Oz Federal Election 2013 - Discussion and Comments

[drron]

From the ATO website

2007–08
Taxable income - Tax on this income
$1–$6,000- Nil
$6,001–$30,000 - 15c for each $1 over $6,000
$30,001–$75,000 - $3,600 plus 30c for each $1 over $30,000
$75,001–$150,000 - $17,100 plus 40c for each $1 over $75,000
$150,001 and over - $47,100 plus 45c for each $1 over $150,000

The basic tax scale for 2012-2013 is as follows:


Taxable Income - Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus $37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

the thresholds have increased considerably - even if you're in the enviable position of earning over $180,000 you're not paying more tax as a percentage of your income than you were under Howard. Under Howard, on $180,000 you were paying $60,600 on an income of $180,000. After six years of Labor, you're now paying $54,547.

if you're earning $100,000, under Howard you were paying $27,100. After six years of Labor, you're now paying $24,947.

if you're on closer to the average wage, on $60,000 under Howard you were paying $12,600. After six years of Labor, $11,047.

I'm not an economist, but that's a pretty easy fact to check and a pretty easy calculation to make. Your claim is simply completely wrong - nothing to do with ideology but the facts don't support your statement. There is no income level at which you would be paying more tax now as a percentage of your income than you were at the end of the Howard government (which is when taxes under Howard were at their lowest.)

I am not a liar.You have not taken into account all factors that determine the tax you pay.
You forget tax deductions.
And as I said before I am not making my personal tax information public but I would make a stat dec or whatever is necessary to say I may a lot more tax in total amount and % of my income.

 

[mono88]

And deductions are also down.I am not going to release my income tax returns but believe me the changes are dramatic.

I would suggest you seek advice from another tax accountant to ensure you are getting all the deductions you are legally entitled to.

 

[drron]

Unfortunately for your argument I'm talking about GDP and total tax collected by the government. Not your personal tax situation.

Perhaps you might like to check out the transition to retirement provisions of super.

And if you reread all my posts you will realise I am talking about total government revenue in 2011/12 being converted to 2008 dollar amounts still being greater than 2007/08 government revenue.

 

[Pukka]

Those additional costs are a bit too significant to just ignore, however (assuming an apartment):

Body Corporate - $5,000/yr
Rates - $1,000/yr
Utilities - $1,000/yr
Maintenance - say, $2,000/yr (assuming no major disasters like flood, etc)

So the $305 you're losing each week is really more like $480.

Now, if you're a somewhat average punter on $75,000/yr, your tax bill has gone down from about $21k to about $11k thanks to the ~$25,000 you're losing each year on your property. So your net loss is really more like $12,000/yr, or about $360k over 30 years.


Let's say the property appreciates a bit above inflation at 3.5%/yr and eventually sells for around $1,140,000.


After 30 years you've netted ca. $690,000, minus whatever CGT takes.




On the other hand, if you'd taken that same $290/wk (ie: $15,000/yr) and put it into high interest savings accounts or term deposits, earning an average of, say, 4.75% after tax, and reinvesting all the interest (so pretty much the most hands-off, conservative, secure and liquid investment known to man), after 30 years you'd have a touch over $1 million.




If you are planning to get the bulk of your return from capital gain rather than yield, I propose to you that you are speculating, not investing.

Hang on there is no possible way you can lose $25k a year every year on an investment property at the current interest rate unless you are cooking the books

 

[drron]

I would suggest you seek advice from another tax accountant to ensure you are getting all the deductions you are legally entitled to.

Every accountant would give me the same answer.

 

[mono88]

Every accountant would give me the same answer.

Depends on the question you ask them, as the answers can range from:
"Let's put it in the bottom of the harbour"
to:
" hang on I need to read the Income Tax Assessment 1997 as amended, and get back to you"

 

[drsmithy]

Hang on there is no possible way you can lose $25k a year every year on an investment property at the current interest rate unless you are cooking the books

That amount was averaged over the entire lifetime of the loan at 7% (probably a little low, but workable).

Even at, say, 6% though:

$400k P+I mortgage = $600/wk or $31,200/yr
Body Corporate - $5,000/yr
Rates - $1,000/yr
Utilities - $1,000/yr
Maintenance - say, $2,000/yr (assuming no major disasters like flood, etc)

Total expenses: $40,200/yr

Rental income at $385/wk = $20,020/yr income.

Annual loss (gross): $20,000
Annual loss (net, assuming $75,000 income): about $10,000

Which lines up reasonably well with what's reported here.


(A happy coincidence, as I hadn't looked that up beforehand.)

(Note high income earners are losing an average of $24k/yr.)

Just about everywhere in Australia it's 1/2 to 2/3 as much to rent as to buy the same property. How could investors *not* be losing money ?

 

[drsmithy]

I am not a liar.You have not taken into account all factors that determine the tax you pay.
You forget tax deductions.
And as I said before I am not making my personal tax information public but I would make a stat dec or whatever is necessary to say I may a lot more tax in total amount and % of my income.

No-one wants your personal tax information. I would like to know what deductions could be claimed, but can no longer be claimed.

 

[HarryB]

Those additional costs are a bit too significant to just ignore, however (assuming an apartment):

Body Corporate - $5,000/yr
Rates - $1,000/yr
Utilities - $1,000/yr
Maintenance - say, $2,000/yr (assuming no major disasters like flood, etc)

So the $305 you're losing each week is really more like $480.

Now, if you're a somewhat average punter on $75,000/yr, your tax bill has gone down from about $21k to about $11k thanks to the ~$25,000 you're losing each year on your property. So your net loss is really more like $12,000/yr, or about $360k over 30 years.


Let's say the property appreciates a bit above inflation at 3.5%/yr and eventually sells for around $1,140,000.


After 30 years you've netted ca. $690,000, minus whatever CGT takes.




On the other hand, if you'd taken that same $290/wk (ie: $15,000/yr) and put it into high interest savings accounts or term deposits, earning an average of, say, 4.75% after tax, and reinvesting all the interest (so pretty much the most hands-off, conservative, secure and liquid investment known to man), after 30 years you'd have a touch over $1 million.




If you are planning to get the bulk of your return from capital gain rather than yield, I propose to you that you are speculating, not investing.

Ok, I understand except that your theory is based on selling the property at the end of the mortgage as you factor in the CGT. If you hang onto the property you have an appreciating asset worth $1.1m that provides you with an income of whatever the rent would be in 30 years time. Clearly the numbers would need to be adjusted for more maintenance on an older property as well.

You don't actually lose money as your previous post suggests, but perhaps you don't make as much as you might with other methods.

 

[medhead]

And if you reread all my posts you will realise I am talking about total government revenue in 2011/12 being converted to 2008 dollar amounts still being greater than 2007/08 government revenue.

Well if you don't like it you can always work hard and get out out of it.

Besides. Total absolute revenue is still not comparable even if converted as you say. If anything it's a number being cherry picked by liberals to try to get out of being the highest taxing government. I'm not sure why a comparable consistent measure is so difficult a concept.

 

[Rebekkap]

I am not a liar.You have not taken into account all factors that determine the tax you pay.
You forget tax deductions.
And as I said before I am not making my personal tax information public but I would make a stat dec or whatever is necessary to say I may a lot more tax in total amount and % of my income.

I didn't say you were a liar, I said you were wrong.

so if you're not, point us to the sweeping change that were made to available deductions that have the result of you paying a higher percentage of your income in tax than you did six years ago - I'm not interested in your personal tax returns, but if there were changes made there will be something on the ATO website.

 

[drsmithy]

Ok, I understand except that your theory is based on selling the property at the end of the mortgage as you factor in the CGT. If you hang onto the property you have an appreciating asset worth $1.1m that provides you with an income of whatever the rent would be in 30 years time. Clearly the numbers would need to be adjusted for more maintenance on an older property as well.

So let's assume rent and expenses increase at 3%/yr.

After 30 years your rental income is $945/wk, or $49,140/yr.

Body Corp: $12,300/yr
Rates: $2,460/yr
Utilities: $2,460/yr
Maintenance: $4,920/yr

Total annual expenses: $22,140

Net annual income: $27,000 (this is a little low since it would be affected by the tax deductions, etc)


The alternative of $1,000,000 in a bank account at 7% is returning $70,000 before tax. Heck, even at 5% it's $50,000.

You don't actually lose money as your previous post suggests, but perhaps you don't make as much as you might with other methods.

You are losing money up until your property becomes positively geared.
You have lost money up until the point your profits have exceeded your losses (which could be either enough time positively geared, or from a sale).

 

[drron]

Well if you don't like it you can always work hard and get out out of it.

Besides. Total absolute revenue is still not comparable even if converted as you say. If anything it's a number being cherry picked by liberals to try to get out of being the highest taxing government. I'm not sure why a comparable consistent measure is so difficult a concept.

My figures come from the ABS and Budget papers,not the Liberal Party

I didn't say you were a liar, I said you were wrong.

so if you're not, point us to the sweeping change that were made to available deductions that have the result of you paying a higher percentage of your income in tax than you did six years ago - I'm not interested in your personal tax returns, but if there were changes made there will be something on the ATO website.

And I'm not wrong either.I doubt you know all relevant tax law.Rudd/Swan added 9042 pages to the tax legislation in their first year alone.
I am quite frankly gobsmacked that you can pretend to know my financial situation.You are the one who is wrong.

 

[drsmithy]

I am quite frankly gobsmacked that you can pretend to know my financial situation.You are the one who is wrong.

No-one is claiming to know your financial situation. The numbers being used are aggregates.

 

[The Rok]

All these figures assume an appt worth $400,000 now is going to be worth $1M+ in 30 years.

It might only be worth $100,000, nobody really knows.

That's not investing, that's gambling.

 

[Rebekkap]

My figures come from the ABS and Budget papers,not the Liberal Party



And I'm not wrong either.I doubt you know all relevant tax law.Rudd/Swan added 9042 pages to the tax legislation in their first year alone.
I am quite frankly gobsmacked that you can pretend to know my financial situation.You are the one who is wrong.

I never claimed to know your financial situation. What I asked you to do, along with several others - which I note you haven't - was post information from the ATO or another reputable source about these supposed changes to deductions that have resulted in people like you astonishingly paying a higher percentage of tax. If there were changes that affected people, there will be something on the ATO website. As to my knowledge - for the first several years of the labor government I was working for one of the big four accounting firms, in the Tax team.

 

[drsmithy]

All these figures assume an appt worth $400,000 now is going to be worth $1M+ in 30 years.

It might only be worth $100,000, nobody really knows.

That's not investing, that's gambling.

Well, I wasn't going to try and make that argument, though I agree with it completely. The point is you don't really need to.

 

[drron]

I never claimed to know your financial situation. What I asked you to do, along with several others - which I note you haven't - was post information from the ATO or another reputable source about these supposed changes to deductions that have resulted in people like you astonishingly paying a higher percentage of tax. If there were changes that affected people, there will be something on the ATO website. As to my knowledge - for the first several years of the labor government I was working for one of the big four accounting firms, in the Tax team.

Well giving you my tax deductions is my personal financial information.Giving you a link would reveal my situation so I am not doing it.You have obviously forgotten some major changes Swan enacted.I am by no means the only one in my situation.

 

[Rebekkap]

Well giving you my tax deductions is my personal financial information.Giving you a link would reveal my situation so I am not doing it.You have obviously forgotten some major changes Swan enacted.I am by no means the only one in my situation.

I have a good memory. There are generally summary pages on the ATO website when changes are made to things like deductibles - no-one is going to assume everything on the page applies to you.

But no-one believes bald assertions that seem to fly in the face of the available evidence from people who won't back up those statements with any kind of evidence.

As the young kids say, link or it didn't happen.

 

[medhead]

Well giving you my tax deductions is my personal financial information.Giving you a link would reveal my situation so I am not doing it.You have obviously forgotten some major changes Swan enacted.I am by no means the only one in my situation.

Well we all know that you can change your situation by working hard. Just work hard and everything will change.