Archive for the ‘Taxation’ Category

Want Affordable Housing? A Super Idea Is Limiting Negative Gearing.

Tuesday, April 11th, 2017

Incredibly expensive housing in Australia is nothing new. For several years now we have had record or near record house prices across the country, combined with very low inflation. It means that the ratio of average income to average house price is such that I can’t work out how people are able to convince their lender that they can repay a mortgage.

The lack of affordability is something that has been discussed, but not addressed, by state and federal governments and is now hitting the headlines again. The latest harebrained idea is to allow first homebuyers to access their super to use as a deposit, and the average gen Y would think that would be great. Until they retire and realise that they had missed out on 30 or 40 years of their super compounding. Or perhaps they would twig when they see house prices continuing to increase as a result of all their peers having more money at the auctions. After all, increasing demand pushes up prices.

So what’s the answer?

This is where I get controversial. Firstly, abolish the First Home Owner Grants. They are a smokescreen designed to think that they’re helping young people when in actual fact all they do is push up prices. (How?! Go back and read that paragraph above).

Secondly, introduce an incentive to encourage first homebuyers to save as large a deposit as possible in the form of a grant for people who have at least a 20% deposit. Grant amounts could be for a maximum of 10% of the saved deposits, up to a maximum of, say, $150,000 (so that’d be a $15,000 grant). 20% deposits mean lower mortgages due to not having to pay Lender’s Mortgage Insurance, which in turn lead to reduced repayment times.

This would lower mortgage amounts and encourage buyers to look for cheaper first homes as well as providing a reason for builders to make smaller homes of 2-3 bedrooms rather than the 4-5 bed monsters you see in display villages.

And lastly (drum roll please because this is the really contentious bit), negative gearing must be limited to amounts over around $3 million. I’m not saying that people can’t own more than $3 million worth of property, just that you couldn’t claim a tax deduction for amounts greater than this.

The average Mum and Dad investor would not be affected but the few who exploit the system by claiming a tax deduction on 10, 20, 100 properties or more would likely be forced to sell their portfolios, freeing up housing stock at lower prices for first homebuyers.

For every winner there’s got to be a loser, right? Yes, and in this case it would be investors with more than 3-5 properties as well as banks and companies selling Lender’s Mortgage Insurance.

Yes there is every likelihood that this idea, if implemented, would lead to a housing market crash that would impact many more people than just those in the aforementioned groups, but this housing bubble is going to burst either way.

We just don’t know when.

The New Financial Year Made Simple

Monday, June 30th, 2014

It’s that time of the year again when many of us turn our thoughts to what we can spend our tax returns on (or how much extra we will have owing to the tax office). As with any new financial year there are a bunch of changes to the system whose impact on you may be positive or negative.

First the bad news. Tax rates are going up for anyone earning over $180,000 to the tune of an extra 2% for every dollar earned above that amount. Yeah, my heart bleeds for the people who have to pay this. This one is called the deficit levy, not the deficit tax ‘cause the Prime Minister promised no new taxes, not no new levies.

The other levy to go up is the Medicare levy. It rises from 1.5% to 2% to pay for the National Disability Insurance Scheme. Personally I am happy to pay an extra 0.5% for the benefit of those in society who need it the most.

The good news is that for Aussies who have simple tax arrangements, doing your tax just got a whole lot easier. If your only income is from wages/salary, bank interest, dividends and/or government payments and your only deductions are things relating to that income (as well as donations and expenses related to doing your tax returns) then you no longer need to do your online tax return via e-tax. E-tax has been a great way for just about everyone to lodge their tax, but it is designed to cater for really complicated tax returns. People with simple returns could easily be confused by all the pages in it that were not necessary for them to complete.

Now there is My Tax – a shorter, simpler alternative that can be done on a smartphone or tablet and which is no more than 10 pages (as compared to e-tax’s 200 pages). For both e-tax and My Tax you do have to create an account at first, but it’s a once off event and you may already have an account if you’ve visited for Centrelink, child support or Medicare purposes. If you are not sure if your tax is simple enough to do via My Tax, check out this Australian Tax Office page.

The main reason that doing your own tax is so easy these days is due to the fact that the tax office knows more about your income than you do. Data matching has meant that most of the figures you go to punch into your computer are already pre-filled by the ATO. Big Brother is watching (not the crap TV show BB, the seriously scary George Orwell one) and he’s got a real good idea what you should be claiming on your tax for someone working in your job. If you want to fudge the figures, prepare yourself for a letter from the ATO that sends chills down your spine.

Be especially wary if you work from home, are a tradesperson or if you claim work related expenses. These are the areas that the tax office is paying special attention to this year and, as you’ve probably just worked out, that’s a huge number of people on their radar.

The Medicare Levy

Thursday, May 2nd, 2013

If you live under a rock, you will not have heard of the National Disability Insurance Scheme (NDIS) and you also won’t know about the government’s proposal to raise the Medicare Levy. Ok, I’ll assume you have some idea that the NDIS is proposed legislation to help out those Australians who have a disability and those who care for them.


Firstly, what’s a levy? Well, it’s not something you drive your Chevy to, only to find that it’s dry (that’s a levee, as all fans of Don Mclean and karaoke would know). A levy is another name for a tax, used by politicians when they don’t want to use the word tax ‘cause they don’t want to sound like they’re taxing people more. Levies usually have a specific political agenda attached to them, such as the Flood Levy that was raised to compensate Queenslanders after the 2010-11 floods and the levy that paid for the buyback to gun owners after the 1996 Port Arthur massacre. In the past, special levies have been temporary and they have generally been seen by the public as necessary to raise the funds needed for a fair dinkum worthwhile cause. (When thinking about how successful the gun buyback has been for reduced gun homicides in Australia, nobody actually says “Whoop-dee-f*&cking-doo!”)


Ok, so what’s the proposed increase in the Medicare Levy? The Gillard government wants to raise the Medicare Levy from 1.5% to 2% to pay for the NDIS (partly pay for that is, as the states pick up the rest of the bill). The difference it would make to someone on $75,000 a year is $375. Whoop-dee-doo. Low income earners would obviously pay heaps less than this, and those on the lowest incomes, below about $20,000, don’t pay the Medicare Levy at all. Considering the difference the NDIS would make to the lives of thousands of struggling Aussies and their families, I reckon it’s the least we can do to help these people out.


*I must disclose that this blog was written 5 days after I stuffed my ankle at touch footy and had to use crutches for the first time. It’s the closest I have ever come to appreciating (to the tiniest degree) what life could be like if I were not able to walk freely. This week has been a struggle, but the big differences between my temporary medical condition and the permanent situation of those who will be eligible for the NDIS are 1) there’s really bugger all wrong with me and I’ll be fine in a couple of weeks, 2) I don’t need a carer (I hope Claudia doesn’t read this!), 3) I have not been financially disadvantaged, and 4) there’s no stigma attached to bung ankles.

Tax Time Tips

Friday, June 1st, 2012

It’s that time of the year again when we are bombarded with ads telling us to take out health insurance before June 30. Here is something they probably won’t mention in the ads – many health insurance companies allow you to prepay next financial year’s premiums (in fact Medibank Private is allowing members to pay up to 18 months in advance). “So what”, you say. As there are changes in the new financial year for individuals earning more than $84,000 and couples/families earning above $168,000, if you are earning these amounts you will be better off locking in this year’s premium and the 30% rebate attached to it before that rebate drops to 20%. For high income earners the rebate drops to 0%. So if you can lock in a once off saving, now is the time to do it. Most people take the 30% health insurance rebate, as reduced premiums during the year. If you are not “most people” don’t forget to claim when you do your tax.


Families need to have a look at a few things around tax time, including checking to see if your children’s immunisations are fully up to date so that you can continue to qualify for Family Tax Benefit Part A.


Be careful with claiming expenses like interest on a mortgage if you have worked from home. It means that your house will be hit with capital gains tax when you sell. Let’s say you claim 20% of your mortgage interest for 2 years when you work from home. It means that 20% of the increase in value of your house when you sell (apportioned over those 2 years) will be subject to capital gains tax. It doesn’t matter that the value of your house may not have risen in those 2 particular years (it may even have gone backwards in value over that time) as it’s worked out as an average over the time you own the home. Claiming the home office expense (a massive 34 cents for every hour you work at home) will not affect any capital gain on it.


Don’t forget to claim any work related deductions, especially if you have had a break from the workforce during the financial year. And of course there are the usual deductions of things like bank fees for any accounts you hold that earn interest during the year.


In the event you have some spare cash and wish to top up your super, a $1,000 contribution from your bank account will be matched dollar for dollar by the government for people earning under $31,920. It tapers off until it cuts out completely for those earning $61,920 for the current financial year. Next financial year the scheme drops in its generosity to be 50 cents contribution from the government for every dollar you put in, and the cut off mark drops to $46,920. So you will only get a maximum of $500 for your grand.


As always, if your tax is too hard for you to do yourself, speak to an expert.

Happy New (financial) Year!

Friday, July 1st, 2011

I reckon the best thing about July 1 is not seeing Paul Harrigan’s head in every single ad break on the telly informing us how much better off we will be if we take up nib’s health insurance before June 30. I suppose that is the best thing to look forward to when you remember that as of today the flood levy kicks in.

The levy is a once off tax increase to pay for the natural disasters that hit the Eastern states (mostly Queensland) around the start of the calendar year. If you earn over $50,000 you will be taxed an extra 0.5%, and if you earn over $100,000 an extra 1%. As it’s for this financial year only, who knows how the next natural disaster will be paid for.

Like it or not, tax time means you should start thinking about gathering receipts and other bits of paper and submitting your tax return. Actually, you are probably better off not just thinking about it, but actually doing it. Wednesday’s Wealth lift-out in The Australian had a statistic in it that raised my eyebrows. It stated that 4.3 million Aussies had yet to lodge a tax return for 2008-09. If the numbers were the same for the previous financial year (2007-08) it would’ve meant lots of people missing out on getting an extra 900 bucks. That was the time when the federal government handed out $900 cheques to those people who had done their tax in ’07-08 as part of the stimulus payment. That too was a one off.

So the moral to this story is: do your tax and you have a once in a lifetime chance of getting $900. It also means you can apply for a job with the tax office and run for parliament without fear that the media will find out you owe 4 years worth of tax payments. Hmm, I’m not really selling this one am I?

Tax discount

Monday, May 2nd, 2011

It’s pretty rare to get something for nothing, especially when it’s the federal government handing you a cheque or giving you a discount on your tax. Well, if you have a FEE-HELP (HECS) loan from studying early childhood education, maths or science, you could get a discount on any debt you still have of up to $1,600. But you had better get your act together as the offer lasts only until June 30 this year. You can find the link to the form you need under the FEE-HELP topic.

Tough but fair

Sunday, August 8th, 2010

It’s getting harder to rip off the taxman. In days gone past it wouldn’t have been too hard to ‘forget’ about a bank account or the money received as cash payments when filling in your tax return. These days the tax office has some pretty sophisticated software for matching your income and deductions with records they have on file. This is because every time you give an institution your tax file number (TFN), they pass on your details to the tax office. If you don’t give your TFN when requested you will have lots of tax withheld automatically.

So this year, when you go to do your tax, remember that big brother is watching (and I don’t mean the really crap Channel 10 program, I’m talking the fair dinkum scary George Orwell type of BB). If you want to submit your return via etax (over the internet) you will find that most things asking for your income (like your salary/wage, interest and managed funds income) will already be filled in with the details that are sitting on the pieces of paper you have in front of you.

If you try to fudge, you will receive a polite but firm ‘Please explain’. If you can’t explain, or make amends, you risk being audited. In the end, this system helps all of us. If people can’t rip the tax system off, the government receives more money, which in turn leads to lower taxes.

Tax cuts

Wednesday, June 30th, 2010

As of tomorrow it’s the new financial year, and that means it’s time for the latest round of tax cuts. Don’t expect a massive difference to your income, unless there will be a big change to your financial circumstances. But you will probably be better off by at least a couple of hundred bucks by this time next year.

Aussies have become accustomed to getting regular tax cuts courtesy of lower tax rates over the last decade or so. If you’ve been earning a steady wage or salary over these years you should’ve noticed that you’re now paying less tax. Haven’t noticed? Righto then, it’s time to get organised.

If you don’t know when you’re paying lower amounts in tax then it probably means this money is being blown. If so, organise with your pay office to have the amount of the tax saving taken out of your pay and put into a savings account before it hits your everyday bank account. This way, you won’t notice a difference in the money in your everyday account, but you will have extra savings, without even trying.

Now that’s a happy new financial year!