'm just an age pensioner with the arse out of my pants but I would still be up for a minimum of $50,000 tax, possibly quite a lot more if I sold. When people talk about scrapping the 50% discount if you've owned the property more than 12 months, they think it's all rich investors involved. They are largely ignorant of the fact a lot of non rich ordinary people get caught in the net as well. People in glass houses are good at throwing stones but they'd squeal if they were no longer eligible for the CGT exemption on their suburban block. My big tax crime is that my block is bigger than two hectares and I bought it after 20th. September 1985.

 

If you have more than two hectares, with the pension, you can get an asset test exemption if you've lived continuously on the property as principle residence for twenty years. They knocked me back on the first application due to me giving up work to look after my sick, elderly father for a while. I stayed at his place with him and gave centrelink that address for correspondence regarding the carer's pension I received. Because of that period, they used the angle that I didn't live at my place for twenty continuous years. I ended up putting in a stat dec saying I still considered my place principle residence during that period and gave evidence such as power and phone still connected, mail still delivered there and stuff like that. They ended up granting me a full pension, so fingers crossed they don't change their mind in the future.

[Marty_d]

Equity is equity.

If you're sitting on a property worth $3m then you're not a "pensioner with the arse out of your pants", you could get a reverse mortgage and live like a king for the rest of your life.

If you choose not to, that's fine, but you do have that option.

On the other hand you have people who, often through no fault of their own, didn't end up owning a house. They don't have that option.

Don't get me wrong, I think it's fantastic that you still live on the property you bought 38 years ago, I hope to do the same. (On my property, not yours 😄)

[willedoo]

3 minutes ago, Marty_d said:

Equity is equity.

If you're sitting on a property worth $3m then you're not a "pensioner with the arse out of your pants", you could get a reverse mortgage and live like a king for the rest of your life.

If you choose not to, that's fine, but you do have that option.

On the other hand you have people who, often through no fault of their own, didn't end up owning a house. They don't have that option.

Don't get me wrong, I think it's fantastic that you still live on the property you bought 38 years ago, I hope to do the same. (On my property, not yours 😄)

Well, I hope to stay here full term Marty. Getting rated off the place would be the only thing stopping me, but at the moment it's affordable. And it suits me not living like a king. I've got a lifestyle here kings could only dream about.