B Invested

What Does A New NSW Premier Mean for Investors?

In NSW, there is a never-ending conversation about housing affordability, or lack thereof.

And a popular way for politicians or regulators to address the issue is to point the finger at investors, for apparently taking the supply of affordable property away from first home buyers.

This issue got a fresh wind in its sails recently with the swearing in of new NSW Premier Dominic Perrottet.

With his seventh child on the way, Perrottet has plenty of cause to be concerned about future generations; but like most in his line of work, his solution to a lack of affordability is to deter investors with tougher taxes.

Essentially, if the NSW government got its way, investors would be paying more Capital Gains Tax (CGT). The rationale is that the 50% discount on CGT that has been a feature for investors who sell after holding a property for longer than at least 12 months, incentivises investors to buy and hold, which means less on the market for owner occupiers.

The situation as it stands

Back in 1999, Prime Minister John Howard oversaw the CGT policy that we still operate under today. Simply put, investors pay CGT on the profits gained when they sell their property. Howard and his treasurer Peter Costello deemed there was a need to encourage investors to hold for longer than a year, by giving them that 50% discount. There must have been a lot of people flipping for quick profits back then!

Fast forward to today and the NSW government has made a submission to the federal government’s housing affordability review, wanting the CGT structure reconsidered. Believe it or not, the Liberal NSW Government is actually suggesting the feds consider something along the lines of Bill Shorten’s 2019 Labor election initiative, to halve the discount.

Don’t sell, don’t care

If you subscribe to a similar theory as b Invested founder Nathan Birch, ie hold properties indefinitely, unless you can use a sale strategically to pay off another debt or leverage into more growth, then you won’t be too worried about CGT. I mean, if you are never going to sell, your capital gains will never be recognised in a taxable way, right?

Well, hold your horses because there have even been calls from some corners to charge CGT as a property accrues value, rather than upon sale. That deferral has even been described as an “interest free loan” to investors by the government. So watch this space.

Take care of your own backyard

But hang on a minute, it’s a bit rich for NSW to be ranting about federal policies when they have some seriously outdated schemes on their own books, right? We’re looking at you stamp duty.

In the previous Sydney property boom the NSW Government enjoyed a budget in the black, largely on the back of the billions it earned in stamp duty. Understandably, there was little incentive for the government to kill that cash cow.

But now, NSW is open to getting rid of stamp duty in favour of a broadbased property tax, but wants federal incentives to help with ease of transition. Hence the submission to the affordability review.

In the meantime

Australians love property and it’s far and away our most invested in asset class, which means governments are always going to try and get a piece of the pie by taxing people who are smart enough to make money (or even just simple folk trying to buy a house to live in).

But, there are people out there who can show you how to build a strategy to minimise your exposure to tax, maximise the amount of money you can claim back from the government and help you get to a place where you can live life on your own terms. Those people are called b Invested. Get in touch with our Investor Relations team member and book in a Discovery Session to see how we can help you.

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