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HIA calls for Stamp Duty to be paid from Superannuation
Topic Started: 27 Aug 2014, 04:39 PM (682 Views)
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Cost-Shifting Stamp Duty – Onto You

David Collyer on August 27, 2014

The Housing Industry Association – the builder’s’ lobby group – today called for changes to allegedly improve home affordability in a media release The Real Cost of Stamp Duty, saying it added three per cent to the cost of buying property. HIA Senior Economist Shane Garrett called for Stamp Duty charges to be paid from individuals’ superannuation to reduce the burden.

This is utter foolishness. It would:

1. Immediately raise the selling price of land by the full extent of Stamp Duty displaced, to the sole benefit of vendors.

2. Reduce retirement incomes and living standards – not simply by the amount paid over to government, but also erase the lifetime compound returns on the capital lost.

Prosper Australia welcomes discussion on tax reform and actively supports the removal of conveyancing Stamp Duty. This is a particularly nasty tax that traps citizens in and out of housing. It makes moving for work transfers or family reasons expensive and directly injures those marginally attached to home ownership.

Interestingly, while the statutory incidence (who the law says must pay) of Stamp Duty falls on buyers, the economic incidence (who pays in practice) usually falls on vendors. This is why the HIA wants change that sticks the charge on someone else. This is simply good old-fashioned cost-shifting.

If taxpayers are to endure the upset of tax reform, then the change should be to best practice – the tax bases economists have identified as causing the least harm.

Right next to Stamp Duty sits the ideal base: State Land Tax. A uniform SLT has deadweight losses and an average excess burden of zero. It causes no harm – a rare and special virtue among taxes, as KPMG Econtech clearly identifies:

The risk of hurt through double-taxation in the transition to SLT could be easily resolved by crediting every property owner who has paid SD with a hypothetical SLT from their date of purchase.

The HIA should embrace a shift of property taxes from SD to SLT. Builders, who buy land and sell homes, would bear only the holding cost for the time it takes to construct the house. The most efficient builders pay least. Removing the transaction charge would also make buy-renovate-sell more profitable and enhance our housing stock.

Read more: http://www.prosper.org.au/2014/08/27/cost-shifting-stamp-duty-onto-you/
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herbie
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Yep, once they figure out that there's some sort of bucket of loot out there, every pig figures he's just naturally entitled to get his snout into it ...

And that includes Collyer's Georgist 'Prosper Australia' - For mine.
Edited by herbie, 27 Aug 2014, 05:20 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Count du Monet
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herbie
27 Aug 2014, 05:17 PM
Yep, once they figure out that there's some sort of bucket of loot out there, every pig figures he's just naturally entitled to get his snout into it ...
Welcome to evolution of the species! Every monkey will put its hand in for some easy money.

It requires a firm commitment to some sort of religious/ philosophical perspective to even stand a chance of rising above the animal drive.
Edited by Count du Monet, 27 Aug 2014, 07:01 PM.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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peter fraser
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Ideally they should either scrap compulsory superannuation or leave it alone.

But we all know they won't scrap it, and we all know they won't leave it alone.
Any expressed market opinion is my own and is not to be taken as financial advice
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zaph
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peter fraser
27 Aug 2014, 06:01 PM
Ideally they should either scrap compulsory superannuation or leave it alone.

But we all know they won't scrap it, and we all know they won't leave it alone.
Tony has run out of toes and fingers to do the calculations. Even with the help of Joe and Bill's fingers and toes it's just too complicated.
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Count du Monet
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peter fraser
27 Aug 2014, 06:01 PM
Ideally they should either scrap compulsory superannuation or leave it alone.

But we all know they won't scrap it, and we all know they won't leave it alone.
Come now Peter, how would the financial system as we know it today survive without "compulsory savings". At the very least it would require higher interest rates otherwise.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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skamy
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herbie
27 Aug 2014, 05:17 PM
Yep, once they figure out that there's some sort of bucket of loot out there, every pig figures he's just naturally entitled to get his snout into it ...

And that includes Collyer's Georgist 'Prosper Australia' - For mine.
True Herbie

The only way they should use super is to save the FTBS getting done for LMI ie it could be used to provide some kind of a bond so that if the house prices do not drop they still have their money. At the moment LMI is money down the drain and FHBs in a market like Sydney just need to cough it up as they will lose more by waiting until they have saved a larger deposit.

Any other use of super will give the end result of transferring FHBs savings in super to home sellers. Any new money in the system will just hike prices in Sydney and Melbourne.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Steve
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Increasing the preservation age is one of those policies that looks good on the surface. It is so easy to argue that superannuants should not be able to withdraw their “tax advantaged” savings, spend the lot, then go on the pension.

If, however, one thinks a little harder and considers the plausible realpolitik consequences, then this policy begins to look very dangerous indeed.

Start by asking yourself why Australians are prepared to pay an average fee of almost 1.25% pa for the management of their superannuation when there are funds available which charge less than half that amount and whose performance is no worse.

The reason is human nature. Superannuation “savings” are so divorce from the everyday life of most people that it is hard for them to associate the fees they are paying with the benefit they receive.

This comment is not another rant about superannuation fees. Rather, it is about this peculiar and well-documented aspect of human nature, and the ways in which it might be exploited by the ruthless.

Imagine now that it becomes impossible to withdraw money from the system. Imagine that the best one can do is to convert it into an annuity . . . an annuity which must comply with relevant government legislation.

You now have a huge pot of money which no-one can ever ask to have paid out to them in full.

Now ask yourself this: How long will it be before some politician takes a look at that Great Big Pot of Money and thinks to himself, “Mmm. Mmmmmm! It would be really, really convenient if we could tap into that pot and direct it into something useful. That would be much more palatable than having to raise taxes.”

In fact, investment bankers of a certain age will remember that such a scheme existed in Australia until 1985. It was called the “30/20 Rule”. Complying superannuation funds were required to keep 30% of their portfolio in government and semi-government bonds, of which 20% had to be Commonwealth government bonds.

The ”Ghost of 30/20” has been seen wandering the corridors of power lately. There is a notion abroad that complying superannuation funds should be forced to “invest” a certain proportion of their portfolio in private infrastructure projects. We all know how Mr Abbott and Mr Hockey love pushing their favourite infrastructure projects!

Of course, such mandatory investment is necessary only if the rate of return is less than that on comparable investments that are not mandatory. And as soon as it becomes mandatory, the issuers will adjust their rates of return accordingly. In short, it will become a tax.

And the burden to superannuants – like the excessive fees they pay – will be so divorced from their everyday life that they’ll hardly know what is happening.

Anyone with the slightest sensitivity to realpolitik will see where this is leading. It is leading to the greatest milch cow in the history of Australia.

Why “tax” people [I say “people” but it really only applies to wage and salary earners; the rich don’t earn their money that way] when you can get them to “save” 12% of their incomes . . . and bleed the money off their captive superannuation funds.

Through successive governments – Labor and Coalition – Australia has been slowly but surely developing a privatised taxation system.

Instead of wage and salary earners [the rich being exempt] paying taxes to the government to provide basic services, they are having their income streamed off into superannuation funds (where the ticket-clippers take their cut), thence into infrastructure funds (where the ticket-clippers take their cut), and thence into privatised infrastructure projects (where the financiers take their cut) . . . to provide the very same services that were once provided quite cheaply by the government itself!!

And once it begins, it is simply too much of a temptation not to keep returning to the trough for more.

I have made the point before: this is a throwback to the “ancien regime”. It is a throwback to Colbert and the ferme generale.

It is a system that will eventually collapse under the weight of its own inefficiency.

If I recall correctly (from many years ago) it was illegal to use a superannuation amount as security for a loan. I suspect that the same would apply to annuity payments.

Of course, that won’t stop people taking out “home equity loans” and paying the interest using their annuity income.

And following that line of thought one can see why this whole proposal will fail to achieve it stated aim.

The reason that people are taking their lump sums and paying off home loans is that they had taken out home equity loans in the first place. And the reason they had taken out home equity loans is that they had been told that superannuation would keep them in their old age.

The net result can be seen in the household savings ratios. There was a steady decline from the mid-1980s until the GFC. In fact, from memory I think household savings were negative in the 1990s.

Superannuation failed to achieve its objective of increasing overall savings because people simply stopped saving in the traditional ways (i.e. paying off their home mortgages).

Forcing them to buy annuities will have the same effect.

The only people who benefit are the ticket-clippers for whom the whole dreadful system was designed in the first place.
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herbie
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Steve
28 Aug 2014, 10:52 PM
Increasing the preservation age is one of those policies that looks good on the surface. It is so easy to argue that superannuants should not be able to withdraw their “tax advantaged” savings, spend the lot, then go on the pension ...

... The only people who benefit are the ticket-clippers for whom the whole dreadful system was designed in the first place.
I've had a grog or three. And it's bedtime.

But the parting thought that goes through my tiny brain just before this particular bedtime, is that housing was the Ponzi that my generation piled into. And super just could be the Ponzi that the younger generation piles into (well, gets pushed into anyway.)
Edited by herbie, 29 Aug 2014, 12:47 AM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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