– FAMILY HOME – Capital Gains Tax (CGT) –
TAMPERING WITH THE SACRED COW
“Moo!”
Or more like “Mooving house might be about to become more expensive”
That’s the sentiment surrounding the recent announcement by independent think-tank the Australia Institute, which recommends scrapping the capital gains tax exemption on the family home. Home ownership is often regarded as the sacred cow of Australian Taxonomy, ‘Surely they can’t tax the roof over my head’ being the mantra.
Don’t go panicking just yet though, because the exemption would only be scrapped for residences worth $2 million or more. That’s not too bad as most people wouldn’t have a home with that sort of market value (yet), but how would a change like this affect Australia’s economy and tax landscape?
Below is a list of tax issues that may arise due to such a change:
If the family home becomes taxable, would the interest on the mortgage, repairs & maintenance and running costs then be deductible?
Will the $2 million threshold ever be indexed upwards in future? What if the average family home today is valued at $2 million in 20 years from now?
Will this discourage people from overcapitalizing their main residence, leading to lower spec, cheaper homes?
Would family homes purchased before September 1985 retain their pre-CGT status?
So would the government seriously consider “tampering with the sacred cow”? According to the Australia Institute, the policy change would raise $11.8 billion revenue over the next four years. Not too bad while only affecting less than 1% of home sales. On the other hand, raising taxes (or cutting spending) in a weak economic environment is political suicide.
My feeling is that neither side of politics would be game enough to take it to an election!
ANTONY MONALDI
SNR ACCOUNTANT -OPTIMA PARTNERS
