Local developer Harridan is seeking to turn its Woolloongabba apartment project into the first stage of a broader transformation of Burke Street, using a new 16-storey mixed-use building to establish a greener pedestrian connection toward the rapidly evolving Boggo Road transport and knowledge precinct.

The South East Queensland developer has filed plans for 154 apartments on the <a href="https://www.apartments.com.au/new-apartments/4-burke-street-woolloongabba-qld-4102">southern side of Burke Street</a>, where its proposal has been designed alongside a wider vision by LatStudios for the street.

That vision positions the southern side of Burke Street for buildings of 15 storeys and above, while envisaging lower-rise development of up to five storeys on the northern side to transition into Woolloongabba's existing character housing. It also proposes wider pedestrian verges, deep planting, new street trees and upgrades to the pedestrian approach to Boggo Road Station.

The Harridan development itself has been designed by Brisbane-based Arqus Design and will comprise 154 apartments across 16 storeys. The mix is weighted heavily toward two-bedroom apartments, with 121 proposed alongside 10 one-bedroom and 23 three-bedroom residences. There will typically be around 14 units per floor.

A lower-ground car park and three podium levels will accommodate 156 resident parking spaces, along with visitor and commercial parking. There will also be 154 resident bicycle spaces and 40 visitor bicycle parks.

&nbsp;

Harridan is a family-owned developer and part of the Holmwood Highgate Group, with more than three decades of development activity across South East Queensland. Its portfolio spans residential, commercial and industrial property, with current residential projects including Riverbank on Byron in Bulimba, Esperance Residences in Carina and The Precinct at Kinross Road in Thornlands.

Wooloongabba has been popular for apartment developers, particularly since the announcement of the 2032 Summer Olympics games in Brisbane.

While there have been a lot of development applications, it has failed to materialize into real supply.&nbsp;

Sarazin has been the major player in the area. They are under construction at Murcia Residences, on the fringe of East Brisbane and Woolloongabba. They have just launched <a href="https://www.apartments.com.au/new-apartments/the-stanley-residences-woolloongabba-8-trafalgar-street-woolloongabba-qld-4102">The Stanley Residences</a>, in Woolloongabba on Trafalagar Street. They also have Nuage coming soon on the nearby <a href="https://www.apartments.com.au/new-apartments/nuage-woolloongabba-14-wellington-road-woolloongabba-qld-4102">Wellington Road</a>.

Joel Robinson

First look: Harridan plans Burke Street transformation beside Boggo Road transport hub

IN BRIEF

<ul>
	<li>
	Just three double-storey Sky Homes sit at the top of The Waterline, each with its own private marina berth and rooftop terrace.
	</li>
	<li>
	Construction on The Waterline is complete, with the first residents expected to move in from mid-October.
	</li>
	<li>
	Sky Homes range from 282 sqm to 367 sqm and are priced from $3.65 million.
	</li>
</ul>

<hr />
Lewis Land has opened the first completed sky home for inspection at Harbour Shores, giving buyers their first opportunity to step inside one of just three double-storey residences crowning The Waterline.

Each sky home comes with its own private marina berth, rooftop terrace and Broadwater views, combining the scale of a larger home with direct access to the boating lifestyle that underpins the wider <a href="https://www.apartments.com.au/new-apartments/harbour-shores-biggera-waters-564-oxley-drive-biggera-waters-qld-4216">Harbour Shores</a> masterplan.

[smartcode_project:default project_id=113271 project_image_fid=366708]

Lewis Land Head of Development Michael Long said the inclusion of a berth with every Sky Home had become increasingly valuable as marina access across the Gold Coast tightened.

“Marina berths are becoming increasingly difficult to secure across the Gold Coast, so including one with every Sky Home makes this a genuinely rare offering,” Long said.

“The private 70-berth marina will accommodate boats up to 12 metres in length and is positioned just 2.5 kilometres from the Broadwater, placing the open ocean only 15 minutes away.

“Being able to step out of your home onto your boat is a rare luxury, and it’s something residents here can look forward to when it opens later this year.”

[smartcode_project:default project_id=113271 project_image_fid=366709]

The display opening comes as construction completes on The Waterline, with the first residents expected to move in from mid-October.

The three Sky Homes range from 282 sqm to 367 sqm and each feature three bedrooms, three bathrooms, multiple living zones, expansive kitchens with butler's pantries and large balconies taking in the Broadwater outlook.

Each residence also has three secure basement car spaces and additional storage.

“This is the first opportunity the Gold Coast has had to step into Harbour Shores and see, touch and feel what we’re bringing to life here,” Long said.

“There are only three Sky Homes within The Waterline, ranging in size from 282sqm to 367sqm, with each residence featuring three large bedrooms, three bathrooms, multiple living zones, expansive custom-built kitchens with butler’s pantry, and large balconies capturing Broadwater views.”

<img alt="Harbour Shores" data-entity-type="file" data-entity-uuid="bab65e10-4fab-45e1-92d8-fc56e2ab98ff" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-25%20at%202.00.16%E2%80%AFPM.png?VersionId=XT8q76LsPkw3cYTsvN3JfFDaPLud90PN" />

Residents of The Waterline will have access to a private pool, along with Harbour Shores' wider collection of amenity including a lagoon pool, social clubhouse, tennis court, gym, yoga facilities and sauna.

Lewis Land partnered with Studio Collective to furnish the completed display, with the interiors designed to demonstrate how the residences could function as permanent homes rather than simply as show apartments.

Studio Collective Director Melissa Park said the surrounding waterways informed the interiors, but in a more restrained way than a traditional coastal scheme.

“We drew inspiration from the canals and coastal surrounds, but our approach was to interpret that subtly through layered materials and a grounded palette of earthy tones, rather than literal coastal references,” Park said.

“We introduced hero moments of green and teal to reference the surrounding waterways, while mirrored elements help reflect natural light.

“The result is a residence that feels elevated yet comfortable, somewhere buyers can genuinely imagine themselves living, entertaining and unwinding.”

Sky Homes are priced from $3.65 million.

Lewis Land is also offering private marina berths with The Residences, its limited collection of three and four-bedroom villas positioned directly along the Harbour Shores waterfront boardwalk.

Three-bedroom villas are priced from $2.99 million, while four-bedroom residences start from $3.19 million.

Harbour Shores is being marketed by Colliers International.

[smartcode_project_cta:default project_id=113271]

Lewis Land opens sky home display as The Waterline completes at Harbour Shores

St Vincent de Paul Society Housing Australia has filed plans for a major mixed-use housing precinct on the southern edge of the North Sydney CBD, adding another significant proposal to a pocket around North Sydn​ey Station that is quickly becoming one of the LGA's busiest development zones.

The State Significant Development Application covers a 5,990 sqm site at <a href="https://www.apartments.com.au/new-apartments/1-19-mackenzie-street-lavender-bay-nsw-2060">1-19 MacKenzie Street and 211 Blues Point Road in Lavender Bay</a>, immediately south of Nor​th Sydney Station and between the commercial core and the lower-rise Lavender Bay Heritage Conservation Area.

Designed by Wardle, the proposal would deliver a new residential tower comprising 88 build-to-sell apartments and 19 affordable apartments, alongside a separate co-living building with 57 rooms and a building manager's studio.

It would also see the significant restoration and upgrade of St Francis Xavier Catholic Church, the adaptive reuse of the former school building, new parish facilities, retail, a new public square and around 1,000 sqm of publicly accessible open space.

<img alt="Vinnies North Sydney" data-entity-type="file" data-entity-uuid="d5dd7f87-a617-463e-b577-17541e01f0e9" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.10.13%E2%80%AFAM.png?VersionId=4R8TsFN3P_LrrXO2HswTOIrx2blil8lh" />

The project is seeking a concurrent rezoning of the site to R4 High Density Residential and an increase in the maximum building height to allow a tower reaching RL120, or up to 20 storeys. The proposal was progressed through the NSW Government's Housing Delivery Authority pathway.

The build-to-sell component will be weighted toward larger apartments, with just six one-bedroom apartments compared with 31 two-beds, 43 three-beds and eight four-bedroom residences.

The 19 affordable apartments will comprise two studios, 15 one-bedroom apartments and two two-bedroom apartments, taking the total apartment component to 107 residences before the 58 co-living rooms are included.

<img alt="Vnnies" data-entity-type="file" data-entity-uuid="7d568ca5-cb90-4e18-96c6-d9795dba0c56" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.10.05%E2%80%AFAM.png?VersionId=GY2R5M9VtQh0EKy1vajaea19PSLOPuRD" />

Wardle's design for the Vinnies site has sought to negotiate that emerging high-rise context while retaining the lower-scale character of MacKenzie Street and the adjoining heritage conservation area.

The main building adopts a three-storey podium and tower arrangement, with the podium aligned to the ridgeline and front setback of St Francis Xavier Church.&nbsp;Wardle has designed the podium with colonnades, seating, recessed entries and active ground-floor frontages, with sandstone-toned precast concrete and face brick referencing the materiality of the existing church.

The tower then steps back eight metres to the south and six metres to the north before rising in a sculpted form comprising four interlocking quadrants. Wardle has also introduced rounded forms and chamfered corners to reduce the tower's perceived bulk and improve view sharing with neighbouring development sites.

Resident facilities and outdoor areas are planned at the separation between the podium and tower at Level 3, oriented toward Sydney Harbour and the CBD skyline.

The tower itself will feature a glass reinforced concrete facade, with recessed balconies and deep reveals used both to provide shading and privacy and frame views toward the harbour and city. The lower levels take a different architectural approach, using brick and sandstone-toned finishes intended to establish a stronger relationship with St Francis Xavier Church. The Church itself will be conserved and upgraded for its continued use, while the former school building will be adaptively reused as part of the co-living component.

<img alt="Lavendar Bay" data-entity-type="file" data-entity-uuid="2d4418ad-90aa-4d49-af93-c80b140aea80" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%209.09.47%E2%80%AFAM.png?VersionId=Kv4gzbsACaGvZSRuaqcfGC54jEJRXIDJ" />

&nbsp;

The proposal adds to an increasingly concentrated pipeline of residential development around Blue Street, MacKenzie Street and Lavender Bay.

Just west of the site, Central Element lodged plans earlier this year for one of the most significant residential developments proposed in Lavender Bay in recent years.

Central Element's SJB-designed scheme at 64-66 Lavender Street and 3-7 Middlemiss Street would deliver 163 apartments across two towers rising 23 and 32 storeys, replacing five existing apartment buildings containing 32 homes. The project also forms part of the Housing Delivery Authority pathway.

<a href="https://www.apartments.com.au/news/nsw/first-look-central-element-reveals-lavender-bay-apartment-plans?utm_source=chatgpt.com" rel="noopener" target="_blank">First look: Central Element reveals Lavender Bay apartment plans</a>

Immediately around North Sy​dney Station, another two significant proposals have emerged at 5 and 15 Blue Street.

Zurich Australian Insurance Properties is seeking to adaptively reuse its longstanding commercial building at 5 Blue Street, directly above North Sydney Station, rather than demolishing the structure.

Its SSDA proposes converting the building into a 14-storey mixed-use development with 62 apartments and 86 co-living rooms, together with ground-floor retail and a major refurbishment of Blue Street Plaza. The application is currently at the Response to Submissions stage.

<a href="https://www.apartments.com.au/news/nsw/first-look-zurich-targets-north-sydney-office-conversion-with-148-unit-proposal-above-metro-station">First look: Zurich targets North Sydney office conversion with 148-unit proposal above Metro station</a>

&nbsp;

First look: Vinnies files for 20-storey Lavender Bay apartment tower as North Sydney housing pocket heats up

When the opportunity arose for South Australian developer Palumbo to return to Kent Town, where it had previously delivered East Park Apartments and the East 
Rundle Apartments, it wasn't one the longstanding developer-builder was going to pass up.

The decision was quickly vindicated, with more than 30 apartments sold within the first month of launching <a href="https://www.apartments.com.au/new-apartments/royal-apartments-kent-town-2-8-north-terrace-kent-town-sa-5067">Royal Apartments</a> to the market.

The 206-apartment development, which will bring significant new supply to Adelaide's tightly held eastern city fringe, also gives <a href="https://www.apartments.com.au/developers/palumbo">Palumbo</a> the opportunity to bring new life to one of Kent Town's most recognisable watering holes.

[smartcode_project:default project_id=6109 project_image_fid=376073]

Royal Apartments incorporates the historic Royal Hotel, a venue Palumbo Managing Director Daniel Palumbo said has a longstanding connection with the local community.

"Everyone in the area has history with the Royal Hotel," Palumbo told Apartments.com.au.

"It was quite an active pub and social gathering place for locals. We want to bring it back to its former glory."

[smartcode_project:default project_id=6109 project_image_fid=376072]

The wider development will comprise two residential towers alongside the restored hotel, sitting on North Terrace opposite the Adelaide Park Lands.

For Palumbo, the project also marks a return to familiar territory.

The developer completed East Park Apartments next door more than a decade ago and jumped at the opportunity to develop in Kent Town again when the Royal Hotel site became available.

"The opportunity emerged, and we moved to secure the site," Palumbo said.

"We were approached by the previous landowner, who said they had extensive commitments in Sydney and weren't in a position to deliver the project.

"We took over the site and within six months recut the design scheme to be more in keeping with the type of development we want to bring to Adelaide.

"Now we're on the market and those changes have really resonated with local buyers."

That has translated into a strong start to sales, with 33 apartments transacting in the project's first 35 days.

Palumbo said the early purchaser profile had been consistent with the group's traditional focus on owner-occupiers rather than investor-led apartment stock.

"Local owner-occupiers have always been our market," he said.

"There are always some investors, but we've never developed what would be called traditional development stock. Owner-occupiers are very much our market."

[smartcode_project:default project_id=6109 project_image_fid=376068]

The buyer mix has been diverse so far, with downsizers and younger professionals both accounting for a significant portion of early sales.

South Australia's current stamp duty settings, which allow&nbsp;eligible homeowners in South Australia aged 60 savings of up to $103,830 on stamp duty when they downsize to a new property valued at up to $2 million,&nbsp;have helped encourage downsizer activity, while younger buyers in their late 20s and early 30s have been attracted to the opportunity to live immediately outside the CBD while still being able to walk into the city.



Location has been a major part of the proposition for both buyer cohorts.

[smartcode_project:default project_id=6109 project_image_fid=376075]

Royal Apartments sits on North Terrace directly opposite the Adelaide Park Lands, with residents able to walk through the parklands toward the East End, Rundle Street and Rundle Mall.

Apartments have been positioned to capture views across the parklands, Adelaide skyline, Botanic Gardens and Adelaide Hills.

Palumbo believes the scarcity of developable land along this section of the Park Lands makes the site particularly difficult to replicate.

"There's very few allotments on that side that can be developed," he said.

"If this location was in New York and you were sitting on Central Park, you'd be talking about a $60 million apartments."

Royal Apartments will offer a broad mix of residences, ranging from one-bedroom apartments through to four-bedroom sub-penthouses and penthouses.

Current listings include one-bedroom apartments from $680,000, while larger three and four-bedroom residences are priced around $2.5 million.

Residents will have access to a swimming pool, gym, barbecue and recreation areas, residents' lounge and dining space, and a communal deck.

[smartcode_project:default project_id=6109 project_image_fid=376067]

The apartments will feature generous balconies, while secure parking, bicycle storage and storage cages will also be provided.

A porte-cochère-style arrival and drop-off area has also resonated with buyers, particularly those attracted to being able to walk into the CBD during the day while retaining secure vehicle access at home.

Palumbo is acting as developer, architect and builder on Royal Apartments, continuing the vertically integrated model it has used across its South Australian portfolio.

The group was also behind the $150 million Sofitel Adelaide, the 251-room five-star hotel and residential tower which opened in 2021.

Palumbo said Royal's launch had come at an interesting time for the broader Adelaide apartment market.

Buyer confidence had initially been impacted by uncertainty surrounding the Federal Budget and broader economic conditions, but Palumbo believes sentiment is beginning to improve against a backdrop of significant investment flowing into South Australia.

He pointed to increased activity across defence and resources, including Olympic Dam, as potential long-term drivers of the state's economy and housing market.

"Money is starting to flow into Adeliade, significant amounts as Adelaide bucks the trend of the rest of the country.," Palumbo said.

"There's a lot of activity in the economy over the next decade. I think more investment will come into this market."

Early works on Royal Apartments are expected to commence this year, with major construction activity and cranes anticipated on site from early next year.

[smartcode_project_cta:default project_id=6109]

Palumbo's return to Kent Town strikes early chord with buyers

Go-to builder-developer <a href="https://www.apartments.com.au/developers/graya">GRAYA</a> is continuing to bulk out its already impressive and diverse apartment portfolio across South East Queensland. Their latest milestone is securing development approval for Silk, its boutique riverfront apartment development in St Lucia.

The approval clears&nbsp;the way for the team to begin construction planning for the 22-residence project.

<a href="https://www.apartments.com.au/new-apartments/silk-st-lucia-16-18-sandford-street-st-lucia-qld-4067">Silk</a> will rise 15 levels from an 810 sqm site at 16-18 Sandford Street, occupying a prominent bend of the Brisbane River with a prized northern aspect across Orleigh Park toward the Brisbane CBD.

The approved scheme will comprise 16 split-floor and six full-floor residences, continuing GRAYA's move into larger-format apartment developments targeting Brisbane's prestige owner-occupier market.

The project has been designed around the site's broad river frontage and dual-direction views, with GRAYA prioritising larger residences, privacy and outlook over apartment yield.

<img alt="Silk St Lucia" data-entity-type="file" data-entity-uuid="aa5c2349-f96c-4914-a812-1f2cd6827af8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%208.25.44%E2%80%AFAM.png?VersionId=WY0vEU_7vYjeRJKQHiCwFdMxu8PvFh52" />

GRAYA Co-founder and Chief Executive Officer Rob Gray said the project had been shaped around local homeowners wanting to remain in St Lucia without maintaining a traditional family home.

"St Lucia is one of those suburbs people do not want to leave," Gray said.

"They know the river, the trees, UQ, the golf course, Toowong and Indooroopilly, and that familiarity is hard to replace.

"True riverfront opportunities here are exceptionally scarce. What we have designed at Silk is a way to stay in the suburb people love, with the scale and privacy of a private home and far less to maintain.

"This is not typical apartment product. It is a proper home on the river, and that is exactly what this market has been missing."

The approval comes as new apartment development continues to increase across the St Lucia and neighbouring Toowong corridor, although direct riverfront sites remain considerably more tightly held.

GRAYA Co-founder and Managing Director Andrew Gray said securing the approval had removed a significant element of development risk from Silk.

"Genuine riverfront sites of this quality in St Lucia are not something that comes up regularly," Gray said.

"The approval removes a substantial layer of execution risk, and the location underwrites demand in a way very few inner-city sites can.

"The fundamentals here are as strong as anything we have assessed in Brisbane."

<img alt="Silk St Lucia" data-entity-type="file" data-entity-uuid="d0f3d734-65e1-48e8-8ed3-2e0715ffcdd9" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-08-26%20at%208.25.56%E2%80%AFAM.png?VersionId=sOLSs_jdHkXLWbBKzRyayf5BfTb2vPsD" />

Silk will see GRAYA return to a stretch of the Brisbane River where it already has recent construction experience. The vertically integrated group recently completed ARC in neighbouring Toowong as builder for developer Spyre, delivering the riverfront project on a constrained site.

GRAYA will take a different role at Silk, controlling the project from design and development through construction and aftercare under its vertically integrated model.

The development will include a gym and resident leisure areas at ground level, integrated with the river's edge.

Silk joins a growing pipeline for GRAYA across Brisbane and the Gold Coast, which includes Enclave, The Gallery, Coral and Ripple.

The developer-builder has also recently lodged plans for its largest project to date, <a href="https://www.apartments.com.au/new-apartments/the-silo-19-chester-street-newstead-qld-4006">The Silo</a>, a proposed <a href="https://www.apartments.com.au/news/qld/graya-buys-frasers-newstead-site-plans-the-silo-between-james-street-and-gasworks-precincts">$700 million mixed-use development</a> in Brisbane's James Street precinct.

Silk is expected to predominantly target local owner-occupiers and prestige buyers seeking a permanent riverfront home in Brisbane's inner west.

Registrations of interest are now open, with further details on the project and construction program to be released as it progresses.

<hr />
<h2>SILK PROJECT FACTS</h2>

Developer-builder: GRAYA

Project: Silk

Location: 16-18 Sandford Street, St Lucia

Apartments: 22

Built form: 15 levels

Site: 810 sqm riverfront holding

Mix: 16 split-floor and six full-floor residences

Status: Development approved

Next step: Construction planning underway

[smartcode_project_cta:default project_id=152168]

GRAYA greenlit for riverfront St Lucia apartment development, Silk

<html><body>
The past few weeks have seen banks tighten up lending conditions for property investors – either charging higher interest rates or imposing lower loan to valuation ratios or both.
This is in response to increasing pressure from the banking regulator APRA (ie the Australian Prudential Regulation Authority) demanding that the 10% cap on property investor lending growth that it announced last December be adhered to. 
Those who have been around for a while might wonder what is going on. Isn’t this what used to happen in the dim dark days before the enlightenment of financial regulation in the 1980s. The answer is yes and the term “macro prudential regulation” – in reference to using prudential controls on lending to influence the economic cycle - is just a fancy term for what went on in the past. 
So why has it made a comeback? And will it work?
The focus on varying prudential controls to achieve macro-economic outcomes was quite common up until the early 1980s but went the way of the dodo when it was concluded that it was only leading to distortions in the financial system, as people found a way around them.
So while financial system regulators, like APRA, continued to ensure that prudential standards were met, from the mid 1980s varying interest rates to control the housing and economic cycle became the norm. And this worked reasonably well.
The last major boom in Australian property prices ended around 2004. This was a cracker and saw average home prices around Australia rise an average of nearly 15% per annum over the five years to the end of 2003; a massive surge in housing related credit with property lending growing 21% and property investor lending growing 30% in 2003; this in part was fuelled by property spruikers running property investment seminars on a grand scale; and there was little doubt that house price gains were being extrapolated off into the future in investors’ minds and that this in turn was driving more investment.
<img src="/images/2015/05/26/oliver1.jpg" alt="">
(Source: CoreLogic RP Data, AMP Capital)
The surge into 2003 took the property price to household income ratio from around three times to around five to six times and saw real property prices go from well below trend to well above.
As a result concern about a property bubble and poor housing affordability came to the fore. It was “cooled down”, not by prudential controls but by a combination of “jawboning” by then RBA Governor Ian Macfarlane warning against the dangers of property speculation and then the start of an interest rate tightening cycle as the economy improved. The collapse of a high profile property spruiker’s business and poor home affordability also helped. 
But while the prudential regulator made sure that lending standards were being maintained, prudential controls were not varied to achieve macro-economic outcomes.
This time is a bit different for several reasons. 
<ul>
<li>First, property price gains are nowhere near as strong – over the last five years average capital city home prices have risen at just 3.5% pa. For Sydney it’s just 6.5% pa. </li>
<li>Second, the gains are not broad based – while Sydney home prices are up 14.5% over the year to April, for the other capital cities the gain is just 1.7%. </li>
<li>Third, credit growth is running at a fraction of what was seen in 2003 with total housing related credit up 7.3% over the year to March and investor credit up 10.4%.</li>
<li>Finally, unlike in 2003 and 2004 the economy is much weaker. Back then growth had been picking up after a soft patch and was being helped by a super low $A, households happy to take on more debt – remember the line about households having an ATM in their living room - and the start of the mining boom. Now the economy has been sub-par for several years as the mining boom is unwinding. In fact, the rest of the economy needs very low interest rates.</li>
</ul>
But of course its never that simple as the RBA and regulators are aware that expressed relative to household income both home prices and household debt levels are already very high – having never really unwound from the surge into 2003-04. And so they are fearful of letting low interest rates drive them much higher given the risk to the financial system and economy should they then fall sharply.
So to balance all these cross currents there has been a return to using macro prudential controls in order to allow the low interest rates that the economy as a whole needs but at the same time to keep a lid on the property market.
Will it work? Only time will tell on this one. APRA is pretty adamant that it wants to see growth in property investment lending slow into the second half of the year and if lenders don’t tow the line then tougher action is likely. So my feeling is that it probably will work and we should expect to see a slowing in the availability of credit for property investors and as a result some slowing in home price growth in Sydney (maybe back to around 8% pa) and to a lesser degree Melbourne over the next year. However, a downturn in property prices will likely have to await the start of interest rate hikes maybe late next year or in 2017.
However, there are several risks around this. APRA’s 10% “cap” on property investor lending growth could prove too lax and on the other side its hard to know when such regulatory tightening has gone too far in which case the property market could slow more than expected. There is also a danger that it hits cities that are weak anyway (basically all the capital cities except Sydney and Melbourne). And longer term, lenders and borrowers may try to find a way around such prudential controls. 
But hopefully by then the economy will have returned to normal and we can go back to relying on interest rates to control the property cycle.
<a href="https://www.propertyobserver.com.au/https://plus.google.com/110172465327488162875?rel=author" target="_blank">SHANE OLIVER</a> is head of investment strategy and economics and chief economist at <a href="https://www.ampcapital.com.au/home" target="_blank">AMP Capital</a> and is responsible for AMP Capital's diversified investment funds. 
</body></html>

soliver-smf6LQXgW9

Back to the past to control the property cycle: Shane Oliver

<html><body>
The Australian Bureau of Statistics (ABS) released data mid-May which revealed that 48.7% of state and local government taxation revenue over the 2013-14 financial year came from property related taxes.
The data showed that over the year, state and local governments collected a record $40.485 billion in taxes from property related sources. In comparison, they collected $21.341 billion in taxes from employers, $11.208 billion in taxes from the provision of goods and services and $10.024 billion in taxes on the use of goods and performance of activities.
As this shows, at a state and local government level property taxes are the largest source of revenue. Although property accounted for 48.7% of total tax revenue over the year, it has previously accounted for as much as 50.6% of all revenue in 2003-04.
<img class="aligncenter size-full wp-image-4780" src="https://blog.corelogic.com.au/wp-content/uploads/2015/05/Chart-13.jpg" alt="Chart 1" width="500" height="183">
The total value of property related taxes increased by 12.6% over the most recent financial year. This represents the greatest year-on-year increase in property related tax revenue since it rose 14.3% over the 2009-10 financial year. In comparison, taxes on employer’s payroll and labour force rose by 2.8%, taxes on the provision of goods and services rose 1.2% and taxes on the use of goods and performance of activities rose 3.5%. Overall, state and local government tax revenue increased by 7.2% over the year.
With home values nationally beginning to rise in June 2012, it is clear that state and local governments are a major benefactor of the strong housing market conditions. With higher home values, taxes such as land tax, municipal rates and stamp duty on conveyances all increase. Conversely when housing market conditions shift and value growth slows or values falls the largest source of tax revenue (property) is adversely affected.
<img class="aligncenter size-full wp-image-4781" src="https://blog.corelogic.com.au/wp-content/uploads/2015/05/Chart-22.jpg" alt="Chart 2" width="500" height="513">
Of the $40.485 billion in property related tax revenue collected in 2013-14, 40% came from municipal rates and 36% came from stamp duties on conveyances. Land tax was the only other sizeable contributor to property related tax accounting for 17% of revenue. Over the year the most significant increase in property related taxes came from stamp duty, up by 24.4%. The amount of tax revenue collected from municipal rates increased by 5.3%, and land taxes increased by 2.8%.
Property related tax revenue is only collected by those who own properties. Ultimately every property is owned by someone, some as an owner occupier and some as an investor. The taxes levied against property are typically only payable by the owner of the property. Given this, those who choose to rent rather than own property pay no tax on property. Not to mention the fact that the cost of renting is typically much lower than the cost of owning.
State and local governments have clearly experienced a significant revenue boost via the improvement in the residential housing market over the year. Stamp duty in particular has seen a significant rise. With sales volumes and property values rising there have been more sales to receive stamp duty from and at a higher price which also increases the stamp duty collected.
Of course, the issue with stamp duty is that it is a tax only collected across those properties which sell. From a residential perspective this is just 5% to 7% of the total housing stock over a given year. Stamp duty also acts as a disincentive for home owners to transact property on a more regular basis because it is a tax paid on a new purchase.
<img class="aligncenter size-full wp-image-4782" src="https://blog.corelogic.com.au/wp-content/uploads/2015/05/Chart-32.jpg" alt="Chart 3" width="500" height="182">
Looking more closely at stamp duty over time you can see just how inefficient the tax is, being heavily reliant on the performance of the housing market. The 2013-14 financial year was a bumper one for stamp duty revenue thanks to strong growth in home values and an increase in sales activity. As we’ve seen in the past, these good times won’t last forever and eventually state and local governments will feel the impact of a downturn in tax revenue as the housing market cools.
I have previously argued that the removal of stamp duties would encourage greater mobility of residents and provide less of a barrier to those home owners looking to upgrade or downsize. Of course state and local governments would lose 36% of their property related tax revenue and 17% of their total taxation revenue. 
Replacing stamp duty with a blanket land tax, another tax, would likely be unpopular and you’d have to consider how equitable that would be particularly for those who have recently paid stamp duty (if a blanket land tax regime were to be introduced it would likely be accomanpied by compensation or discounts to those who recently purchased under the stamp duty regime). 
To put a blanket land tax into perspective to cover the $15.976 billion in stamp duty revenue over the 2013-14 financial year, each residential dwelling would have to pay $1,705.60 based on the ABS estimate of 9,366,800 residential dwellings as at June 2014. 
Keep in mind that stamp duty isn’t just payable on residential property transactions and more revenue is available from commercial and industrial properties or the cost per home could be reduced.
<img class="aligncenter size-full wp-image-4783" src="https://blog.corelogic.com.au/wp-content/uploads/2015/05/Chart-42.jpg" alt="Chart 4" width="500" height="149">
Over the year, stamp duty revenue was higher in each state and territory except for the Australian Capital Territory (-1.7%). Across the other states the rise in stamp duty revenues were recorded at: 32.3% in New South Wales, 27.9% in Victoria, 27.3% in Queensland, 2.1% in South Australia, 9.5% in Western Australia, 10.8% in Tasmania and 12.7% in the Northern Territory.  
According to the CoreLogic RP Data Home Value Index, home values rose across each capital city except for Darwin over the year with the largest rises in Sydney, Melbourne and Brisbane. Clearly home value rises across the capital city markets have had a positive effect on stamp duty revenues.
The data highlighted shows that property related taxes are the most important source of revenue for state and local governments, accounting for 48.7% of their total taxation revenue. The issue of course is that these levels of government are looking to constantly grow their revenues. The two main sources of property related revenue are rates and stamp duty. Rates can be grown by encouraging a greater number of ratepayers into a region (create more housing) and stamp duty can only be lifted by changing the rates or encouraging higher prices and/or more sales. 
In certain regions increasing the supply of ratepayers is not possible so it is clear that stamp duty is an extremely important source of revenue.  With capital city home values continuing to rise throughout the 2014-15 financial year, we anticipate that stamp duty will be higher once again. The question is whether governments can continue to rely on property being a one-way bet?
The ACT has already announced a phase out of stamp duty over the next two decades, and there is also discussion around a move away from stamp duty in South Australia.  The major benefit to State governments under a broad land tax arrangement as opposed to stamp duty would be the consistency of revenue flows rather than the lumpy market driven revenue which is evident under the stamp duty system.
Cameron Kusher is CoreLogic RP Data’s senior research analyst. You can read his posts here.
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ckusher-ujnxiKuFQs

Property related tax revenue surpasses $40 billion: Cameron Kusher

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Small businesses with a turnover of less than $2m can now claim an immediate tax deduction when purchasing plant equipment valued under $20,000.
This new tax break will deliver an early Xmas present to fit-out contractors who specialise in restaurant and small office refurbishments.
I was surprised by the quantum of the tax break.
I think $20,000 as an immediate tax deduction for individual items is a huge amount and an incredible incentive to bring that fit-out forward.
Fit-out contractors now believe in Santa Claus and he’s taken the form of Joe Hockey.
We recently refurbished our office for a cost of $202,000 and were able to claim $35,000 in depreciation in the first year. If we’d carried out the same fit-out today our first year depreciation would’ve been over $123,000.
That’s a huge difference.
Quantity Surveyors are experts in breaking down the overall construction cost into individual items and now has never been a more appropriate time to do this.
There are four main points to consider:
<ol>
<li>Small businesses should ensure a detailed report of any fit-out costs be carried out.</li>
<li>When acquiring any new asset, small businesses should try to keep the costs below $20,000.</li>
<li>This generous bonus has an expiry date of June 30, 2017.</li>
<li>Assets costing over $20,000 can still be depreciated but not claimed as an outright deduction.</li>
</ol>
Some examples of what may qualify for an immediate tax deduction include carpet, desks, blinds, work stations and a lighting upgrade.
Now has never been a better time to upgrade that office or refurbish your restaurant.
TYRON HYDE is director of <a href="https://www.washingtonbrown.com.au/" target="_blank">Washington Brown Quantity Surveyors</a>.
His book <a href="https://www.claim-it.com.au/?utm_source=wbsite&amp;utm_medium=image&amp;utm_campaign=homepagebanner" target="_blank">CLAIM IT!</a> helps property investors maximise their tax benefits through smart deprecation.
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tyronhyde-GVUTYT8ZT3

Christmas for contractors as Hockey delivers: Tyron Hyde

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The South Australian treasurer Tom Koutsantonis has declined to rule “in or out” introducing a foreign buyers tax on property sales leading up to next month’s state budget.
The local website InDaily noted Koutsantonis said there was no indication the Weatherill Government would introduce such a measure “just because something’s happened in Victoria”.
“In terms of any decision we’re going to make, I’m not pre-empting anything in our budget leading up to it,” he said.
“If I start ruling things in or out, the moment I say ‘yes’ or ‘no’ to a foreign investor tax, people will say ‘what about abolishing stamp duty?’ or ‘what about payroll tax?’”
But the Real Estate Institute of SA wants an early assurance with CEO Greg Troughton telling InDaily any disincentive to foreign investment is “the last thing South Australia needs”.
The Property Council of Australia says there is a need for urgent, fundamental tax reform in South Australia.
Property in South Australia is heavily taxed with 42% of state revenues coming from property taxes.
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'Along with contributing $1.8bn in property specific taxes to State Government revenues, the property sector also pays a generous share of other taxes through payroll taxes, insurance taxes, goods and services tax and Council rates," the PCA of SA said.
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jchancellor-FAypfDUnLy

REISA doesn't want South Australia to follow Victoria with foreign property buyers' tax

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Foreign property investors being used as 'cash cows' by the Victorian government could potentially impact foreign investment in the state, according to property, finance and immigration firm Ausin Group (Ausin). 
The comments came after the Victorian government announced it is set to impose a 3% levy on purchases by foreign citizens who are not permanent residents along with a 0.5% land tax surcharge to absentee property owners who are not citizens or permanent residents.
Joseph Zaja, the Ausin Group managing director believes the Victorian property industry is currently sustaining the state economy with stamp duty generating the highest tax revenue in the state. 
"Overseas investors are an easy revenue raising target for the government," Mr Zaja said. 
“Foreign property investors are the lifeblood for several major property projects across Victoria.
"Without this cash injection many would not be developed and thousands of jobs would be lost. The State government is sending the message to foreign investors that it is not open for business by introducing new property taxes.
“Overseas buyers are about to be slugged with two new property taxes from both Federal and State governments – a double whammy."
 The Federal government is currently considering introducing a $5,000 levy as part of its Foreign Investment Review Board changes for overseas buyers purchasing in Australia. 
Mr Zaja stressed Australia's enviable reputation as a place that welcomes foreign investment was key to future economic prosperity. 
“The Victorian government’s announcement to slug foreign property purchasers with a new tax is short sighted.
"It is hoped the other states don’t follow their lead.
"We expect our foreign purchasers to start looking for more investment opportunities in others states,” Mr Zaja said.
In the last financial year over 60 per cent of Ausin’s property sales totally almost 2000 were to foreigners buying property in Victoria.  
Over half of those sales were to investors seeking to move here in the near future.
Ausin is one of Australia’s largest privately owned companies providing property, immigration and financial services advice to both Australian and Asia Pacific markets. The company sells properties for Australian Stock Exchange (ASX) listed companies and private property developers in Australia and New Zealand.
It employs over 350 staff across its offices.
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Victorian government milking foreign 'cash cow'

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GUEST OBSERVATION
It is budget time again and, like on many previous occasions, the voices seeking easy publicity are calling louder and louder for the abolition of negative gearing. Housing affordability is a hot topic in an environment where property prices are rising, in some places quite significantly, so the media is happily running with this agenda without questioning the basis of various claims.
But how can you have an honest debate on the issues involved if none of those commenting against negative gearing demonstrate enough knowledge on the topic they are talking about?
Dispelling myths about negative gearing is like trying to convince a 3 year old that "spinach is good for you"… It requires some maturity to comprehend the topic of the discussion before one is able to participate without any prejudice.
It may appear as a harsh and provocative assessment of those criticising negative gearing and Australia’s current tax arrangements - especially since the anti-negative gearing voices include prominent economists, managers of investment funds, various social think-tank organisation and media personalities. But if you scrutinise what they are saying it is very obvious they are just repeating overheard phrases without any understanding of the meaning of what these words really mean. Just like the aforementioned 3 year olds…
Just to illustrate, the prevailing theme is that negative gearing is a "cost to taxpayers"… Really? How about taking a class in basic accounting to understand the principles of cash flow before making any such statements publicly? Then the commentator would understand the negative gearing is all about cash flow and not about profit and therefore, that it is neutral from an overall tax perspective. (I explained the mechanics in my earlier article if you care to read - <a href="/news/negative-gearing-the-three-facts-that-will-challenge-your-assumptions">Negative gearing: The three facts that will challenge your assumptions</a>).
Then there are ideas about changing the provisions to allow negative gearing on new properties only, to increase new build. Yeah, right, great idea. Let’s keep all those people unable to buy isolated in renter ghettos, or relegate them to city fringes, and keep the suburbs pristine and free from temporary drifters. Let’s repeat those social housing experiments from 1960’s and 1970’s (this time round with private money) which legacy is still haunting parts of our capital cities half a century later.
Of course I am exaggerating the possible consequences but only to highlight that those who call for such arrangements did not think through the full consequence of what may happen. Ask yourself, where is the greatest demand for rental accommodation? Of course, in city centres and along major transport routes. This is where investors are providing the bulk of rental stock - because this is where the demand is. And of course this is, in the great majority of instances, second-hand and not brand new stock for a very obvious reason.
“But” they say, “if properties were cheaper in those convenient locations, more people could afford to buy there and would not need to rent”. Great logic. Sure, let’s implement policies that will allow converting everything in such locations to cheap owner-occupier housing – and then we will end up with a real housing affordability problem for those who prefer or are forced to rent. But sure enough, taxpayers will be very happy to spend billions of dollars to address it, no worries.
The premise that renters will buy “cheap houses” rather than continue renting would be amusing if it was not promoted so seriously by those prominent commentators. The naivety of such thinking, on such a large scale (mind you, without any evidence and/or testing the assumptions), is staggering.
One only needs to look to late 1990 to understand why such thinking has no merit whatsoever. In particular, towards the end of 1990’s, the cost of owning a property was at a historically low level and in many locations renting was costing more than paying off a property and still, not everybody was prepared to buy, even if they could afford it easily.
All those commentators are forgetting the basic logic that drives people’s decisions – if prices are cheap, they are so for a reason. That is, owning is perceived by the majority as unattractive and without a merit, and cheap prices in relation to rental expenses only reinforce this perception. People need to perceive a positive outlook for the property market to want to own the place of their residence - this outlook can only be reinforced by a history of rising prices. It’s as simple as that, yet so difficult to comprehend for many.
Then we have such pearls of wisdom like grandfathering negative gearing on existing purchases but, at the same time, allowing for the writing-off of operational loses against capital gains. Great, let’s make tax affairs so complicated that nobody will be able to figure out whether they are making money or losing it. Accountants will love it and growth of employment at the Tax Office will propel Australia’s economic growth for the next few decades.
Or how about proclaiming that before 1986 there were no property investors in Australia (because this is what housing finance statistics “show”) and that the “current property investment boom crisis” is the fault of Keating and Hawke re-introducing negative gearing and Howard and Costello halving the capital gains tax on investment properties? This position conveniently disregards the fact that the proportions of rental stock remained relatively static for many, many decades. So what is really going on?
<img src="/images/2015/05/04/Occupied_private_dwellings.png" alt="">
Those commentators simply don’t comprehend that there was a shift in the investor profile from, a situation where a single person owned entire blocks of flats, to that where now many individual investors only own one flat each. Those aforementioned policies were just a catalyst enabling this transition to happen.
And because of these policies, people now have a choice to either live where they are and invest their extra money in the long term rental accommodation business (yes, it is a business after all) or upgrade their primary residence - and the financial outcome is the same at the end. Unbelievable but true, once you do the math.
But the biggest fable of all is that negative gearing is the reason prices are “so high” today. So, by removing negative gearing, we will restore “housing affordability” - whatever that means. Pity not many can understand what is really driving property prices in Australia.
It doesn’t fit in these people’s agendas that the cost of buying and renting in Australia is close to its historically best level, and that housing is more affordable now than at many points in time in the last three decades. Even in Sydney – the apparent “epicentre of housing speculation”.
<img src="/images/2015/05/04/Long_term_purchase_affordability_Sydney.png" alt="">
Interestingly enough, NSW’s share of net rental income losses was only 5.7% in the 2012-13 financial year (or $312 million out of $5.5B claimed by investors – as per Table 15 of recently published statistics that show all income and expense items from rental property schedules, by the state/territory location of the property). This means that just two years ago, in aggregate, profits from long term rental accommodation business in NSW almost matched losses.
In other words, negative gearing was not as widespread in NSW as everybody is led to believe. No surprise here at all since purchases with gross rental yields of 6-7% were not that uncommon in Sydney in 2012. But why bother with facts that spoil a “good story” for media attention.
By the way, where were these commentators in 1997-99, 2005/6, 2009 or 2012-13 when there were ample opportunities to buy property cheaply? Why they were not heralding those opportunities then as loudly as they now voice their opposition to negative gearing? (As a side note, did you notice how regularly these opportunities come about?) There is a simple answer - because back then they were chasing media headlines with another favourite crowd pleaser - the upcoming Armageddon.
My, in many ways, aggressive and ironic commentary serves the purpose of mobilising you - the reader - to start confronting these commentators and questioning their understanding of a concept they are so outspoken about. And secondly, treating what you read and hear on the news about negative gearing with a fair dose of scepticism.
After all, in the whole scheme of things, negative gearing is inconsequential for individual property investors – sure, it helps with cash flow but it does not impact profitability and certainly, it does not make houses more expensive. So, its abolition would not change a thing – but that point of view is missing from the public debate.
Journalists are failing in their duty to present information objectively by not offering contrasting opinions and, most importantly, by not questioning individual commentators on merits of their points of view.
I have a tip for anybody who wants to know whether a particular commentator has any idea about the topic of negative gearing - check if they consider negative gearing to be a cost to taxpayers, or offering extra profit for investors, or none of the above. If they do consider it a cost or extra profit opportunity, then you know you cannot take seriously anything they say, no matter what other credentials they present.
Arek Drozda is an independent property market analyst. Follow on Twitter @arekdrozda.
 
 
 
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Are publicity stunts driving the negative gearing agenda? Arek Drozda

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GUEST OBSERVATION
Treasury recently released its <a href="https://bettertax.gov.au/files/2015/03/TWP_combined-online.pdf">submission to the federal Tax White Paper</a>. It has found a tax that actually confers a benefit on Australian citizens. That is, using it actually leaves us better off.
It isn’t a new tax - it is land tax.
Unbiased economists have always known a broad based nil exemption land tax has a marginal excess burden of zero. They have continually urged government to use it ahead of every other conceivable tax instrument available.
The net benefit comes about because foreign and domestic landowners must pay it yet it is spent solely on Australians.
Or, as Treasury describes it:
"Modelling also suggests that broad-based land taxes, such as municipal rates, have a low economic cost (Chart 2.9). This is because land is immobile (unlike other capital) and cannot be moved or varied to avoid tax. The model applies this assumption to both domestic and foreign ownership of land. Land taxes paid by foreign and domestic landowners are only redistributed to the domestic households, providing a benefit to Australian households and generating a negative marginal excess burden for a broad-based land tax shown in the chart."
<a href="https://www.prosper.org.au/wp-content/uploads/2015/03/ScreenHunter_6774-Mar.-30-10.24.jpg"><img class="alignright size-medium wp-image-8881" src="https://www.prosper.org.au/wp-content/uploads/2015/03/ScreenHunter_6774-Mar.-30-10.24-494x300.jpg" alt="ScreenHunter_6774-Mar.-30-10.24" width="494" height="300"></a>
There is much unrest at the high and growing level of foreign land ownership in Australia. We have abandoned the settler compact that all political parties once held as sacred: that every Australian citizen, no matter how humble, should enjoy the freedom, independence and privacy of land ownership.
Now, the share going to first home buyers is at historic lows yet there is no let to the foreign investment in Australian property, according to a recent NAB survey:
<a href="https://www.prosper.org.au/wp-content/uploads/2015/03/NAB-foreign-buyers28.png"><img class="alignright size-full wp-image-8880" src="https://www.prosper.org.au/wp-content/uploads/2015/03/NAB-foreign-buyers28.png" alt="NAB foreign buyers28" width="434" height="274"></a>
I urge a debate on land tax, not because it takes from foreigners – although that is certainly a positive feature – but because we would be richer, more active and freer with it.
If a tax exists with a positive excess burden, we have an obligation to examine its features and shortcomings with a microscope.
The only genuine negative I have ever heard about land tax came from nobel laureate<a href="https://www.youtube.com/watch?v=yS7Jb58hcsc" target="_blank"> Milton Freidman, who observed</a>: “It’s the only tax left on the books for which people have to write a big cheque.”
David Collyer is policy director of <a href="https://www.prosper.org.au/" target="_blank">Prosper Australia</a>.
David ran as a Senate candidate for the Australian Democrats in the 2013 federal election.
This article first appeared on Prosper's website.
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dcollyer-7rQRVBSdz6

A land tax would leave Australia a lot better off: David Collyer

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GUEST OBSERVATION
Tax concessions for investment housing include a 50% discount off normal individual tax rates on capital gains together with so-called ‘negative gearing’ arrangements, which allow investors to deduct ‘losses’ made on rental property investments (including interest on loan re-payments) from other income (including wages).
Deductions can, of course, be claimed for losses on other kinds of investments and this would not normally be regarded as a ‘tax concession’. The unique feature of ‘negative gearing’ for investments in assets such as property, shares, and agricultural schemes is that income from these investments often comes mainly from capital gains – the increase in the value of the asset over time.
Under the Capital Gains Tax rules these are only taxed when the asset is sold, and then at half the marginal tax rate. Yet expenses associated with the investment (especially interest payments on loans) can be deducted from tax annually and often exceed rental income.The tax system treats this as a ‘loss’. These ‘losses’ can be offset against other income that would otherwise be taxed at the full marginal rate (mainly wages).
In reality, in most cases the investment is not making a ‘loss’ because it is accruing capital gains. Otherwise there would be no point investing in these assets. If the tax system properly matched income and deductions, then either capital gains would be taxed each year at normal marginal tax rates or deductions for ‘losses’ could not be offset against other income until the capital gains are taxed on sale of the asset.
Whenever deductions for investment expenses are not properly matched with income, there is always a risk that people will maximise ‘losses’ in order to avoid tax on their other income.
This is achieved by structuring debt so that interest expenses on loans to purchase the asset exceed income from the investment such as rent, for instance by using more expensive ‘interest only’ loans (often with flexible interest re-payments so that investors can ensure their costs always exceed rental income), or by borrowing more to buy second and third properties as soon as the first one turns a ‘profit’.
In recent years, since superannuation legislation was amended to allow it, investors have been encouraged to borrow to invest in rental property through self-managed Super funds. A major advantage of this strategy is that capital gains on the sale of assets in Super funds are normally free of tax. Negative gearing is mainly used for rental property investment because housing is perceived to be a safe investment to borrow against, but it is also used to invest in agriculture (for example pine plantations), and shares (‘leveraged equities’).
The large-scale use of these tax schemes not only threatens public revenue and faith in the fairness of our tax system. It also reduces the efficiency of investment by encouraging people to invest with tax avoidance in mind rather than to achieve the best return at the least risk. It destabilises the economy by encouraging people to borrow more than they otherwise would and adding fuel to booms in asset prices – which are often followed by recessions.
Given that most negatively geared investment is in rental property, these schemes impact especially on housing markets. They encourage borrowing to speculate on housing prices, rather than patient investment in housing to achieve the best long term rental yield.
How widespread is their use? In the last year for which tax statistics are available (2011) two thirds of individual rental property investors – 1.2 million people - reported deductable losses of $14 billion. When those who reported profits from rental properties are included, taxpayers still claimed $8 billion in net rental losses overall in that year. Both the overall number of rental property investors, and the proportion who are negatively geared, have risen dramatically since 2000, when tax rates on personal capital gains were halved.
<img src="/images/2015/04/22/neg-april-22-one.jpg" alt="">
Source (figures 4-6): Eslake (2014)Op.cit
What do they cost and who gains? The Grattan Institute calculated that the cost of negative gearing concessions (compared to a regime in which deductions could only be claimed against income from the same investment) was $2 billion in 2011-12. The cost of the 50% discount on Capital Gains Tax for individual investors was $5 billion.
There is a perception that negatively geared investors are mostly middle income earners – so called ‘mum and dad investors’. This claim is usually based on the Tax Statistics data on individual taxpayers produced by the ATO. These data should be used with caution as they understate the incomes of negatively-geared rental property investors for the following reasons:
<ul>
<li>Taxpayers are divided according to taxable income, which is artificially reduced by tax deductions arising from negative gearing strategies;</li>
<li>Many property investors (especially those with higher incomes) control their investments through private trusts.</li>
<li>They are listed in the tax statistics as recipients of trust income rather than direct property investors.</li>
</ul>
When the Reserve Bank compared investment in rental property by individual taxpayers at different levels of total income (rather than taxable income), they found that over half of all geared rental property investors earned over $100,000 (the top 10% of taxpayers in 2011) and 30% earned over $500,000.
<img src="/images/2015/04/22/neg-april-22-two.jpg" alt="">
Source: RBA (2014) “Financial stability review, September 2014. Box C: Households’ investment property exposures, evidence from tax and survey data.”
At the household level, the tax benefits of negative gearing and the Capital Gains Tax discount go mainly to those with high incomes.
In 2006, households in the highest income quintile (top 20%) received an average benefit of $73 per week from negative gearing and $30 per week from the capital gains tax discount. When combined ($103 per week), this was twice the benefit received by the middle quintile ($45 per week) and over 12 times what the lowest income quintile receives (a combined eight dollars per week).
<img src="/images/2015/04/22/neg-april-22-three.jpg" alt="">
Source: Yates (2010) in Stewart ‘Housing and Tax Policy’. Tax concessions by gross household income quintile, 2006.
Weekly benefit from negative gearing is averaged over only those households with negative rental income. Sourced from Melbourne Institute HILDA survey.
This is an exerpt from the Australian Council of Social Service (ACOSS) report, ‘Fuel on the fire: Negative gearing, Capital Gains Tax and housing affordability. Read the full report <a href="https://www.acoss.org.au/media/release/new_report_calls_for_action_on_negative_gearing_and_capital_gains_tax" target="_blank">here</a>.
Peter Davidson is senior advisor with ACOSS.
Ro Evans is policy officer with ACOSS.
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Negative gearing and CGT discounts - how these tax breaks work: ACOSS

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GUEST OBSERVATION
Achieving tax reform is often a long process as the government of the day looks for consensus before presenting proposals to the Parliament. The process that the current government is following seems to be even longer and more tortuous than most.
It doesn’t help matters when the Treasurer appears to have dismissed a number of suggestions put forward by Treasury just two weeks after the release of the discussion paper.
In his <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;db=CHAMBER;id=chamber%2Fhansardr%2F135b167f-578d-4414-a5b0-b2a35bc1cc32%2F0238;query=Id%3A%22chamber%2Fhansardr%2F135b167f-578d-4414-a5b0-b2a35bc1cc32%2F0000%22" target="_blank">2013-14 Budget Reply</a> speech incoming prime minister Tony Abbott promised to “consult with the community to produce a comprehensive white paper on tax reform. We’ll finish the job that the Henry review started and this (Labor) government squibbed.”
One would have thought that the <a href="https://taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm" target="_blank">2010 Henry Tax Review</a> - which sought to look forward to the next 40 years - was a comprehensive review of the tax system.
Instead, in the current process Treasury officials have gone back to basics. The long-promised white paper is still to come - the <a href="https://bettertax.gov.au/publications/discussion-paper/" target="_blank">Re:think</a> discussion paper released on 30 March is yet another consultation paper, which sets out a range of questions, but no concrete proposals.
However comments made by Hockey in an interview in the Australian Financial Review this week appears to pre-empt some of the more controversial suggestions in this discussion paper, with AFR columnist Laura Tingle writing that the treasurer “poured cold water” on any significant alteration of dividend imputation, the indexing of income tax thresholds to tackle bracket creep and on changes to the capital gains regime.
Google and ‘Netflix’ taxes
The emerging <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporate_Tax_Avoidance/Public_Hearings">evidence</a> from last week’s Senate Hearings in the Inquiry into Corporate Tax Avoidance shows the need for reform of international taxation. Although the Re:think discussion paper does raise the problem, there are no suggestions or specific questions in relation to the issues around international tax avoidance - in fact the thrust of the paper is to seek ways to encourage foreign investment.
Re:think asks the question: "Q 34. How can tax avoidance practices such as transfer pricing be addressed without imposing an excessive regulatory burden and discouraging investment?"
The treasurer has proposed a “Google tax”, modelled on the <a href="/news">UK’s diverted profits tax</a>, which was intended to counteract “contrived arrangements that exploit the permanent establishment rules”. However there are serious <a href="https://theconversation.com/experts-caution-australia-on-unilateral-google-tax-39794">concerns</a> as to whether a unilateral approach to the problem will be effective.
The discussion paper raises questions about the GST exemption for imported goods, particularly those ordered on-line. The so-called “Netflix tax” singles out multimedia downloads and is designed to address the situation where video streaming services based in Australia are required to collect GST on videos downloaded here, whereas services based overseas are not required to pay GST as the value is below the import threshold of $1,000. In the virtual world, this is a clear anomaly. The principle behind this move is worthy; but people are already working out how to circumvent the new tax.
Generally, however, broader GST reform will not be proposed unless there is consensus across political parties and the states.
There also seems to be <a href="https://www.skynews.com.au/news/top-stories/2015/03/31/shorten-open-to-top-end-super-changes" target="_blank">consensus</a> that the taxation of superannuation does need to be reformed. Even the <a href="https://www.smsfassociation.com/library/submissions/budget-submission-2015.aspx?categoryid=1375#.VSxokfBUrF">superannuation industry</a> <a href="https://www.superannuation.asn.au/media-release-1-april-2015">acknowledges</a> that the concessions are skewed to high income earners, and following the repeal of the <a href="https://theconversation.com/abbott-is-not-playing-fair-removing-super-contribution-will-hurt-working-poor-14604" target="_blank">Low Income Superannuation Contribution</a> (effective from 2017) low income earners effectively pay a higher rate of tax on superannuation than on their take-home pay.
Capital gains tax
But there are other issues raised in the discussion paper, particularly in relation to the taxation of investment income, that the treasurer has discounted before stakeholders have even drafted their submissions. "Q 19. To what extent is the rationale for the CGT discount, and the size of the discount, still appropriate?"
The 50% Capital Gains tax discount evolved from the indexation of capital gains that applied when CGT was first introduced.
It is hard to argue that a 50% discount can be justified in the current economic climate, with annual inflation running at less than 3%. Yet this week the Treasurer commented that changing the discount could restrict the flow of capital into start-ups. Although start-up companies are an important area of economic growth, it is only one investment sector.
Dividend imputation
The Discussion paper also asked: "20. To what extent does the dividend imputation system impact savings decisions?"
Dividend imputation, like superannuation and negative gearing, has popular support among the “mum and dad” investors in Australia. But there has been a global move away from dividend imputation systems, leaving Australia and NZ as the two remaining regimes.
The Henry Review <a href="https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/Papers/Final_Report_Part_2/chapter_b2-4.htm" target="_blank">recommended</a> that: "Dividend imputation should be retained in the short to medium term, but for the longer term, consideration should be given to alternatives as part of a further consideration of company income tax arrangements."
It has increased investment in Australian companies, whether individually or through superannuation, but it is increasingly anachronistic in the modern economy. However the Treasurer wants submissions to address “how it can be improved” rather than “get rid of it”.
"21. Do the CGT and negative gearing influence savings and investment decisions, and if so,how?"
Again, the paper highlights the interaction between <a href="https://theconversation.com/explainer-why-negative-gearing-is-bad-policy-21882" target="_blank">negative gearing</a> and capital gains tax and suggests a quarantining mechanism to reduce the immediate tax benefit from negative gearing. However, although the Treasurer seemed <a href="https://www.abc.net.au/am/content/2015/s4207069.htm" target="_blank">open to discussions</a> when the paper was released two weeks ago, he told the AFR this week: "We’ve got to be very careful about constantly adjusting the policy. There is a temptation to constantly adjust policy for the volatility of the times. Now, we are in a world where that is incredibly liquid, where yields are incredibly low. That is creating perverse incentives."
But there are ways to construct reform that would not have an adverse impact on other investments.
Bracket creep
Although the <a href="https://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report" target="_blank">intergenerational report</a> and the discussion paper highlighted that the main source of revenue growth would come from bracket creep, Hockey has flagged that he does not agree with indexation of thresholds. There is some evidence to support this, as the previous experience of indexation of tax thresholds in the early 1980s contributed to inflation as wage demands increased.
However it is also clear that the government does not intend to see an increase in the personal tax rate; and has already said that the <a href="https://www.ato.gov.au/general/new-legislation/in-detail/direct-taxes/income-tax-for-individuals/temporary-budget-repair-levy/">Budget Repair Levy</a> imposed last year on incomes over $180,000 will not be extended beyond the legislated three years. Therefore the formula of the last 30 years, allowing the Government to adjust thresholds periodically, seems set to continue.
So where is the money coming from to reduce the deficit in the current budget? The suggested Bank Deposit Tax is <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2015-04-02/big-banks-warn-federal-government-against-tax-deposits/6366562">opposed </a> by the banks, who will engage in a campaign like that of the miners in relation to the Minerals Rent Resources Tax. Most of the suggestions from Treasury have been excluded by the Treasurer. The Senate has shown that it will not support further reductions in benefits and services that impact on the least well off. Most government agencies will tell you that they have been squeezed dry.
It is time for an action plan in which all of the options are on the table.
Helen Hodgson is associate professor, Curtin Law School. Curtin Business School at Curtin University.
This article was originally published on <a href="https://theconversation.com" target="_blank">The Conversation</a>. 
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hhodgson-WTYf8w7F7q

The Tax white paper - only good for fish and chips now? Helen Hodgson

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Hi Margaret,
I have just purchased a house as a principle place of residence for $295,000 with $235,000 left in the mortgage and $225,000 in an offset account. 
We are using the money in the offset account (approximately $30,000) for renovations, and are looking to spend the rest on the purchase in (hopefully two) investment properties.   Do you think this is a good plan of attack or should I keep the money in the offset account and use the equity in the principle place of residence as a deposit on an investment property? 
With $30,000 on renovations hopefully I can have the house re-evaluated for $350,000. 
Kind regards,
Dave
Hi Dave, 
When investors come to my company Destiny for assistance, around 80% of them have finance structures in place that are not well thought through and which are potentially costing them some good tax deductions.
Around 20% of them are straight out incorrect, some of them using strategies which may contravene the spirit of the tax act or in other ways be a potential issue going forward.
When you buy any kind of property, be it for investment or as a principle place of residence (PPOR), you should be thinking with an holistic view – and considering what you may be wishing to achieve financially over many years, rather than just what you need at that moment in time. 
You should have a forward plan and know what level of financial independence you wish to achieve and over what time, as well as many other things such as your risk profile and current and future cash flow needs.
Then you must consult with a professional who can also assist you from a property investment advice perspective as well as getting you the loans you need – and to do this they must have some kind of qualification such as the Qualified Property Investment Advising qualification offered through <a href="https://www.pipa.asn.au">www.pipa.asn.au</a>.
Before you use the $195,000 which will remain in offset after your renovations to invest, you should first clear away all and any personal debt.  This is because such debt is non- deductible, and to use cash as a deposit for a deductible investment while you still have non- deductible debt can be a mistake. 
Then you need to be very sure that you plan to remain in your current PPOR for the duration – if you think there may be any chance that the future may bring a  desire to upgrade into a larger and more expensive home of your own, you will want to preserve your cash to use for that time. 
If you use up your available cash on an investment or two, while you can draw this back to use to buy a bigger home of your own, doing so would create a non- deductible, or personal debt which carries no deductibility.
If this all sounds confusing, this is because it is!  And so you need good guidance which considers a holistic approach to your entire financial future, not just this current home, or the immediate few properties you are ready to buy.  
Regards,
Maragret
Have a property question?  <a href="mailto:askmargaret@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
Please not that due to the number of requests, Margaret may not be able to answer every question.
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