Balancing the debate on possible TWG initiatives

Question from Paul updated on 18th November 2010:

Mark, have you considered making any response in the media for the Tax Working Group initiatives? There have been some recent one-sided views put forward by the pro-share lobby, notably Mark Weldon and Gareth Morgan. You’re a smart and prominent guy on the property scene. I’m sure you could balance the ledger and debate.

Our expert Mark Withers responded:

*This questioned was correct at time of answering, April 26th, 2010.

I'm taking every opportunity that comes my way to get some balance into this debate, I've had letters to the editor published, spoken personally with politicians and even appeared briefly on 3 news the other night. We have also circulated an email to all our clients explaining the implications. Rest assured I will continue to do what I can. Each and every property investor though should pick up a pen and write to their local National MP expressing their concerns. Make sure you comment on how it will influence your decision at the ballot box.

The govenment is playing a high stakes game with their policical capital and one would assume they are gauging the potential fallout. I'm also concerned that the average investor hasn't come to grips with the suggested deemed rate of return on residential property. This is potentially very scary, the proposal is to tax ones equity in a rental property at a deemed level and remove the ability to file a rental statement and claim a tax loss.

Tax refunds would immediately become tax payments across the board despite having to fund genuine tax losses. This would remove any incentive to build wealth by paying off debt. Westpac have predicted this regime could cause residential property prices to fall between 26 - 34%. Scary stuff! One can only hope that our politicians have the smarts to think through all the implications of a tax like this. This little gem hasn't been tried anywhere else in the world. Mark

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.


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