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Property tax hikes would hit our cities hardest

  • June 28, 2016

Property tax hikes would hit our cities hardest

Changes to negative gearing and capital gains tax would be felt most acutely by investors in Australia’s major cities and in the areas where we can expect future growth, finds new analysis.

According to new analysis by the Property Council of Australia, investment property owners in some of Australia’s fastest-growing city areas will pay up to $35,600 more in property taxes under the Federal Opposition’s policy.

Under their proposal, new investment property owners would pay more in capital gains tax and investors who purchase existing properties would not be able claim any losses accrued on the property, known as negative gearing.

The analysis, which examines median prices, annual property growth rates, rents, loans and capital gains, reveals the additional tax that is likely to be paid for the purchases of property after 1 July 2017.

A property investor under this policy could pay a total of $184,000 in taxes over a six-year period in Sydney’s Toongabbie, which would include an additional $35,600 in increased taxes. A property owner in the Melbourne suburb of Croydon would pay $146,000 in taxes over six years, including almost $23,000 in additional taxes, while in Brisbane’s Northgate, a taxpayer would pay $154,000 in income tax, including almost $20,000 in additional income tax.

“Changes to negative gearing and capital gains tax would collect an additional $32 billion in taxes over the next 10 years,” says Property Council chief executive Ken Morrison.

Morrison says the analysis shows “that the burden of this taxation will be carried by investors in our major cities, particularly areas where we can expect future growth.”

“An investment property owner pays stamp duty, land tax, council rates and capital gains tax on the property they hold. No one should argue that investment property owners are not paying their fair share,” Morrison says.

“This analysis shows that the additional $32 billion in additional taxes would not be allocated evenly. If you are in a growth area in one of our major cities, you would be hit hard.

“While the focus of the Opposition’s policy has been on negative gearing, our analysis demonstrates that it is the changes to capital gains tax which will have the biggest impact on many investors.”

Morrison says private investors will be doing their own sums when it comes to the impact of the Opposition’s proposed changes to negative gearing and capital gains tax.

“The danger is that domestic and overseas investors will stay away from investing in the market. This is the worst possible outcome for the future of our cities,” Morrison concludes.