A property investor has warned the tax changes in the Federal Budget could force landlords like him to hike rents – despite the Treasury claiming rents will only rise by a modest $2 per week.
The Budget papers state that the tax reform package, which includes the biggest changes to the Capital Gains Tax (CGT) discount and negative gearing, is likely to have a ‘small’ impact on rents, ‘with an expected increase of less than $2 per week for households paying the current median rent.’
When asked by the Daily Mail if he would be raising rents on his 17 properties, landlord Jack Henderson quipped: ‘I’m not a charity, that’s for sure.’
The 29-year-old, who has a $60million property portfolio, said renters would be treated ‘very poorly’ under the Budget changes.
‘They got a one per cent tax cut on $28,000 worth of income and they will likely get a 10 to 15 per cent increase in rental prices,’ he said.
Under the reforms, landlords who can no longer claim tax deductions on losses from investment properties may try to pass those extra costs on to tenants through higher rents.
For example, a property renting for $2,600 a month but costing the landlord $3,600 a month in mortgage repayments currently runs at a loss of $1,000 a month.
Without negative gearing to offset that loss, some landlords may attempt to recover the shortfall by increasing the rent – potentially by as much as $1,000 a month.
But property investor Jack Henderson (pictured) said the reforms were minuscule and would only affect working Australians
Treasurer Jim Chalmers announced on Tuesday that the government will wind back negative gearing to only include new builds from July next year as part of his Federal Budget
Asked if he would raise rents at his 17 properties after the Budget, he said: ‘I’m not a charity’ (pictured, Mr Henderson’s property in Coogee, New South Wales)
In the Budget, the Albanese government wound back negative gearing so it only applies to new builds from July next year. Meanwhile, the 50 per cent capital gains tax discount will be replaced with an inflation-adjusted indexation system.
Under the previous rules, investors only had to pay tax on half their profits when selling an asset.
Under the new system, the tax will be indexed to inflation before being applied to the sale, meaning investors could be hit with higher capital gains tax bills.
Speaking to the Daily Mail during the Budget lock-up, Chalmers said: ‘I don’t begrudge people who’ve done well, this is about making sure more people can do well.’
But Mr Henderson said the reforms were minor and would only affect working Australians – not wealthy property investors like him.
‘(The government) saying they’re trying to make it easier for people to get into the housing market means nothing,’ Mr Henderson said.
‘They also said that this will help 75,000 more Australians get into the property market over the next 10 years. So, 7,500 per year for 10 years. That’s a pretty minuscule amount in a population of 27 million.
‘It’s only going to affect the working Australian.
Mr Henderson, who has a $60million portfolio, said renters will be treated ‘very poorly’. Above with his McLaren
‘Sophisticated investors and people that run businesses, so the wealthy people they’re trying to tax, like me, own assets inside company structures or trust structures, of which you can’t negatively gear anyway, so it makes no difference.’
(Discretionary trusts – where trustees hold assets for beneficiaries – will be stung with a 30 per cent tax on distributions from July 1, 2028, under the Budget.)
Meanwhile, the Albanese government has also changed the lowest tax brackets to ease pressure on low-income earners in an effort to increase the financial rewards from work.
From July 1, the 16 per cent rate on the lowest marginal tax bracket will be reduced to 15 per cent. This means anyone earning between $18,201 and $45,000 will pay one cent less in tax for every dollar earned.
Anyone earning more than $45,000 will also benefit from the reduction, saving a total of $268 per year, or $5.15 per week.
‘It’s a bit funny,’ Mr Henderson said. ‘Essentially, they’re trying to tax rich people and they’re saying they’re distributing it to the punter, the poor person in Australia, who’s trying to get ahead.
‘And their reward to the poor person was saying that we’re going to give you a one per cent tax cut.
‘They’re saying they are trying to solve intergenerational inequality. They’re saying older people are too wealthy, and it’s much harder to get ahead if you’re young.
‘But the changes they’ve made don’t reflect that whatsoever, like zero. You can’t say that we’re going to redistribute the wealth and then say we’re going to give lower-income people a one per cent tax cut and nothing else. It’s just bizarre.’
Critics say cash-strapped renters were largely overlooked in this year’s Budget (pictured, Chalmers is welcomed by Anthony Albanese)
Another concern for Mr Henderson was that the government has abolished the 50 per cent capital gains tax discount across all asset classes, including shares and existing property investments.
Mr Henderson said the Albanese government ‘should be trying to encourage young founders to come to Australia’ but they would now be taxed heavily as the policy affects all asset classes, not just property.
‘If I was a politician, I would just have removed the capital gains tax discount on housing, but kept it in for other asset classes that you want people to invest in,’ he said.
‘Businesses, they’re a productive asset. But now, if I was a young founder looking at starting the next billion-dollar business, why would you start in Australia now?’
Source: https://www.dailymail.com/news/article-15810695/Jack-Henderson-Federal-Budget.html
