Australian Housing Affordability Discussion

[whatmeworry]

Another article about property and money laundering.

ANZ Bank says a lack of political will has seen successive Australian governments fail to extend money laundering laws to cover lawyers, real estate agents and accountants.
[h=2]Key points:[/h]

• Australia's anti-money laundering law does not cover real estate agents, lawyers and accountants
• The lack of regulation makes Australia an attractive target for money launderers, says ANZ
• Real estate and law bodies have raised concerns over cost of new legislation

Australia's hot property market is an attractive haven for criminals, with estimates that billions of dollars of dirty money is being laundered through residential property.
Australia's anti-money laundering law does not cover real estate agents, lawyers and accountants, despite promises when the law was enacted in 2006 that the legislation would be widened.

AUSTRAC, Australia's financial crimes regulator, said in a report two years ago that the laundering of illicit funds through real estate was "an established money laundering method in Australia".
It said around $1 billion in suspicious transactions came from Chinese investors into Australian property in 2015-16.
Australia's housing market has been targeted by money launderers from countries including Papua New Guinea, Malaysia and China.
Dudley House, student accommodation in inner city Melbourne, was bought at a significantly inflated value by Malaysian officials.

Australia a 'place of choice' for money laundering due to lack of regulation: ANZ - ABC News (Australian Broadcasting Corporation)

 

[RAM]

Another article about property and money laundering.

Australia a 'place of choice' for money laundering due to lack of regulation: ANZ - ABC News (Australian Broadcasting Corporation)

Good to see we have some ABC staff reading AFF.

Looks as if they may have researched their report using my earlier post:

http://www.australianfrequentflyer....dability-discussion-68657-38.html#post1619317

 

[cove]

RAM I know 3 who are on AFF.
Perth prices seem to be stabilising at around 45% to 50% of Sydney house prices.

 

[amaroo]

LOL I think I know one of them

 

[whatmeworry]

Putting things into perspective.

 

[cove]

Ok Bill Shorten wants an estate tax so Melbourne and Sydney housing prices will be a big help.

 

[whatmeworry]

Ok Bill Shorten wants an estate tax so Melbourne and Sydney housing prices will be a big help.

No mention of an estate tax but plans to clamp down tax dodgers and tax minimisers using family trusts in the works.

The use of trusts and other tax-minimisation vehicles used mostly by higher-income earners will be targeted by a Labor government after Bill Shorten promised to end the nation's "two-class tax system".
As experts rejected the Opposition leader's assertion that inequality in Australia was on the rise, Mr Shorten said Labor would target the "whole different set of rules for people with the financial wherewithal to mine the plethora of choices for aggressively minimising their tax".
These included vehicles such a trusts, vast property portfolios, complex deductions and "parking their money in offshore havens".
Mr Shorten said there were two classes of Australian taxpayer, the vast bulk being of pay-as-you-earn workers, who he called "economy class", and "then there's business class, beyond the curtain where a different tax menu is served".

Read more: Trusts in Labor's sights as it targets 'two-class' tax system | afr.com
Follow us: @FinancialReview on Twitter | financialreview on Facebook
​

Meanwhile Baby boomers and older having it great.

Baby boomers and older are enjoying the biggest increase in incomes on record — but the reverse is occurring for people in their late teenage years, 20s and even 30s.

The 2006 Census recorded 2827 people in the country, aged 85 or more, who had a weekly income of more than $2000. Of the 251,000 Australians who declared an income in this age group, they accounted for just 1.1 per cent.Last year’s Census, however, found almost 9000 people aged over 85 earning more than $2000 a week (including 5200 grabbing more than $3000 a week). The proportion of people aged 85 and over with an annual income of more than $100,000 has more than doubled, to 2.4 per cent. A similar trend is evident among those aged between 75 and 84.

The single biggest income earning age group in the country are 35 to 44-year-olds.

Traditionally, it also has the biggest number of high-income earners. At the 2011 Census, of the 1.1 million Australians who had an income of at least $2000 a week, almost 32 per cent were aged between 35 and 44.But that fell to 30.5 per cent in the 2016 Census. The higher incomes were pushed into the older age groups.

If you’re a young Australian, you can rightfully claim the future’s being eaten — by older Australians.

https://thewest.com.au/opinion/shan...sh-are-eating-the-youngs-future-ng-b88528681z

 

[DaveB]

I would imagine the majority of family trusts are used to minimise, not avoid tax by either:
A Distribute after tax dividends from a company;
B Distribute before tax salary income from a company.
Given that the Family Trustees are usually the controlling owners of the company generating the dividend/income, there will always be a means for company owners to minimise tax.

 

[cove]

It is not unlawful to have a tax strategy that minimizes income taxes. Personal tax rates are already too high so lots of income is warehoused in companies where the rates are being lowered. When/if the companies pay a dividend is when the secondary taxes are paid less a franking tax credit.
If you make a profit inside a company and end up paying the secondary tax decades later you have the use of up to 72.5% of that money that remains rather than only 51% if you are on the highest personal tax rate.
That said I can tell you that house prices in Sydney and Melbourne are not in sync with most of the rest of the world. Paying off a million dollar non tax deductible home loan is way outside normal capacity to repay.
I think the big 4 banks are likely to continue reducing access to these jumbo loans.

 

[CaptJCool]

I would imagine the majority of family trusts are used to minimise, not avoid tax by either:
A Distribute after tax dividends from a company;
B Distribute before tax salary income from a company.
Given that the Family Trustees are usually the controlling owners of the company generating the dividend/income, there will always be a means for company owners to minimise tax.

It works several ways beyond the above
loss soaking between entities
income in one provided to the other as management fees (then transformed to venture capital) which is then on-used for startup R&D or other costs (which can include wages for or distributions to adult children who are ineligible for Newstart or Austudy because of mum and dads income levels, and have a spare tax-free threshold or business class fares

I'm sure there's more options than this

when Shorten says there's business class for one lot and economy for the rest, why do we act so surprised. I know after Super and income tax pay day garnishee and Medicare levy and child Support and GST and WET (Wine) and alcohol excise and fuel taxes and council rates and emergency services levy and loan interest and strata fees another lot of GST. there isn't much left. Take a guess at what that adds upto in total % of income

Why the hard sell on personal income tax cuts? - ABC News (Australian Broadcasting Corporation)

Tax rate shopping is in vogue because adding 49.5 and 10 makes nearly 60%.... salary sacrificing, SMSFs after age 60 makes Zero....oh and overseas travel no GST on that !

While the ABS Have done the household analysis of the payers of all the taxes it's now too dated at 2010.

 

[RAM]

Unfortunately family trusts and various permutations there of form the basis for billions each year in 'tax keeping fees'.

Such merry-go-rounds where not tax-paying individuals lend money to tax paying individuals via family trust so that the interest earnt is tax-free while the interest paid is deducted by the other family member. A management fee gets thrown in, add a few margins and tax is reduced to zero so that dividends earnt end up getting all the franking credits (or nearly all) refunded in cash from the ATO.

I seem to recall an investigative journalist (late 90s or early 2000s investigated Federal Politicians and found that approx (memory) 70+% of Libs/Nats had trusts and 60+% of ALP members had trusts.

Anyone recall recent exposes of wife renting Canberra house/apartment to husband (MP) or vice-versa where MP then claims away from home allowance per night. Anyone want to bet this was through a family trust? Say family trust A?

Then most likely, property is negative geared (possibly by a loan from family trust B) which sees partner of MP claim tax deductions whilst possibly getting paid a fee for managing trust B at the same time...

Welcome to the world of someone else paying tax and not those with family trusts....

 

[whatmeworry]

When we let inequality become entrenched.

 

[cove]

I watched a bit of the current Labor leader on his recent video clips. I think the only thing he has done well is meeting daughters of millionaires and marrying them. He really has never had what I would call a real job so I hope he can be replaced by a better pick. Meanwhile the crazy prices in Sydney and Melbourne continue to price many out of the market.

 

[drron]

Cove you must be reading too much of News Ltd.
A recent Telegraph opinion piece headlined-
The only thing Bill Shorten knows about money is marrying it.

 

[james4321]

I think some popcorn is gonna be required for this thread!

 

[RAM]

I think some popcorn is gonna be required for this thread!

One tonne or two?

 

[JohnK]

What do people think about investing in places such as Coffs Harbour, Tamworth, Casino etc? Older style apartments look to be priced ok with some good rental returns.

Bad idea? I have some spare cash that I'd like to try and stretch with investment loans and negative gear.

 

[cove]

Actually John I have done the opposite. I have used these ultra low interest rates to make money and then we repaid the bank on all of our properties. I think I may be 2 years early but I really don't care. Mrscove is happy that she has no mortgage debts she could be stuck with if I drop off the perch.

 

[RAM]

Actually John I have done the opposite. I have used these ultra low interest rates to make money and then we repaid the bank on all of our properties. I think I may be 2 years early but I really don't care. Mrscove is happy that she has no mortgage debts she could be stuck with if I drop off the perch.

Has she increased the life insurance since then?

Just asking....

What do people think about investing in places such as Coffs Harbour, Tamworth, Casino etc? Older style apartments look to be priced ok with some good rental returns.

Bad idea? I have some spare cash that I'd like to try and stretch with investment loans and negative gear.

The only thing they're not making more of is land. Unit blocks keep getting taller and squeezing more in but they all require the land.

Whether a good or bad idea becomes a very personal decision. Always worth considering worst case events and how'd you would cope. Things like an unexpected expense of $5,000 to $10,000 or extended period unemployed - would you be able to make repayments with job income for 3 months, 6 months etc etc.

Rental returns in regional areas can be a little like Russian Roulette unless you have good local knowledge (and even better) a relative/friend who lives there as well as being financially on the ball.

A high rental yield normally indicates low investor demand for investment properties. Some things to consider/do - have a look and see how long units have been on the market as well as houses, one trick is where it is listed with one REA and then taken off and re-listed with another so the days on market is artificially lowered.

Is it in a flood zone? How much would it cost for insurance - nothing to stop you going on-line and getting a quote for the address. I think it is NRMA Insurance who have a free-online (but disastrously publicised) flood zone map of Australia.

Is it in a high crime zone? Good/bad local schools, near public transport etc etc.

Stamp duty is a big hurdle to overcome before you make any money - so make your due diligence equally huge.

 

[Quickstatus]

BTW there is a Tent city in Martin Place sydney. Ironically juxtaposed to the Reserve Bank of Australia and Clover Moore