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WA State Budget supports home ownership

13 May 2016 Cannington 0 Comment

reiwa
The Real Estate Institute of WA – REIWA , have just put out a press release advising that there will be no changes to any taxation for the upcoming state budget .

 

To many this will be good news as there are several taxes that have had changes and proposed changes in recent years.

The First Home owners Stamp Duty Concessions were adjusted downwards two budgets ago for First Home Buyers (FHB) where No Stamp Duty was applicable to FHB if they purchased property to live in for a sum of $530,000 or less to a tax free threshold of $430,000 or less before Stamp Duty started to become applicable.

This was viewed by many as strange at the time given the median Perth House price was Around the $530K mark.

Living and working in the Canning Shire selling homes to buyers in and around that price point – or at least the range of $430K – $530K means that many first home buyers are restricted in their purchase – especially those FHB that are looking to buy a sufficiently large enough home where they can accommodate a family …

Whiles there are many FHB that are single and through affordability will look to buy in the $430K mark as a maximum – many by necessity  need to buy at higher prices to buy that sufficiently larger home for an expected or expanding family….

I would have thought that perhaps a change in the taxation where one buyer has a stamp duty free threshold of $430K max but two first home buyers has a stamp duty free threshold of $530K would have been a much more sensible policy implementation.

Ultimately if there are one or two first home buyers trying to access the tax exception they have to be assess so this is no extra burden on the assessors at state treasury.

This also then gets property owners into their first home more suited to their needs.

Another State Tax that has been hotly debated is the Land Tax Issue

I can say that there have been several property investors who have been severely hit by hugely increased Land Tax costs.

Land Tax is a cost born by a property owner for all the cumulative property owned under that persons joint ownership where your principle place of residence is exempt – but all other property owned in WA is assess for the land value only and then the regressive taxation amount then applies.

The tax is applied to the person who owns those properties on midnight 30th of June each year and is not a pro-rated cost like say Shire Rates which is apportioned as per how much time during the year your owned one such property (ie: if you owned the property from the 1st of July to the 31st of December in a given year – your Shire rates are apportioned for half of the total cost.

Fair enough – I’ve personally got no problem with that .

You own the investment on the last day of the financial year – you cop the tax.

But when I say Regressive taxation – I mean very regressive taxation….

Income tax for instance is a regressive tax – the more you earn as you go up the scale the higher proportionately you are taxed.

In essence “Fair Enough” again, those that are well off enough should bear the burden of taxation – be it local, state, or federal taxation.

However the tax hikes across the last three years have – to not overstate it, – been  massive.

Here are links to the tables for the last three years – source WA State Treasury:

2012/13  –  https://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Land_Tax/Land_Tax_Information_Brochure.pdf

2013/14  –   https://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Land_Tax/Land_Tax_Brochure_2013-14_Website.pdf

2014/15  – https://www.finance.wa.gov.au/cms/uploadedFiles/_State_Revenue/Land_Tax/Land_Tax_Brochure_2014-15.pdf

In looking at the change in the tables there is no doubt that you would have to have a certain amount of land value in investment property, the reality is that many Self-Funded Retirees have investments heavily loaded towards property.

Also a lot of that property is not owned outright but funded through lenders.

In assessing an example of a property portfolio with land value of say  $3M there would have been an increase in your land tax bill as follows:

2012/13 – $16,030

2013/14 – $18,020

2014/15 – $19,810

Increases of 12.4% from 2012/13 to 2013/14 and another 9.9% to 2014/15

A second example of land tax for a property portfolio of say $4.5M there would have been an increase in your land tax bill as follows:

2012/13 – $34,330

2013/14 – $38,570

2014/15 – $42,460

Increases of 12.35% from 2012/13 to 2013/14 and another 10.1% to 2014/15

As you can see a very regressive tax

I know that this is not most people who are going to have a property portfolio of say $5M for $3M in land value for example and say $7M for $4.5M in land value for example.

Certainly not me

Nor do I expect that there would a huge outpouring of sympathy for property owners of this sort of property.

But the point I do make is that most of the owners of this sort of property who we deal with as land lords are Self Funded Retirees and they are hurting – big time!

One said to me that the property he owns for a total land tax bill this year of over $38, 000 only generates net rental income of $3422 / month averaged out per month across last  year (=$790.30 /week) after all costs are deducted.

Not exactly huge dollars and a total now this year of only $2548 / month averaged out per month across last  year (=$588.04 /week).

While this has been due to decreasing rental and a slightly higher vacancy rate, the majority of this drop has been due to increased land tax according to him.

I again state that I’m in total agreement with the notion that the those with more should bear the cost of a greater rate of taxation, but I just wonder who is bearing the cost of the majority of these hefty increases..

I don’t know too many land barons, but I do have a lot of contact with Landlords of our Agency that are self-funded retires  – and they are certainly not living a lavish lifestyle.

Author – SimonBackhouse – Licensee/Director

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