The PPOR exemption is for many of us the single biggest tax concession we have in our country.
Taxpayers are paying around 50% at the top rate of income tax with associated levies and charges. Capital gains are given a 50% discount on the amount taxed, which is in some ways generous but also under review by politicians seeking to increase the overall tax raised.
For all the noise about the negative gearing tax concession, it is rarely highlighted that it is only a TIMING difference. Investments typically become cash flow positive and taxable in time and tax is being paid over the investment cycle. Bringing forward a tax collection is not going to fix the need to increase the tax take in the long run. It is plausible to argue, it may actually reduce the tax take! Less investors becoming self-funded retirees is a nightmare for the government’s future budgets.
Superannuation is taxed at 15% on the way in, 15% while it is there and in many cases no tax on the way out!
While paying tax is never popular, the reality is we all ultimately should accept paying taxes as it provides the funds for all the services and expenses of our country and communities. Much oxygen and argument takes place over who should pay, how much and how it should be spent, but let’s not go there! Most people want to know they are only paying a fair share and not more than they should.
To the main point – if you want the single biggest tax concession we have, make sure you are using and protecting your PPOR concession. It is easy to compromise it, by not fully understanding the rules. Make sure you understand them and how you will maximise your use of this big tax concession.