Unrealised Capital Gains.

[red750]

Capital Gains Tax is normally paid when the asset is realised, sold. The tax is calculated on the difference between purchase price and sale price.

 

The  government is considering an Unrealised Capital Gains Tax. The tax will becharged on the difference between the purchase price and the current value at 30 June, even if the asset is not sold. The threshold is reported to be #=$3 mill.

 

The key characteristic of unrealized capital gains is that they exist solely on paper, representing potential profits that are yet to be realized through a sale.

 

So if you own a farm worth $3 mill, or a self managed super fund with  assets of two houses worth $1.5 each, you will be requirewd to pay tax on the capital gains, even ifd you don't sell. Some people may be forced to sell all or part of their assets to pay the tax. This will have a serious impact on farmers or the retirement fundsa of self managed super holders. You could pay the tax the suffer a capital loss if the value of the asset drops.

[onetrack]

It won't work, and it won't get past any legal challenges. There are better ways to increase taxes, and a simple increase in the tax rate for extremely high earners is warranted.

People with huge unrealised capital gains may have little by way of income, and you can't tax people for capital gains that they haven't got in their bank accounts.

[spacesailor]

You can force people to sell assets. 

An example is/ was the farmer's widow . Her local council put her rates at a very steep rate to force her to sell acreage to pay the rates .

Probably that lady is now in a ' nursing home .

I could give away her location.  But will only say ! .

Lake Macquarie NSW

spacesailor

PS. : they wanted that large parcel of land to start a suburb. It was sold to people to build private dwellings .

In the same area a council sold land with a " no build clause "

( not even a caravan slab ).

spacesailor

[Marty_d]

2 hours ago, red750 said:

Capital Gains Tax is normally paid when the asset is realised, sold. The tax is calculated on the difference between purchase price and sale price.

 

The  government is considering an Unrealised Capital Gains Tax. The tax will becharged on the difference between the purchase price and the current value at 30 June, even if the asset is not sold. The threshold is reported to be #=$3 mill.

 

The key characteristic of unrealized capital gains is that they exist solely on paper, representing potential profits that are yet to be realized through a sale.

 

So if you own a farm worth $3 mill, or a self managed super fund with  assets of two houses worth $1.5 each, you will be requirewd to pay tax on the capital gains, even ifd you don't sell. Some people may be forced to sell all or part of their assets to pay the tax. This will have a serious impact on farmers or the retirement fundsa of self managed super holders. You could pay the tax the suffer a capital loss if the value of the asset drops.

Source?

 

Jeez they can't even get sensible changes to the CGT discount through without losing an election, how do you think that one would fly?

 

Someone's making stuff up.

[red750]

3 minutes ago, Marty_d said:

Source?

https://www.abc.net.au/news/rural/2023-03-17/farmers-caught-up-in-superannuation-changes/102087902

[Marty_d]

So it's not a property tax, it's an increase in tax on super over $3m, which in most cases is an entirely fair thing.

They might have to do a carve out for farmers but they'll have to do it carefully.

[Jerry_Atrick]

Hmm.. I guess over here we are spoilt..or they are incentivising us to save..

 

We have these things called individual savings accounts (ISAs).. Can invest up to £20K and all returns are tax fre. The can be cash, or shares (I think UK bourses only),

 

Our company contributions to our pensions (super) is tax free up to 10%, but for every 1% we put in up to 5%, the company can match that 1% tax free (of input tax). We can contribute up to £25K of personal contributions free of input tax from our gross earnings.. Anf of course, that means reducing our grossable earnings by 25K, so there is a tax benefit to that, too.

 

There is no withdrawal tax either. The capital gains (inc reinvested dividends) is tax free.. when you start drawing an income, for example through an annuity, you pay mormal tax rates. However, the state pension is not means tested, because it is based on teh national insurance contributions made - effectively a payroll tax + personal tax - it is not elective.

 

Over the above, you are taxed at the nominal rate.

 

I would argue, even in higher interest rates, $3m is not huge amount. The killer for Aussies is the 15% input tax. When I was in Aus, as I recall but am happy to be corrected, it didn't matter what your annual contributions were (employer or personal), they were all subject to a 15% tax. Depending interest rates, that couls easily shave 30% off your longer term investment.. In financial regulations here, under MiFID II, we have to declare "costs and charges", which for retail investors is a comparative projection of the free from fees vs. fees returns on their investment.. and fees are typically about 1%.. The 30 year difference in the curves is often around a 15% impact on the returns of the investment.

 

CGT on a super fund during its life is another fee that will inhibit growth. By all means tax it at the end over a threshold, but leave it alone until then.

[pmccarthy]

$3M was a large amount once, but no longer. It now costs around $50 for two coffees and two toasted sandwiches at most places around here. Blame Melbourne tourists. Rates, power, Telstra etc all have doubled since a few years ago, which means the purchasing power of that $3M in super has halved. We need to work on dying before it runs out.

[facthunter]

3M does not make a wealthy man.  Capital gain without reducing the amount by the inflation rate over the period is ROBBERY. Your money isn't worth any thing like it was even 10 years ago.. Inflation does make paying a debt off easier, but generally it's a really bad thing. Nev

[spacesailor]

Now they're after the interest on your " term deposits " .

The revenu'rs have taken most of my daughters interest as ' unearned income ' .

Now that sucks. 

spacesailor

pS. : saving for a " gallbladder " operation .

 

[facthunter]

Interest is profit.  Why would it be exempt?   Nev