Talking Politics

[DavidSSS]

But there is a tax concession on wages. Highly inaccurate generalisation but.
First $20 grand wages no tax.
$20 grand to $40 grand at 17% tax
$40 grand to $60 grand at 30% tax
$60 grand to whatever amount at 38% tax.
Or some such foolish numbers, but the concession is there.

In other words, same tax rates as for capital gains income.

No, the difference is that capital gains get a discount. The discount is that you only count 50% of the gain if you own the asset for over 12 months.

Taxable income is taxable income, it is all taxed at the same rate (or set of rates as above). Taxable income is income earned through working, dividends etc plus capital gains. Only capital gains get the opportunity to only count half the income as part of your taxable income.

My issue is why capital gains are not just taxed the same as wage income, no concessions.

This is not self interest, I retired earlier this year, my income from wages no longer exists. I will benefit from this concession, but I see no reason why I, or anyone else, should.

DS

 

[TigerMasochist]

This is not self interest, I retired earlier this year, my income from wages no longer exists. I will benefit from this concession, but I see no reason why I, or anyone else, should.

DS

Ooooh. So happy enough to have your fingers in the till, but feel guilty because you know ya shouldn't.

Just on the Cap gains tax discount, guess perhaps it's an incentive to get smaller investors to inject / risk some of their spare money into whatever.
Investor takes a risk on their funds or loans buying an item at X value. If the investment value drops the investor loses money. But if the investor holds for 12 months or longer any profit from that investment gets taxed at a discount.

 

[Sintiger]

None of the above explains why capital gains get a tax concession when tax on wages don't.

We all know that wealth inequality is greater than income inequality and we all know, and that article pointed out, that the vast majority of income from capital gains goes to the very wealthy.

As for the notion that you get to offset inflation, again, why not allow wage earners to do the same?

While we're at it, if we are going to tax capital gains across the years of the gains at the marginal tax rates for the person in question (doubt those making the most from capital gains would agree as it would make it harder for them to manage their tax affairs, but that is a digression) then they might as well pay as they go, pay as the income is accumulated . . . like wage earners.

All I ask is for capital gains to be taxed the same as wages - no concessions.

DS

Capital (especially property) is taxed in many ways that wages are not. For instance it attracts stamp duty when it is transferred it also attracts land tax.

You can’t tax wages and capital the same way.

The equivalent of CPI offset in capital gain would be indexing tax brackets to maintain real after tax earnings and preventing bracket creep, which I would totally support.

I also think earned interest should be discounted by CPI before being taxed. Any interest or capital gain that does nothing but result in the taxpayer standing still in real terms is not earnings imo, or shouldn’t be, and the way you protect wages earners in the same way is indexing tax brackets.

 

[mrposhman]

In other words, same tax rates as for capital gains income.

No, the difference is that capital gains get a discount. The discount is that you only count 50% of the gain if you own the asset for over 12 months.

Taxable income is taxable income, it is all taxed at the same rate (or set of rates as above). Taxable income is income earned through working, dividends etc plus capital gains. Only capital gains get the opportunity to only count half the income as part of your taxable income.

My issue is why capital gains are not just taxed the same as wage income, no concessions.

This is not self interest, I retired earlier this year, my income from wages no longer exists. I will benefit from this concession, but I see no reason why I, or anyone else, should.

DS

Ordinary mums and dads investors are a good thing. It reduces the burden of the state when people get to retirement, by increasing the level of assets held by individuals outside of super. There is a benefit to society of doing this. The alternative is to disincentivise investing and having everyone just spend everything now, and save nothing other than super for retirement for most people which is a disaster and what our country is trying to do away with, ie. we are actively trying to decrease the number of people that need help (ie. state pension) when they retire.

However, maybe we do have the wrong system in place, its maybe too advantageous, especially to people with a lot of money rather than helping mum and dad investors. Capital gains are not really income and shouldn't really be included in income tax calculations but they are in Australia, which is partially what complicates things.

I think most on here know I grew up in the UK, they have a seperate capital gains tax rather than grouping it with income tax. It has its only tax free allowance (ie used to be very generous at 12k GBP but has dropped to 3.5k GBP) and its own tax rates. The UK also provides some favourable investments called ISA's where again you have an annual limit that you can put in there, and the returns made on the assets within the ISA are tax free for life (I think the limit is around 4k GBP per year).

Its a much fairer system, essentially in that there are caps on the tax free benefits that you receive, unlike the unlimited tax free discounts that we receive in this country for capital gains. Ie. if you were so lucky to gain $1m on an investment in AU and you held it for more than 12 months, then you immediately get $500k tax free essentially due to the discount, whereas in the UK, you'd get something like $7k tax free. It seems a much fairer system to provide tax free benefits (they also have govt matching on ISA's for those with lower incomes) to more people, whilst capping those benefits for the richest in society.

Whatever system we have, needs to be fairer but also needs to incentivise investing for most "normal" people in the country. Your scenario of removing all benefits probably does the 1st one, but it completely removes any incentive to invest and try and build your own retirement savings outside of super.

 

[tigerman]

I've worked with people who have 20+ investment properties, they are not cash on hand rich, but they've got equity. Housing prices keep on rising, so when they've got enough equity in their house/houses they just buy another one. This makes it so hard for a first time home buyer, prices are being driven up by investors, and all the first time buyer has is a deposit, they don't have the equity of multiple properties investors.

What's the solution. Perhaps cut some of the tax deductions that investors can claim, or scrap the 50% capital gains deduction once they have X amount of properties.

One thing for sure is the system is broken, something needs to be done to help first home buyers.

 

[Tigaman]

Left wing economic

I've worked with people who have 20+ investment properties, they are not cash on hand rich, but they've got equity. Housing prices keep on rising, so when they've got enough equity in their house/houses they just buy another one. This makes it so hard for a first time home buyer, prices are being driven up by investors, and all the first time buyer has is a deposit, they don't have the equity of multiple properties investors.

What's the solution. Perhaps cut some of the tax deductions that investors can claim, or scrap the 50% capital gains deduction once they have X amount of properties.

One thing for sure is the system is broken, something needs to be done to help first home buyers.

First home buyers well lock overseas investors out of the market. Prime example place next to me fully renovated 3 bedroom one bathroom one toilet, solar hot water, air condition unit. No garage no patio no built in cupboards The place was owned by a ex Polish Army guy & basically did no maintenance inside. When he died it was left to a family guy who was the son of one of his ex Polish mate. He would have been happy to get $340 Grand Five bids over $500 G went for $529 G .Chinese guy in the Eastern States bought it now a rental going for God knows what. Apparently he has bought anther three around here.

 

[tigertime2]

They'll run this same game when Trump loses the election. It was rigged.

Still posting US election nonsense.
Trump is going to win in a landslide.

 

[AngryAnt]

Still posting US election nonsense.

Yes, so I see.

 

[DavidSSS]

Ooooh. So happy enough to have your fingers in the till, but feel guilty because you know ya shouldn't.

Just on the Cap gains tax discount, guess perhaps it's an incentive to get smaller investors to inject / risk some of their spare money into whatever.
Investor takes a risk on their funds or loans buying an item at X value. If the investment value drops the investor loses money. But if the investor holds for 12 months or longer any profit from that investment gets taxed at a discount.

I don't feel guilty at all, I just don't see why income from capital gains gets a concession. If I purchase shares and sell them 18 months later I only pay tax on half the income I gain - I don't get that concession if I stay with the same employer for over 12 months. Same treatment would be nice.

Investors are not putting money into a business when they buy shares, they are just paying the previous owner of the shares unless it is an initial offer or a capital raising exercise by the company. This argument is often trotted out but the reality is that the vast majority, likely well over 95% of shares bought, are not injecting any money into the business. Similar with housing, just a change of ownership unless a new dwelling is constructed.

MrPoshman, you make a fair point about putting money aside for retirement, but the superannuation taxes are completely different to capital gains tax. The concession on capital gains is not related to superannuation, it is a separate concession. Always remember too, the superannuation contributions resulted from wage rises foregone by employees, that was how the system was set up, we all accepted lower wage rises for a contribution to super. I like compulsory super, I think it is a great idea, but it has nothing to do with the capital gains tax concession which is outside super. I don't know enough about the super taxes (likely to find out soon though!) to really know what needs fixing although I did like the idea implemented, I think this year, to remove the concessions for super on balances above, I think, $3 million - seems reasonable.

I can see no justification for favourable tax treatment of income earned from capital gains over income earned from working.

DS

 

[mrposhman]

I don't feel guilty at all, I just don't see why income from capital gains gets a concession. If I purchase shares and sell them 18 months later I only pay tax on half the income I gain - I don't get that concession if I stay with the same employer for over 12 months. Same treatment would be nice.

Investors are not putting money into a business when they buy shares, they are just paying the previous owner of the shares unless it is an initial offer or a capital raising exercise by the company. This argument is often trotted out but the reality is that the vast majority, likely well over 95% of shares bought, are not injecting any money into the business. Similar with housing, just a change of ownership unless a new dwelling is constructed.

MrPoshman, you make a fair point about putting money aside for retirement, but the superannuation taxes are completely different to capital gains tax. The concession on capital gains is not related to superannuation, it is a separate concession. Always remember too, the superannuation contributions resulted from wage rises foregone by employees, that was how the system was set up, we all accepted lower wage rises for a contribution to super. I like compulsory super, I think it is a great idea, but it has nothing to do with the capital gains tax concession which is outside super. I don't know enough about the super taxes (likely to find out soon though!) to really know what needs fixing although I did like the idea implemented, I think this year, to remove the concessions for super on balances above, I think, $3 million - seems reasonable.

I can see no justification for favourable tax treatment of income earned from capital gains over income earned from working.

DS

Looks like you've completely missed the point I made about incentivising savings outside of super.

 

[DavidSSS]

Looks like you've completely missed the point I made about incentivising savings outside of super.

No, I just can't see why income from capital gains is given a concession. It is a concession only to those who have spare funds to invest, in effect a regressive tax concession.

DS

 

[mrposhman]

No, I just can't see why income from capital gains is given a concession. It is a concession only to those who have spare funds to invest, in effect a regressive tax concession.

DS

Thats not what I said though, but savings in the form of investments are important outside of super and still need to be incentivised in order to take the risk. Whether that should be changed from what it currently is, then I probably agree, the current concessions are certainly far more weighted to the rich compared to the lower income. My view is capital gains are not income, and should be taxed on a different system in a similar way to how I described above like they do in the UK.

 

[spook]

Great Australian John Kerr not deterred by the Power of Government.

Treasonous CIA stooge.

 

[Tigaman]

Treasonous CIA stooge.

What about Russian ?.

 

[DavidSSS]

That's not what I said though, but savings in the form of investments are important outside of super and still need to be incentivised in order to take the risk. Whether that should be changed from what it currently is, then I probably agree, the current concessions are certainly far more weighted to the rich compared to the lower income. My view is capital gains are not income, and should be taxed on a different system in a similar way to how I described above like they do in the UK.

If capital gains aren't income, what are they? Are they Milton Friedman's helicopter money? What?

Capital gains are income and should be taxed as such with no concession.

Also, investors invest for profit, that is the incentive. If they need more incentive they can go jump. Risk is part of investing, if people don't know that then they shouldn't invest. In any case, if you lose money (ie capital loss) you can offset that against any capital gain, you can even hold it over to a later year if you made no capital gains in the financial year you made a capital loss. So, it isn't as if you automatically pay tax on capital gains income, you pay tax on the net capital gain taking into account losses.

Still not seeing a reason why income "earned" from capital gains gets a tax concession.

DS

 

[TT33]

What about Russian ?.

Nah, they got Harold Holt, that kept 'em happy for a couple of years.

 

[mrposhman]

If capital gains aren't income, what are they? Are they Milton Friedman's helicopter money? What?

Capital gains are income and should be taxed as such with no concession.

Also, investors invest for profit, that is the incentive. If they need more incentive they can go jump. Risk is part of investing, if people don't know that then they shouldn't invest. In any case, if you lose money (ie capital loss) you can offset that against any capital gain, you can even hold it over to a later year if you made no capital gains in the financial year you made a capital loss. So, it isn't as if you automatically pay tax on capital gains income, you pay tax on the net capital gain taking into account losses.

Still not seeing a reason why income "earned" from capital gains gets a tax concession.

DS

The big picture is its better for the economy to reduce the outgoing of government funds for retirees particularly as the population ages. The burden on the tax payer just keeps growing so allowing some incentive to grow out of super earnings makes sense.

Your proposal means that people take risk, which some will not do because of the risk / reward of what they could do with the money now. Providing a relatively small incentive to invest makes sense for smaller investors. Again take a look at the UK's example of earnings. I can guarantee you, risk-averse investors will still take out some of these products, even if they don't have a lot of disposable income. Again, if you look at the limits shown in my post, these aren't mass gains for those with massive portfolios, they are incentivises for those lower income earners in the economy, who it would benefit the country to have them grow their out of super retirement savings.

Clearly you have a very steadfast approach on this which I disagree with. I agree that the current 50% discount uncapped is not the right approach, but there should be some incentive to have people invest their money and take that risk, for what are essentially fairly moderate gains per year (think of tracker funds etc).

 

[frickenel]

I'm not an investment advisor, but imo right now is a very good time to tighten up your stop positions if you're holding stocks. I'm surprised the markets have held up this long (SP500) but we're now heading into the blackout period.


I've said it before and i will say it again, Jerome Powell is not going to engineer a soft landing. Fact is he is as economically illiterate as our own Brett Chalmers. Neither are economists and their policies reflect this.

 

[Sintiger]

If capital gains aren't income, what are they? Are they Milton Friedman's helicopter money? What?

Capital gains are income and should be taxed as such with no concession.

Also, investors invest for profit, that is the incentive. If they need more incentive they can go jump. Risk is part of investing, if people don't know that then they shouldn't invest. In any case, if you lose money (ie capital loss) you can offset that against any capital gain, you can even hold it over to a later year if you made no capital gains in the financial year you made a capital loss. So, it isn't as if you automatically pay tax on capital gains income, you pay tax on the net capital gain taking into account losses.

Still not seeing a reason why income "earned" from capital gains gets a tax concession.

DS

Capital gains are taxed in the year the asset is sold yet the actual capital gain is earned over the years of ownership. In many cases that means that when they are taxed they are taxed at a marginal rate higher than the taxpayer's marginal rate in the years of ownership. If you want to equivalise wages income with capital gains then that should be changed.

Also taxation costs that have been incurred in ownership should not be a deduction, they should be refunded in full if we are equivalising. That would include stamp duty on the transfer and land taxes paid. If we tax capital gains exactly the same as wages then all other taxes levied on the capital during ownership should not occur otherwise it is not equivalent. There are no taxes levied on wages except income tax and medicare levy.

 

[Ian4]

I'm not an investment advisor, but imo right now is a very good time to tighten up your stop positions if you're holding stocks. I'm surprised the markets have held up this long (SP500) but we're now heading into the blackout period.

My super is on fire atm. gone up by $23k this quarter alone. I always suspected it wouldn't last.