Renovations Done—Now About the Government

I am absolutely delighted to announce that after nearly eight months of a house in turmoil our renovations are pretty much finished. I never thought I’d be pleased to be able to do some vacuum cleaning but I was. Despite the tradies’ best efforts to keep the dust and fragments outside it’s sneaky stuff and managed to get into all sorts of unlikely places. I expect I’ll still be finding little surprises in hidden corners for months.

Anyway, it was worth the pain. The kitchen and bathrooms look great and the new carpet has made all the difference. We are both very happy.

Needless to say, the returned Labor government is looking to hoover up as much of everybody’s money as they possibly can, presumably so it can afford to pay for all the sweeteners and subsidies it offered in the election campaign. The latest idea is unrealised capital gains. The Labor government has proposed a 30% tax on unrealised capital gains for superannuation balances exceeding $3 million. Let’s say your super fund was worth $3.5 million at 30 June last year. A year later, its value is $4 million. You now have an unrealised capital gain of $500,000. You’re liable for $150,000 tax.

Some people will be saying ‘but that’s taxing the rich. It won’t affect me’. Don’t be too sure. As this informative article in Mint Equity explains, “By moving the goalposts and taxing unrealised gains, the government opens the door to taxing you on money you haven’t actually received. Today, it’s limited to high super balances — but once the mechanism is in place, what’s stopping future governments from expanding it to include family homes, investment properties, or shares held outside super? If your property goes up $100,000 in value — but you don’t sell it — would you want to pay $30,000 in tax on the increase? That’s the trajectory this policy sets.”

The policy will hit self managed super funds hardest. Funds may have to sell assets to pay tax on capital gains they haven’t realised. And who values the assets, and how? That $3 million isn’t indexed so there will be bracket creep. And it’s yet another example of the Government moving the goal posts.

You wait. The next cab off the rank will be to stop negative gearing. The term describes a situation where expenses associated with an asset (including interest expenses) are greater than the income earned from the asset. Individuals who are negatively geared can deduct their loss against other income, such as salary and wages. Negative gearing can apply to any type of investment, not just housing, but that’s where the impact will be felt. Because people will no longer invest in rental property. Paul Keating tried removing negative gearing back in 1985. That lasted for 2 years as investors got out of the market and rents skyrocketed. You think we’ve got a housing crisis now?

Then they’ll try including the value of the family home as part of the assets test to receive pensions.

Meanwhile, they’ll continue with their unbudgeted renewables developments for power generation.

Sigh. I’d better stop. I’m frightening myself.

My latest science fiction romance book is now published. My thanks to those who pre-ordered. For everyone else, if you like high-stakes treasure hunts, alien mysteries, and slow-burn sci-fi romance, do take a look.