I’m really concerned that there will be a bunch of investors wanting to offload their properties at the same time because they have been waiting for better tax breaks post-July 1. Once those thresholds have been moved, it will no longer be profitable for them to keep their houses, so they may want to sell them. Too many properties coming onto the market at once could mean a slump in property prices. I don’t want to be trying to sell in that environment.
I beg to differ – most people with investment properties are in the $45,000-$120,000 year tax bracket. The July 1 changes will result in their marginal rate dropping from 32.5 per cent to 30 per cent. That’s minimal, irrespective of whether they are positively geared or negatively geared.
The tax cuts slated to come in on July 1 are unlikely to result in a flurry of property listings.Credit: Simon Letch
The negative I see for properties are the increasing taxes put on by state governments, such as the latest land tax changes in Victoria, coupled with the increasingly onerous laws being placed on landlords. But these are nothing new.
Remember, if somebody wishes to sell an investment property, they would almost certainly be liable for a large capital gains tax bill, which would far exceed any difference to their situation caused by the tax rate changes.
I’m aware of the $27,500 cap on concessional contributions to super, but what if I want to contribute, say, $40,000 to super in the tax year? Does my super fund automatically allocate the $27,500 to concessional contributions and the remainder to the non-concessional component?
I would have assumed that the super fund treats the first $27,500 from me as concessional, as I do not have an employer as such. I’m a sole trader, so I’d like to maximise contributions and tax deductibility approaching, hopefully, retirement in the next three to five years. There have been no contributions from any sources this financial year, as my intention is to contribute more than $27,500 this financial year.
Given you are an income earner, it would make sense to focus on making tax-deductible contributions to your super. I see no point in making extra contributions from after-tax dollars. The good news for you is that the limit on concessional contributions will increase from $27,500 to $30,000 on 1 July.
If you make a $40,000 personal contribution to super, and you want to claim a tax deduction for some of it, then you will also have to lodge a ‘notice of intent’ form with your super fund, which sets out how much is being claimed as a tax deduction, and how much is not.
For example, if $40,000 is contributed, $27,500 can be marked as concessional (ie tax-deductible), and the balance as non-concessional (ie non-deductible). The super fund will acknowledge the receipt of the NOI and you are then free to claim the deductible amount in your tax return.
Recently, there have been articles about possibly changing the taxation of trusts in relation to capital gains. What does this mean? Our family’s main asset is in a trust due to Dad dying in 1983 with underage children. How can Australians plan for their future and retirement if the government keeps changing the goalposts?
There have been rumours about changes to family trusts for as long as I can remember. Given there will be an election next year, I don’t think we’re going to see too many onerous tax changes in the next 15 months.
And given your trust would appear to be a testamentary trust from the information provided, I suggest they would be the last ones to be attacked.
I just need some clarification on super. I am just reviewing my will and want to leave my super to my adult kids – will they have to pay tax on this? I have had conflicting advice.
The laws are clear – there is a tax of 15 per cent plus Medicare levy on the taxable component of your superannuation that is left to a non-dependent.
In this context, your partner is always a dependent. Obviously, most adult children would be non-dependents. The solution is to withdraw your superannuation before you die tax-free and either put it in your bank account, where it will be part of your estate or give it to the kids while you’re still alive.
Noel Whittaker is the co-author of Downsizing Made Simple with fellow finance expert Rachel Lane, available here. Email: noel@noelwhittaker.com.au
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Will the July 1 tax cuts affect property prices?
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06.03.2024
I’m really concerned that there will be a bunch of investors wanting to offload their properties at the same time because they have been waiting for better tax breaks post-July 1. Once those thresholds have been moved, it will no longer be profitable for them to keep their houses, so they may want to sell them. Too many properties coming onto the market at once could mean a slump in property prices. I don’t want to be trying to sell in that environment.
I beg to differ – most people with investment properties are in the $45,000-$120,000 year tax bracket. The July 1 changes will result in their marginal rate dropping from 32.5 per cent to 30 per cent. That’s minimal, irrespective of whether they are positively geared or negatively geared.
The tax cuts slated to come in on July 1 are unlikely to result in a flurry of property listings.Credit: Simon Letch
The negative I see for properties are the increasing taxes put on by state governments, such as the latest land tax changes in Victoria, coupled with the increasingly onerous laws being placed on landlords. But these are nothing new.
Remember, if somebody wishes to sell an investment........
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