Tax and property
It has been said that to pay more than 30% of your income as a housing cost is to put you in housing stress.
Earn over $37,000 and you are already paying 32.5% tax on every extra dollar earned. Is this tax stress?
The issue is that the home upgrade market is limited by tax creep due to the percentage of income already going into tax before the upgrade interest bills are paid, as most owners borrow the extra to upgrade homes.
Add the 5%-plus cost to sell and rebuy making an upgrade worthwhile if some $300 000 is spent and this makes this market look vulnerable.
Earn above $80,000 and it looks worse with a 37% tax rate. This is not a whine on tax, far from it, it merely points out that the changeover costs, the upgrade borrowing costs and the increased costs of living make upgrading in many parts of Australia more challenging given the income tax steps and the normal tax creep.
Super at risk
In the September 26 article ‘SMSFs in the firing line’, Bruce Brammall doesn't say whether the proposed alterations to the super funds only relate to the accumulation stage or whether they also refer to the draw-down pension stage for CGT. Are you suggesting that the later pension (after 65) will still be in a tax free zone?
Editor’s response: While it seems nothing is certain when it comes to super, tax and this government, Alan Kohler does comment in a recent video (found here) that: “It’s hard to believe that they would attack the tax-free super after 60.” Rather, any changes would be more likely to come from the tax benefits of saving inside super.
The postcode problem
As a teacher of marketing at third-year university level (and a property owner), I find that reports such as the hottest property postcodes are next to useless.
Properties are an individual sales item – the success of the sales process is dependent on too many variables to enable any bulk research to have any veracity. Type of property, quality of the salesperson and preparation of the property for sale (just to mention a few), result in similar properties in the same street having vastly different sales experiences. The end result is that the researchers cobble together a limited number of statistics, promote their conclusions as gospel and try to earn a livelihood from the sale of their reports.
Sorry, in the long term, it simply does not work.
To read more letters, click here.
We welcome your letters
Eureka Report is always seeking insightful comments to publish on our letters page. If you have a letter to send, please click here.