Guest Post: Rodney – The Family Home Racket

I own one house and one factory.

The house has land value twice that of the factory. The Local Government charge for the house is 2.02%. For the factory which is zoned A Industrial; the rate is 9.15%. The house is land tax exempt. The factory is subject to land tax, Fire Brigade levy and Stamp duty. The house is not.

The total of State and local Government charges on the factory are six times those on the house. On a pro-rata basis the total is therefore twelve times.

If a property yields a capital gain on resale,there is no tax on the house, but a substantial tax on the factory.

Traditionally Australians have sought to own their own home and this has generally been thought to be a GOOD IDEA. Family home ownership was further encouraged by low interest finance. For Many years this yielded no great profit although it did encourage saving and a store of wealth.

Inflation changed this a little. (Gough Whitlam should be my hero. He reduced my then $8500 mortgage by 45% in 3 years.)

Town planning changed the situation a lot. Town planning has meant that the cost of land for housing has risen rapidly and therefore enriched those with houses. Increasingly expenditure on housing is not expenditure on building or even renovation. It is a payment for transfer of a privileged location. It is also extremely generous to planners, bureaucrats, consultants and similar parasites.

Increasingly savings are devoted to reshuffling the stock of dwellings, not productive investment.

Finally when we reach the ultimate parasitic stage, known as retirement, the family home does not count as an asset for means test for a pension. It may even make sense to buy a bigger house for retirement.

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84 Responses to Guest Post: Rodney – The Family Home Racket

  1. If a property yields a capital gain on resale,there is no tax on the house, but a substantial tax on the factory.

    I think that if you have used your house to make any money, eg. rented out even one room, you have to pay capital gains tax if you sell the property later at a profit.

    If someone can tell me this ain’t so, I’d be very glad to hear them out.

  2. Andrew

    True but I believe ties pro rata pro rata, Phillipa. On that % of the house rented (floor space perhaps, share of bedrooms etc) and then by the time in which it was rented. So ends up trivial, after again applying 50% discount (thanks Peter).

  3. Beertruk

    If you have an investment property and sell it for more than you bought it for, then you are subject to capital gains tax. The house that you live in is not subject to capital gains. However I don’t know how it works if you have a boarder renting a room in your place of residence.

  4. blogstrop

    Finally when we reach the ultimate parasitic stage, known as retirement …

    You had to end that whinge with a slur, didn’t you.

  5. pseudonym

    Philippa,

    This is the rule you are referring to:

    http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.190.html

    Through convoluted reasoning, the ATO takes the view that the exemption is not available where (say) a room in the house is used as a home office. On the other hand, that rule is only applied on a “reasonable” basis so that, for example, if the home office is 20m^2 and the house is 150m^2, then you can still get the principal residence exemption for 86.7% of the capital gain on sale.

    However, the position becomes much more complex if you first started using the home office after 20 August 1996, in which case this rule can apply:

    http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.192.html

    IMPORTANT DISCLAIMER: What I’ve written here is an gross oversimplification (almost to the point of being misleading) of some complex rules. I urge you to seek professional advice on your own particular circumstances.

  6. ralph

    Indeed, its a disgrace. Saul Estlake’s submission to the Senate Economics References Committee in February summed it up well: the stock of housing hasn’t been growing enough because governments no longer build like they used to and up front charges for infrastructure. He is particularly critical of the FHOG which has done nothing for afford ability (btw if Hockey has any balls he will scrap it) and simply enriching vendors. He is also critical of negative gearing which hasn’t increased supply and combined with the 50% CGT discount has become a vehicle for reducing and deferring personal tax liabilities. He also neatly explodes the myth of the “landlords strike” if negative gearing is removed. He has estimated at least 5 billion in revenue foregone from negative gearing. He recommends getting rid of cash grants, stamp duty exemptions and negative gearing; directly funding construction by government; sharedequity schemes; broad based land taxes rather than stamp duty; funding infrastructure by levies based on value rather than up front charges; and more infill. Politics though – he concludes”Australians are likely to live with a dysfunctional housing system for a long time yet to come”.

  7. Rabz

    pseudonym, here’s my take.

    However I don’t know how it works if you have a boarder renting a room in your place of residence.

    It’s a fractional figure based on how the place was divided (e.g. 50% while the co-resident was resident) and the period of time involved.

    For example: Tenant lives in residence, rents a room, shares equal time in the dwelling. The tenant dwells in the spare room for the last two years of a four year ownership of the property. (this assumes a pure 50% split of the dwelling’s floor space, you can use a ratio based on the size of the room rented out)

    The property’s net capital gain is $80,000 over the four years. Two years or 50% of the CG is taxable, i.e. $40,000.

    Discount that again by the Costello CGT exemption (50%).

    Therefore, $20,000 is taxable at your highest marginal rate, in the financial year of the sale.

  8. Walter Plinge

    I think that if you have used your house to make any money, eg. rented out even one room, you have to pay capital gains tax if you sell the property later at a profit.

    If someone can tell me this ain’t so, I’d be very glad to hear them out.

    It is correct. I added a purpose-built office with separate client entrance to my home at some considerable expense. When it came to tax time (30 June 2013) I advised all the appropriate deductions to my tax accountant. His advise was not to bother as the capital gains liability that would now be incurred would outweigh or merely negate the deductions. So I didn’t bother with the capital-related expenses and just stuck with the outgoings such as rates, electricity and so on, based on floor area.

    As to Beertruk’s boarder…that just, ahem, goes in the old skyrocket.

  9. Makka

    “Increasingly savings are devoted to reshuffling the stock of dwellings, not productive investment.”

    Over 1 Trillion dollars tied up in capital ex-banks in Australian RE. There is no bigger capital pool in Australia my any measurement – none. This is a gross miss-allocation of capital , mainly because of the risks such a behemoth represents to the economy and our future. In so doing we have priced probably 2 generations into debt poverty. Not such a great achievement.

  10. Bob Campbell

    ” It may even make sense to buy a bigger house for retirement.”
    It certainly does, which is why so many do.
    And offspring are outraged at suggestions that home should be used to pay for care of elderly parents – That’s my money Ralph!

  11. boyfromtottenham

    Philippa – So what? The aim of the article was surely to point out the relativly disadvantageous treatment of productive land (quaintly known as Factories) versus unproductive land (i.e. simple private dwellings). If you think that this disadvantage is not a problem, please say so. Otherwise your comments are just a distraction.

    To be even-handed: Rodney, why do you choose to characterise retirement in that nasty way? As a self-funded retiree, I do not consider myself a parasite, and cannot understand why my ilk should be so described. Would you like to explain why you chose to use this unpleasant term about this group – it spoiled an otherwise insightful article.

  12. johanna

    Oh, my, the old “capital and investment is tied up in housing” argument, which is a favourite of leftist economists.

    Here’s the thing. In a free society, people choose how to save/spend/invest their money. Sorry if it doesn’t fit in with the Master Plan. This kind of thinking is along the same lines that people’s superannuation savings should be invested in “worthy”, rather than highest yielding, investments.

    There are at least two good reasons for people to invest heavily in their homes. One is that it is the last bastion of preserving your money against punitive taxation. The other is that Australian tenancy laws mean that most renters are always just a few months away from potential eviction.

    The notion that people who (rightly) regard their homes as their nest-egg, and enjoy making them more comfortable, is some sort of perversion of economics is just a Five Year Plan by another name.

  13. Tel

    The total of State and local Government charges on the factory are six times those on the house. On a pro-rata basis the total is therefore twelve times.

    And that’s why it is only valued half as much as the home.

    Increasingly expenditure on housing is not expenditure on building or even renovation. It is a payment for transfer of a privileged location. It is also extremely generous to planners, bureaucrats, consultants and similar parasites.

    Exactly. Every complex multi-cell creature on Earth also has parasites, every group of people also has a government… coincidence? I think not.

    Finally when we reach the ultimate parasitic stage, known as retirement, the family home does not count as an asset for means test for a pension. It may even make sense to buy a bigger house for retirement.

    It might even make sense to have a little factory tucked out in the shed, but don’t tell anyone!

    If it bothers you that much, how about a non-privileged location? I hear Dubbo is cheap. Most people only live in the city so they can get jobs and those jobs are wherever the town planners put them (generally clustered around the public transport nexus).

  14. Tel

    Rabz, the purpose of Capital Gains Tax is to ensure that people don’t use assets to dodge the Inflation Tax.

    In other words CGT helps keep inflation under control and stabilize the currency. It would be good if government was able to keep their spending under control and stabilize inflation that way, but that ain’t gonna happen, so we have CGT instead.

  15. JC

    In other words CGT helps keep inflation under control and stabilize the currency.

    Tel, nothing personal but are you chewing coca leaves?

  16. Raider580

    And yer, cash poor pensioner should sell their houses and live rich under a railway bridge.

  17. Ubique

    If capital gains tax was applied to the family home it would severely restrict the mobility of labour. Once you’ve paid the CG tax on selling your home, you wouldn’t have enough left to buy an equivalent replacement. Just because we’re paying too much tax on other stuff isn’t reason to increase tax on the family home.

  18. 2dogs

    Every complex multi-cell creature on Earth also has parasites, every group of people also has a government… coincidence? I think not.

    Gold!

  19. ar

    Apply CGT to the family home, allow deductions for interest payments with a deeming rate for rent that would be otherwise earned. Shouldn’t be too complicated.

  20. Senile Old Guy

    the ultimate parasitic stage, known as retirement

    And that disgraceful slur negates your entire contribution.

  21. Tel

    Tel, nothing personal but are you chewing coca leaves?

    I happen to think very rapidly without stimulants, but the inflation question can be explained in a reasonably short space even to slow thinkers.

    When government spends money, or when banks lend money they put more money into the system. When government taxes money they slurp it back out of the system. Thus, a government with a balanced budget is neutral… and this is an excellent thing for the economy.

    When a government runs a deficit, the question is how they fund that, if they can convince ordinary citizens to buy bonds it is temporarily neutral because those citizens are temporarily refraining from consumption in proportion to government spending. If the government is borrowing from banks who in turn regard the bonds as collateral, then we have a rubber balloon situation and typically we get a bit of inflation. Smart investors amplify that inflation by avoiding holding cash and moving it into gold, land, and other traditionally stable assets… up go the asset prices.

    CGT has an immediate negative feedback, discouraging investment in assets and should people insist, then the more inflation, the more the government can tax it back out of you, thus slurping money out of the system and bringing the government books back into balance (or at least helping in that direction).

  22. Tel

    I might just add, that Australia’s CGT is a bit of a hybrid because although it discourages investment in most assets, it does not discourage investment in the family home. Thus most regular folks (knowing that Superannuation is unlikely ever to pay out) make their two biggest lifetime investments their kids and their family home (possibly in that order, possibly not). People who invest beyond that generally do so after their kids are grown and their home is paid for.

  23. .

    No Tel.

    Taxes do not make things cheaper.

  24. Noddy

    >Senile Old Guy
    #1183275, posted on February 9, 2014 at 6:44 pm
    the ultimate parasitic stage, known as retirement

    And that disgraceful slur negates your entire contribution.<

    Bravo Old Guy!
    While you other lot are getting rid of the ABC/SBS throw in the ATO… another pack of unrepresentative parasites.

  25. Grigory M

    You had to end that whinge with a slur, didn’t you.

    I’m with you, Blogstrop. Damned if I know why good posting space has been wasted on Rodney’s big fucking whinge. It’s unsubstantiated, unadulterated crap. And I call bullshit on Rodney’s home being exempt from Fire Brigade levy and Stamp duty – WTF is that Fire and Emergency Services Levy, GST and Stamp Duty that I pay each year on my home insurance? And I can’t claim any of them on my tax return, whereas Rodney can get a full refund of the GST (assuming his “factory” enterprise is registered) and also claim the others as expenses against the earnings from his ‘factory”.

  26. JC

    Tel

    Don’t get me wrong as most of the stuff you rant about is pretty decent. Sometimes though you seem to have a predilection toward jumping off a cliff. Dot and I are here to prevent you from doing so because we care.

  27. Monkey's Uncle

    Doing away with special treatment of the family home is probably politically impossible to achieve. The only thing that will change this situation is if there is a significant fall in house prices, which will happen when there is an economic downturn. I wonder how many people will still think it is a great idea to put all your money into their house.

  28. MemoryVault

    Ya just gotta luv it.

    Australia’s (to quote) “leading libertarian, centre-right blog”, debating the best way to tax retirees out of their family home, because (apparently) the investment stuffs up the central planners.

    Oh the ironing.

  29. .

    rodney has a point. People shouldn’t be making profits because of town planning.

  30. Monkey's Uncle

    Here’s the thing. In a free society, people choose how to save/spend/invest their money. Sorry if it doesn’t fit in with the Master Plan.

    Of course people choose how they shall save/spend/invest their money. That does not stop governments from distorting incentives and choices by offering more favourable treatment, via taxation or other regulations, to some forms of activity compared to others.

    And as if special treatment of the family home compared to other types of investment is not itself a vast form of social engineering. A bit of self awareness please.

  31. Gab

    “leading libertarian, centre-right blog”

    Where does it say that?

  32. MemoryVault

    Monkeys Uncle

    I wonder how many people will still think it is a great idea to put all your money into their house.

    Monkey, if I could figure out a way to put all your money into my house, I’d probably go on thinking it was a good idea no matter what happened to prices.

    Unfortunately I’m not the government – or a union official.

  33. Monkey's Uncle

    Australia’s (to quote) “leading libertarian, centre-right blog”, debating the best way to tax retirees out of their family home, because (apparently) the investment stuffs up the central planners.

    No, because it stuffs up the free movement of capital to its highest and most beneficial use when governments distort incentives to favour some kinds of investment over others.

    And favouring home ownership over other forms of economic activity is itself a form of social engineering you slow learner.

  34. MemoryVault

    Gab

    Where does it say that?

    It ran for a while up in the top right-hand corner – currently it says:

    To educate, entertain, and inform.

  35. JC

    I wonder how many people will still think it is a great idea to put all your money into their house.

    This doesn’t mean it will continue, but Australian real estate has been the best investment ever. Even better than Australian Stocks and Australian index is up there as the best 100 year investment.

  36. MemoryVault

    And favouring home ownership over other forms of economic activity is itself a form of social engineering you slow learner.

    Yeah – everybody should be subject to the same level of social engineering – that’s the libertarian way.

    Forgive them Bastiat, for they not what they do.

  37. .

    Yeah – everybody should be subject to the same level of social engineering – that’s the libertarian way.

    Forgive them Bastiat, for they not what they do.

    Correct – zero.

    I have a hotline to Bazza at Wednesday night goat riding when we crack out the “Wee-gee” (Aussie pronunciation) board.

    He says I’m doing ok!

  38. Monkey's Uncle

    Memory Vault,

    If you are going to take the piss out of me over minor typo/grammatical errors, it is probably best not to write stuff like this.

    Oh the ironing.

    I think you meant to say ‘oh the irony’.

    Deadshit.

  39. stackja

    Families need housing how does making it harder help?
    Savings given to Super funds seem to disappear.
    What are families supposed to spend the money on?

  40. .

    MU

    He’s trying to riff that we’re basically intelligent as Ralph Wiggum for disagreeing with him.

    Which would be fantastic if he had an argument against my view that there should be an equal (zero) level of social engineering.

  41. MemoryVault

    I think you meant to say ‘oh the irony’.

    No, actually I was quoting an expression oft-used by what was for a time one of the best blogs on the internet, The Daily Bayonet. Now sadly in retirement.

    However the expression caught on and has been used – often – by Jo Nova, James Delingpole, Donna La Framboise, and at Bishop Hill, amongst others.

    Obviously you don’t get around much on the ‘net, Monkey.

  42. Dan

    Savings given to Super funds seem to disappear.

    How do you figure that? It might be called ‘super’ but it can represent any assert class.

  43. MemoryVault

    Which would be fantastic if he had an argument against my view that there should be an equal (zero) level of social engineering.

    I have absolutely no problem with your zero tolerance to social engineering, Dot.
    I agree entirely, so why would I have an argument against it.

    It’s the Monkey who’s miffed because the family home is (currently) exempt.

    Tax, tax tax! Apparently it’s the libertarian way – according to some here.

  44. Monkey's Uncle

    Tax, tax tax! Apparently it’s the libertarian way – according to some here.

    No, the libertarian way is to reduce taxes across the board instead of offering tax breaks to some kinds of economic activity but not others.

    Offering tax breaks to some sectors of the economy instead of reducing taxes and public expenditure overall is not morally virtuous. It often just means that those who benefit from specific tax breaks may also benefit from public expenditure that is financed by those sectors that don’t get tax breaks.

    Taxing some activities while exempting others is actually the worst form of government intervention, redistribution and distortion of the market. Taxes should be broad-based but at as low a rate as possible.

  45. .

    Will no one else but myself, give rodney’s claim that people shouldn’t profiteer from town planning, any support?

    No economic reform is pareto optimal. However they often are optimal nevertheless.

    The LDP policy for example significantly raises the TFT, cuts the tax rate, eliminates them to one only and treats all kinds of income equally.

    Any losses would be first order effects. The upshot would be higher growth and the like.

  46. Grigory M

    Will no one else but myself, give rodney’s claim that people shouldn’t profiteer from town planning, any support?

    Nope.

  47. .

    So, people should profit from town planning decisions?

    Grigory – I assure you that would be the mother of all bad policy principles.

    What would end a lot of bad future decisions, unfairness and graft would be to sell off all land deemed for future release right now, all zoned with a per metre price – sure the zoning could change privately but lock it in a covenant and also economic incentives are going to stop people building residential near a piggery etc.

    This would be fair as the rules would be far less likely to change. Look at what has happened with the M4 corridor for example.

  48. blogstrop

    Dot, people are going to play the ball where it lies, for the most part. It’s all they can do. You can’t go blaming them for that. How long has it taken for union corruption to get a head of steam up in the public mind – manipulated by the selective nature of the press? How much longer is it going to take to get town planning and (more importantly) actual land releases to be more plentiful and less taxed?

  49. Sinclair Davidson

    debating the best way to tax retirees out of their family home, because (apparently) the investment stuffs up the central planners.

    MV has a good point here – I tend to be very suspicious of arguments that promote taxation as ‘improving’ the economy.

  50. .

    Yeah I know.

    I’m a professional economist with a strong interest in policy and politics.

    My mates were shocked when I rattled off how much tax (when you tally up various taxes and rates) we actually pay.

  51. blogstrop

    And it’s not as if the real estate market has only just begun to be profitable, at least on a par with the stock market when taken as an overall index over half a century. Yes, I know you can make more in the stock market if things go well (up or down) and you know what you’re doing.

    But making money in real estate is something that more people can do and have done for a heck of a long time, because it’s less of a casino than the stock market. It’s more readily understood by the average punter. Nothing new about that, just some exaggerating factors from time to time.

    Now tell me that people shouldn’t make profits by buying and selling stocks, or short selling, or naked short selling, you libertarian, you!

  52. Sinclair Davidson

    I was wondering how long it would take posters to notice I’d changed the tagline. We’re still the leading libertarian and centre-right blog in Australia, but I thought we could have a dig at the ABC. Doing their job without being a burden on the taxpayer.

  53. .

    But making money in real estate is something that more people can do and have done for a heck of a long time, because it’s less of a casino than the stock market. It’s more readily understood by the average punter. Nothing new about that, just some exaggerating factors from time to time.

    This is why taxes on dwelling construction, being so high, inefficient and ubiquitous, along with restrictions on compulsory savings, are bloody insidious.

    It should be easier to invest in real estate.

  54. entropy

    Monkey’s Uncle
    #1183406, posted on February 9, 2014 at 7:55 pm
    Tax, tax tax! Apparently it’s the libertarian way – according to some here.

    No, the libertarian way is to reduce taxes across the board instead of offering tax breaks to some kinds of economic activity but not others.

    Offering tax breaks to some sectors of the economy instead of reducing taxes and public expenditure overall is not morally virtuous. It often just means that those who benefit from specific tax breaks may also benefit from public expenditure that is financed by those sectors that don’t get tax breaks.

    Taxing some activities while exempting others is actually the worst form of government intervention, redistribution and distortion of the market. Taxes should be broad-based but at as low a rate as possible.

    An important principle. I have a clarification: taxes on goods used for specific purposes can have an exemption if the good is used for another purpose outside the intended purpose of the tax. It is the purpose that is being taxed, not the good.

  55. blogstrop

    I thought we could have a dig at the ABC.

    They’re in season, after all.

  56. Gab

    I thought we could have a dig at the ABC.

    Good. I’d like the ABC buried while you’re at it.

  57. blogstrop

    … the intended purpose of the tax

    That would rule out all taxes whose patent purpose is revenue raising.

  58. stackja

    Sinclair Davidson
    #1183476, posted on February 9, 2014 at 8:37 pm

    As I have mentioned elsewhere I do not now have a TV so Sinc you do

    ‘To educate, entertain, and inform.’

  59. Rabz

    Tel,

    You’ve confused me with someone else. I was simply trying to explain, in as simple terms as possible, how you could negatively gear a portion of an owner occupied dwelling and what the tax liability might be for doing so.

  60. MemoryVault

    Sinclair

    I tend to be very suspicious of arguments that promote taxation as ‘improving’ the economy.

    Therein lies the heart of the matter. Rodney could have used the same example (home versus factory), and the same figures, to argue that the factory was overtaxed compared to the family home. Instead the argument was put in such a manner as to suggest the home should be overtaxed in the same manner as the factory. Labeling of home-owning retirees as “parasites” didn’t help his cause.

  61. This post highlights a very important point – housing affordability is determined much more by government policies than by the laws of supply and demand.

    If housing was treated like any other asset for taxation and welfare purposes, and the town planning industry was made redundant, affordability would return to what it used to be (and should be).

  62. MemoryVault

    Dot,

    My mates were shocked when I rattled off how much tax (when you tally up various taxes and rates) we actually pay.

    Once in a previous lifetime in a land far, far away, my wife was the Secretary of the local Turf Racing Club, I was the Gate man, and a certain then recently-elected federal politician was the Patron. We’ll call him “Iron-Bar” for historical reasons.

    It was iron-Bar’s wont to chuck a barbie after the races (and before the two-up started). At one of these digs a voter asked Iron-Bar a rather obvious question:

    “Iron-Bar, why do we have all these myriad complex taxes? Why not just make it one big tax and be done with it?”

    To which Iron-Bar offered this shocked reply:

    “Good God man, don’t be stupid. If we did that you would realise just how much we take off you. And if that ever happened, you’d string us all up from the lamp posts.”

  63. Sinclair Davidson

    MemoryVault – well yes. As we have all observed over the past few days on this topic emotions run hot and tempers fray very quickly.

  64. Infidel Tiger

    I can see quite a few advantages to the family home being treated like any other asset class. Imagine the tax write offs?!

  65. Rodney

    Taxes should be as low as possible, and the budget should always be balanced. Govt handouts should only go to those who really need them. They should not be a reward for re-arranging assets.
    More broadly, the special treatment given the FAMILY HOME ;
    1. Advantages the old at the expense of the young;
    2. Encourages non productive investment over growth and employment;
    3. Sets the stage for dangerous speculative bubble.

    Self funded retirees are not parasites. Rich old chisellers trying to scrooge money out of the Govt most certainly are.

  66. MemoryVault

    More broadly, the special treatment given the FAMILY HOME

    You see Rodney, this is exactly the reverse-thinking attitude I was talking about. There is no “special treatment” (advantageous) given to the family home, except in comparison to the “special treatment” (disadvantageous) afforded to other forms of investment.

    The answer lies not in dragging the family home down into the same cesspit of government taxes and charges, but rather in liberating other forms of investment from them.

  67. Monkey's Uncle

    Therein lies the heart of the matter. Rodney could have used the same example (home versus factory), and the same figures, to argue that the factory was overtaxed compared to the family home.

    Sure, we could abolish most taxes and still have money to pay pensioners etc. Never mind that the budget is already in serious structural deficit. Maybe there is a magic fairy that shits cash that may be able to make it all work? You really should submit some of these policy proposals to Treasury for proper modeling, as I fear your talents are being wasted on a humble blog like this.

    I have little time for people that resent and whinge about paying taxes, yet still expect government to provide this and that. Taxation only exists as a by-product of demand for public spending. If people want less tax, start making fewer demands on government. If governments could find a way of funding expenditure through other means with less reliance on taxation, I am sure they would do so as it would be politically very popular.

  68. dismissive

    I don’t know anyone who has bought their home as a nest egg. Perhaps I know the wrong people.

  69. .

    I have little time for people that resent and whinge about paying taxes, yet still expect government to provide this and that. Taxation only exists as a by-product of demand for public spending. If people want less tax, start making fewer demands on government. If governments could find a way of funding expenditure through other means with less reliance on taxation, I am sure they would do so as it would be politically very popular.

    People don’t demand more to be spent on them as they are taxed more? The concept of lower taxes would mean lower spending isn’t ingrained? Really?

  70. Monkey's Uncle

    People don’t demand more to be spent on them as they are taxed more?

    Yes, governments levy taxes mainly for the purpose of annoying people. Then they are left with the dilemma of what to do with the money. They don’t levy taxes because someone demands government do something.

    People that pay little tax and are net recipients of government tend to favour more public spending as it doesn’t cost them. While people that pay significant tax tend to support public spending if they think they can get something back for the taxes they pay. If everyone adopts that mindset, how are we ever to reduce the size of government? Ever heard of a vicious circle?

  71. MemoryVault

    You really should submit some of these policy proposals to Treasury for proper modeling, as I fear your talents are being wasted on a humble blog like this.

    Actually, Monkey, I did just that in 1985 – 86, at least with respect to welfare spending. When the government (and the opposition) of the day ignored the advice, my wife and I traveled across Australia, defrauding the system in several states, then went on national television to show how easy it all was.

    I wrote a best-selling book about it, and for a time had a weekly spot on the Ray Martin Midday Show, again explaining how easy it would be to halve welfare spending without inconveniencing a single person in genuine need – in fact, paying them more. The biggest wastes back then were in the system itself, not with the recipients. Nothing much has changed in the intervening 27 years, except that the administration of welfare has gotten a whole lot worse.

    Back then (Ray Martin days), the average Australian had no trouble understanding the problems, or the (rather simple) solutions. It seems the lack of understanding – and acceptance – of the realities is limited to the politicians and their attendant economists. That too remains unchanged.

    Since I am now housebound except for where my mobility scooter can take me, and have little time left – maybe a year at best – I’ll yell the truth in whatever format I can find, including this blog.

    Oh, and don’t worry Monkey. Despite your many and varied assertions about me regarding pensions, I’m not on DSP and won’t last long enough to draw an Age Pension, even if I was financially qualified to do so.

  72. ralph

    Not one useful interesting comment in this whole thread. What a waste of space – get a life you adolescents. Sinclair, you are waisting your time, do something useful.

  73. MemoryVault

    Sinclair, you are waisting your time, do something useful.

    Well, as long as it’s not going to his head.
    His waist is ample enough – not that I can speak.

  74. Craig Mc

    If a property yields a capital gain on resale,there is no tax on the house, but a substantial tax on the factory.

    Mortgage interest is not deductible on the house, but is on the factory.

  75. Squirrel

    “…..Traditionally Australians have sought to own their own home and this has generally been thought to be a GOOD IDEA. Family home ownership was further encouraged by low interest finance. For Many years this yielded no great profit although it did encourage saving and a store of wealth……”

    I still think it’s a good idea (or even a GOOD IDEA) too, even if some of the measures which have contributed to the pursuit of that objective over the years stray somewhat from a libertarian ideal. By comparison, what we have now is an increasingly toxic combination of genuine market forces and artificial constraints and stimuli – all working together to produce egregiously unaffordable and, too often, unsuitable housing (whether for young families or older people who would like to downsize).

    I would support a government which methodically addressed those issues, but I truly have trouble understanding how extending the Capital Gains Tax to all owner-occupied properties would assist. Surely, in practice, the CGT (and likewise a broad based land tax) would be just another cost which would be passed on to the buyer (unless we reach a state of sustained and widespread housing glut)?

  76. Jannie

    I have made most of my retirement money out of buying and selling residential, off the plan and preexisting. Always waited at least a year, to reduce capital gains tax by 50%. It was the only asset market my wife and I could get a handle on. Not sure if that means I am in the parasitic stage, but I get no money from the guvmint.

  77. johanna

    The bottom line is – piss off Rodney et al. The notion that people’s money should be forcibly channeled to purposes that you consider to be important is about as far from libertarianism as you can get.

    Attacking the sacred status of the family home would be electoral suicide in Australia – and a damn good thing too.

    As others above have said – addressing unequal tax treatment by increasing tax levels is bulllshit.

  78. Rodney

    MemoryVault

    At least you had a go. I wish you well.

  79. .

    I wrote a best-selling book about it, and for a time had a weekly spot on the Ray Martin Midday Show, again explaining how easy it would be to halve welfare spending without inconveniencing a single person in genuine need – in fact, paying them more. The biggest wastes back then were in the system itself, not with the recipients. Nothing much has changed in the intervening 27 years, except that the administration of welfare has gotten a whole lot worse.

    What is a shame is how obvious this is, even to us “attendant economists” (whatever the hell that means), but not for MPs.

  80. .

    I’m interested to know why people think starving the beast won’t break the vicious cycle mentioned.

  81. rickw

    I think we should be far more focussed on Governments restriction of land supply (“planning”) and Governments restriction of land use (“planning”).

    Address this issue and the price of land / houses / factories becomes reasonable and the whole debate about treatment of assets etc. becomes moot, you’re not debating the treatment of $1,000,000 but instead $200,000.

    If you want to stop the inefficient use of capital. Then put an end to people having to pour the majority of their earnings into buying something that is priced 5 times over its intrinsic value due to Government restriction of supply.

  82. MemoryVault

    If you want to stop the inefficient use of capital. Then put an end to people having to pour the majority of their earnings into buying something that is priced 5 times over its intrinsic value due to Government restriction of supply.

    Hammer. Nail. Head.

    Thankyou.

  83. Botswana O'Hooligan

    Is that Rosie the riveter on the U tube clip? Everyone is wasting time talking about making money from houses which is a myth, for the only winners are the real estate agents and the bloody banks. When blokes like me buy it’s a vendors market, and when I sell it’s a buyers market, and if I break even in the most unlikely event the market in the next locale is stronger and housing dearer. The only solution is to declare oneself a refuge and knock on senator Hanson Young’s door asking her to take one in, a fate worse than death maybe if one is accepted, but needs must when the devil drives.

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