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The executive chairman is calling for a tax holiday for older Australians to encourage real estate transactions and put a dampener on rapidly rising property values.
Reflecting on the ways Australia could combat the issue of rapidly rising property values, Raine & Horne’s executive chairman, Angus Raine, has penned an article, “It’s a super time to give older investors a CGT break”, in which he takes the stance that the current federal government “could take a leaf out of former PM John Howard’s playbook to help older investors to solve the impasse”.
Mr Raine acknowledged that “older investors, including the hastily retiring Baby Boomers and the members of the so-called ‘Silent Generation’ (born between the mid-1920s to the early-to-mid 1940s) are keen to sell up some of their long-term properties to help fund their retirements”.
“However, they are being stalled by the prospect of prohibitive capital gains tax (CGT) imposts,” he considered.
The executive chairman said that in recent times, he has been made aware of older investors who bought quality, well-located investment properties 20–30 years ago for up to $350,000 in Sydney’s inner east and northern suburbs, which are now worth $2.5 million to $3 million.
“In these cases, the exit tax bill will be well over $600,000 per property,” he highlighted.
According to Mr Raine, not only is this impost obstructing older investors from taking some well-earned capital gains, “but the real estate stalemate this creates is adding to supply and affordability issues in our biggest capital cities”.
It’s why the real estate veteran is arguing for a recalibration of the way in which the property investments held by older Australians are taxed.
“I’d like to see these investors given an exemption for, say, 24 months on the payment of the CGT liability,” he argued, expressing his confidence that such an idea “could flush out retirees in much the same way the decision by the Howard government in early 2007 to make transitional changes to superannuation”.
He outlined how, back then, property listings across Sydney had skyrocketed as investors cashed in their housing assets and pumped the funds into superannuation to take advantage of the tax changes.
The executive chairman added that under the federal government’s super regulations, money received from a taxed super fund was tax-free for people over the age of 60, “making it the most tax-effective investment for retirement at the time”.
“I’m confident 13 years later that a CGT tax holiday could have a similar impact by encouraging older investors to sell,” Mr Raine said.
The executive chairman concluded by stating that such a change would also “unlock a lot of investment property that has stopped younger buyers getting into many inner ring property markets in our capital cities for many years now”.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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