Why does the Government give me Tax Relief for my Investment Property?

June 22, 2012 3:57 pm
posted by James Parnwell

investment property

I don’t know if anyone particularly enjoys paying tax. We know we need it to build roads, educate our kids and pay for hospitals. But it still hurts to see the chunk come out of our hard earned pay each payday. Especially when it pays our politicians!





Investment Property Tax Relief

The Governments largest expense is on Social Welfare. Once we reach an age where we can’t work anymore it’s the Government who foots the bill. The good news is that the pollies in Canberra are happy for industrious Australians to invest in property and actually put some of our tax dollars into creating wealth. This is mostly so that we can fund ourselves in retirement and reduce the pension burden. There are even bigger tax incentives for holding onto our properties until after 65. That’s a topic for another day.

The second reason that the government is happy to give us some tax relief is to give us an incentive to go out and buy property, particularly new houses. The economy is heavily propped up by the building industry. If you build a house you need concretors, electricians, plumbers, conveyancers, mortgage brokers, insurance policies and the list goes on. Each of these keeps income flowing through the economy and food on the table of Australians.

The third reason the Government likes to give us tax back for an investment property is because of the housing shortage. Basically speaking there are not enough houses in Australia for the number of people that live here. In fact, in Michael Yardney’s article on Sydney’s housing shortage he believes we are 178,000 houses short nationally. That’s a lot of people sleeping with family and friends or on the street. If you have looked for a rental property in Sydney lately you will know that you have to fight tooth and nail with dozens of other desperate tenants. If we don’t buy and build, the Government has to build them. They aren’t keen on getting into the home ownership game.

In 1986 the government actually changed the laws to get rid of the tax benefits. It was seen as a benefit to the rich, helping them get richer. The problem was that someone had to pay for the shortfall in tax breaks. In the wash up, it was the tenant who had to pay. Unfair? Maybe, but rents went through the roof. It was actually the poorer end of the community that suffered the most from this decision. Needless to say they changed the laws back quick smart.

The tax system in Australia really helps those with an investment property get ahead. It rewards hard work and diligence with extra money to invest an support ourselves in our futures. We really are the lucky country!

Article by James Parnwell

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