Australians Paying $1 Million a Minute in Taxes!

Now that’s one expensive tax meter!

Governments throughout Australia should be focused on cutting taxes, not penalising property owners by reducing the negative gearing tax benefits. They are already collecting nearly $1 million in taxes every minute.

The latest official figures on taxation collection by all levels of Government show they collected $119,563 million in taxes during the three months covering the December quarter 2015. That means Australians are now paying around $1,313 million in taxes every day, $55 million every hour and nearly $1 million every minute! We are born free and taxed to death!

And the amount of taxes being collected by Government is increasing with total taxation revenue increasing by 17.9% (6 times the inflation rate) over the December quarter.

The debate on negative gearing has helped to mask the massive tax take by Governments throughout Australia and a lot of this money is being collected from property owners.

Social Housing and Pensions would be Strained

By limiting negative gearing, the Government would in effect discourage investment in property and with fewer people funding their retirement through this form of asset creation, the financial burden on the Federal Government pension system will only increase.

At the same time, State Governments would have to provide more social housing as there would be fewer rental properties becoming available as property investors deserted the real estate market – thanks to the noose on negative gearing.

Property Prices will Climb Higher

Governments throughout Australia should examine their current expenditure levels rather than cutting tax incentives such as negative gearing. By dabbling with changes in property taxes, they will only distort the property market as has been the case with the previous change to negative gearing undertaken by the Hawke Labor Government.

I predict that quarantining negative gearing to only new homes would result in a fourteen fold increase in demand for new homes as currently only 7% of investors buy new.

In my 50 years of property investing, I’ve seen it before. These proposed changes to negative gearing will result in a huge increase in prices of new housing because supply would not cope with the huge surge in demand from investors driven out of the second hand market.

At the moment new home building approvals are very sluggish and it takes at least two years before the new home building sector is able to meet any upswing in demand due to the time lag in construction of new homes.

Property Club Investors are Winning Investors

Club investors who have already purchased property before the interference of either government will be the winners. Why? Because the grandfathering provisions required in any new legislation mean the changes will only affect property purchase that take place after the legislation change. Labor have already announced their swipe at negative gearing will be effective from July 1, 2017. Liberals deadline is, as yet, unclear.

That is a great reason to get off the fence and invest now!  Procrastinators will be the losers.

Our Property Mentors also have access to Cash Flow analysis software that can closely estimate the amount that your new investment property would be negatively geared by.  The types of properties we source provide significant tax-saving advantages, and coupled with sustained low interest rates, the negative amounts are very low for average wage earners.

So don’t be a procrastinator or scared off the wrong side of the fence by the hype surrounding negative gearing changes. Don’t be one of the many destined to live on the miniscule pension or the failing superannuation system. Get informed and get in now while the best opportunities are there.

Kevin Young Property Club Founder