Exit Tax vs CGT ?

The cost of the new exit stamp duty (2.25%)when selling your IP can be added to the cost of acquisition (cost base) for the purposes of calculating capital gains tax……Therefore, your capital gain liability is reduced

Can you give some examples of how you feel RE investment has been ‘hurt’? If you mean prices are falling as a result of less people buying property to rent out, I believe that was the goverment intention. They wanted to cool the market in the hope of retaining some of Sydney’s brightest youngsters who were being priced out of the chance to ever own their own homes unless they left the state. Admittedly, the adjustment would have occurred regardless of this additional tax, but I think the intention was good.[cap]

…and I’ll bet a large percentage of people struggling to save 20% deposit on their first home in Sydney are glad it is there!

So who is more deserving of having their desires met, the 28 year old earning below average wages and trying to save $80,000 deposit on his first house just an hour’s commute from his place of work in the city so that he feels secure enough to propose to his girlfriend and ‘have one for the the country’ who will hopefully grow up to earn a wage and pay enough taxes to support the pension of the baby boomers in their dying days?…

Or a baby boomer who already owns a PPOR and 3 investment properties and expects to retire this year at age 55 even though his/her super isn’t going to cover the 30 odd years s/he will live on average?
(incidentally current legislation has the young fella’s super locked up until age 60 at least so he’s already chained to the wheel for 5 years / 15% longer than the baby boomers!)

I personally believe that markets are largely able to balance themselves and that government intervention is a mistake, but they may have actually saved a few of the ‘greater fools’ from financial ruin with this tax. The real test will be whether they will remove the tax once house prices return to trend along with the affordability index….
I doubt it very much!

Not at all! As stated as above, I believe that government intervention is a mistake, and that would apply to the sharemarket as well as property.

However, I believe the sharemarket is a different kettle of fish in that:

– ‘mum & dad investors’ tend to invest some or all of their savings and perhaps if they are not too risk averse a share loan / margin loan. They don’t in general stake the family home on the performance of a single asset class.

– speculation in shares may cause a stockmarket bubble, but young people can still find a way to buy into the stockmarket if they so desire. Not so with houses.

– the thrill & feeling of security associated with owning one’s house cannot be achieved by holding shares.

– a house price bubble and the accompanying over-investment is damaging to the economy in that it increases the money supply while lowering productivity*. Sure, it temporarily creates jobs and growth, but this is finite, and must come to an abrupt halt.
Over-investment in local companies on the other hand has very positive effects on productivity, so any adjustment has far less serious consequences.

Just a few thoughts. I’m more than happy to be corrected on any of the above, as it is only my own ideas, not expert opinion.
Cheers,
F.

*All this money being created out of thin air allows people to work less, retire earlier etc, without an increase in output or product. It also encourages investors to shift investments out of shares…