Show me how in my example given the purchaser had any extra cost at all on the home whether it was GST liable or not. Only the developer has to cover the cost of the GST liability.
Do the right thing for once and admit that my point is correct and represents the reality of the way the GST operates on new builds.
If all homes were GST liable then the purchaser would pay but they are not. Only new homes sold by developers have to pay GST. The purchaser pays the same regardless of the GST liability the developer does not.
If you are still incapable of understanding this, I don't recommend you try developing for a living, you will be laughed outta town if you try to charge your buyer GST.
My goodness, you still don't understand.
An example. Developers total cost including GST = $320,000. Developers sale price to purchaser including GST = $330,000. On their costs the developer will claim back $320,000/11 in GST = $29,090. On their sale price (paid by the purchaser) they pass on $330,000/11 in GST = $30,000. Net GST remitted to the ATO = $909.09. Profit on sale = $9,090. The GST is neither an expense or revenue to any business they simply act as collection agencies for the ATO for the GST that is paid by the purchaser. That is the purchaser paid $30,000 in GST when they bought the property, and they can't claim it back under normal circumstances.
I think it is a lost cause explaining it to you.
Do some more research, again, and try again.
Trojan
21 Aug 2014, 09:29 PM
Thats probably because you don't understand negative gearing or deliberately misrepresenting it. Removing NG will not be "$10,000 per year tax deduction foregone". It will merely be deferring the tax deduction.
Currently, if a PI paid $10,000 LMI on a property purchase, that cost is spread out over 5 years. If the government decided to change the rule to make it tax deductible in the first year, do you think there will be a massive increase in the number of property investors? It was always tax deductible ... just a change in timing.
It's not deferred if the property is sold prior to making a rental profit, which is most of the time.
Trojan
21 Aug 2014, 07:16 PM
I can completely understand your argument about the rubbish removal charge being directly benefiting to the property investor. However, lumping roads, parks, libraries, etc and claiming it directly benefits the property investor is too far.
Because it is no different to State spending the money on improving the state (state roads, education, hospitals, police, etc) and then claiming it directly benefits the property investor. Yes it does benefit all property owners in the state (who wants to live in a state with no police, schools or hospitals, right?) but claiming its a payment for direct services is taking it too far. Likewise with maintaining local roads, parks and libraries is providing for the wider community. The property investor just happens to be part of the community and thus indirectly benefits.
Do you understand the difference?
Likewise stamp duty doesn't go into federal and local council consolidated revenue. They are spent on services like stamping title transfers and maintenance of state roads and national parks. The only difference is I don't pretend if its at a local government level its a direct benefit to the property investor but at a state level, its not a direct benefit. p.s. No one ever claimed council rates go to federal and state consolidated. You can debate it and disprove it all you want but that is the very definition of strawman argument.
Trojan I think you know deep down that you are wrong here.
If you are seriously trying to argue there is no difference to the property owner for their $1,700 in rates and their $20,000 in stamp duty in terms of direct benefit to the property owner we both know that is a big stretch. It looks like you won't budge from your view though, so be it.
Trojan I think you know deep down that you are wrong here.
If you are seriously trying to argue there is no difference to the property owner for their $1,700 in rates and their $20,000 in stamp duty in terms of direct benefit to the property owner we both know that is a big stretch. It looks like you won't budge from your view though, so be it.
On the contrary. I (and others like miw) has pointed to to you the claim of direct benefit is a very long shot. If fact you seem alone in claiming local council rates should be 100% discounted because they all directly provide services to the property investor but stamp duty doesn't. It might seem more direct because local council looks after a smaller area. But for you to try and completely discount and say it shouldn't be included in the tax that property investors pay at all is why I'm taking you to task with it.
It's not deferred if the property is sold prior to making a rental profit, which is most of the time.
Evidence please?
Anyway, if new laws were introduced requiring property related losses to be quarantined, then investors would simply delay selling until such time as there was rental profit against which to offset those losses.
On the contrary. I (and others like miw) has pointed to to you the claim of direct benefit is a very long shot. It might seem more direct because local council looks after a smaller area. But for you to try and completely discount and say it shouldn't be included in the tax that property investors pay at all is why I'm taking you to task with it.
If fact you seem alone in claiming local council rates should be 100% discounted because they all directly provide services to the property investor but stamp duty doesn't.
Can I just confirm then that you think there is no difference to the property owner regarding direct benefit and value to their property in paying rates vs stamp duty? Because if so that is fine but we can log it in the quotes to bring back out from time to time.
I've explained it fairly clearly, and no without looking it up someone else did agree with me on this thread.
Lets paint these two scenarios.
Scenario 1. For some unknown reason, there is a suburb in Brisbane that does not pay rates, it somehow falls outside of the council, even though it is surrounded by suburbs that pay rates and receive council services. Because that suburb is excluded from the council it does not pay rates but it also does not receive the benefits that surrounding suburbs receive from the council. This is because council areas are clearly defined and the services provided are also strictly channelled back into that area. So that suburb does not receive rubbish collection, and its roads and parks are not maintained. The property owners therefore need to organise their own waste collection, taking time and money. The roads quickly become ridden with potholes as they are never maintained, and the parks become overgrown as they aren't mowed. Tenants in this area pay less in rent due to the run down roads and overgrown parks. In addition, the property owner either pays for waste collection or charges the tenant, which in turn reduces their asking rent again. Neighbouring suburbs pay $1,700 per year to their council but also achieve an extra $100 per week in rent as their roads are good, parks are well kept and their rubbish is collected weekly. Note that the council revenue comes almost entirely from the one source, i.e. rates.
Scenario 2. Somehow a property investor buys a property and pays no stamp duty. They slip through the cracks. A state official notices this and decides to cut a deal with this PI. They say out of total state revenue 30% (made up) is stamp duty, so you must pay an extra toll on 30% of our state funded roads, and must pay a charge on otherwise free hospital visits. This is ok, but doesn't impact on the PI property rent or value of the property.
Lets go even further though Troj! On top of the direct benefit that the PI receives from rates for their property, both in rental and market value, as well as reducing their costs, they also receive a tax deduction for that service to their property.
Anyway, if new laws were introduced requiring property related losses to be quarantined, then investors would simply delay selling until such time as there was rental profit against which to offset those losses.
The evidence is staring you in the face. Every year the average PI is making a rental loss on their property, shown by the chart detailing net rental losses claimed by PIs. So by definition, when the average PI sells, they are making a rental loss on their property.
In fact, the whole deferral argument by you is incorrect. The losses are currently not deferred, and on average there are never enough profits from PIs rentals to cover their losses, as shown by the annual negative gearing loss claimed by PIs.
Can I just confirm then that you think there is no difference to the property owner regarding direct benefit and value to their property in paying rates vs stamp duty? Because if so that is fine but we can log it in the quotes to bring back out from time to time.
Close. Other than the garbage collection amount which is listed separately in the rates notice (in NSW at least), then there is no difference in local government tax (council rates) and state government tax (stamp duty)
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
It is deferred till when the property makes a rental profit or sold for capital gains, which is most of the time. It's in our tax law.
No the losses are claimed against other income immediately, they are not deferred. Whether or not in the future a profit is made, there is no deferral, those losses have already been claimed. And on average property investors don't make a rental profit, as shown by the annual negative gearing losses claimed by PIs, this includes all the profitable ones. CGT is a separate calculation.
Scenario: PI loses $8,000 per year on average for 5 years. They have claimed $40,000 in rental losses. They are on a tax rate of 40% so have offset their losses by $16,000 i.e. the taxpayer has funded $16k of their losses. They then sell for a $50,000 capital gain. This gain gets the 50% discount, bringing it to $25,000. 40% tax on the $25,000 means they pay $10,000 in tax. So overall they have eked out a $10,000 gain but have cost the taxpayer $6,000.
Scenario 1. For some unknown reason, there is a suburb in Brisbane that does not pay rates, it somehow falls outside of the council, even though it is surrounded by suburbs that pay rates and receive council services. Because that suburb is excluded from the council it does not pay rates but it also does not receive the benefits that surrounding suburbs receive from the council. This is because council areas are clearly defined and the services provided are also strictly channelled back into that area. So that suburb does not receive rubbish collection, and its roads and parks are not maintained. The property owners therefore need to organise their own waste collection, taking time and money. The roads quickly become ridden with potholes as they are never maintained, and the parks become overgrown as they aren't mowed. Tenants in this area pay less in rent due to the run down roads and overgrown parks. In addition, the property owner either pays for waste collection or charges the tenant, which in turn reduces their asking rent again. Neighbouring suburbs pay $1,700 per year to their council but also achieve an extra $100 per week in rent as their roads are good, parks are well kept and their rubbish is collected weekly. Note that the council revenue comes almost entirely from the one source, i.e. rates.
That is no different to a state who collects no stamp duty and provides no hospitals, police, state roads or national parks. Who would want to rent a property in that state? Note the single biggest income for the state government is property taxes.
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