No wonder, what with zero stamp duty in NZ on property and zero – yes zero – capital gains tax, unless the principal purpose of the land purchase was for resale.
In Australia on the other hand, as all of us punters know, stamp duty is indeed payable on property purchases and Victoria can lay claim to imposing the highest stamp duty in this area.
To top that off, there are the other taxes, and the none-too-small matter of personal income tax. The highest marginal income tax rate in NZ is 33 per cent, while in Australia the highest marginal tax rate is 45 per cent. Ouch! But let’s not forget about that other little lick, the Medicare levy which is another 1.5 per cent on top of one’s taxable income.
Is it any wonder that Australians are buying up in NZ? Is it any wonder that the exodus of New Zealanders to Australia has stopped? April recorded the lowest rate of NZ migrants to Australia in three-and-a-half years. The “penny has dropped” people are doing it tough in Australia and the so-called miracle economy is no more than political rhetoric, because in reality, everyday people are struggling.
What is deeply troubling is that due to its nomadic nature, capital will always migrate to jurisdictions that generate the best return. It stands to reason that Auckland property prices are going through the roof as the country is attracting phenomenal overseas investment, and part of the attraction is a more benevolent taxation regime.
Australia has to engineer a more holistic and attractive taxation regime. If it doesn’t, it will lose out on foreign property
investors as they will migrate their nomadic dollars to far more investment friendly countries like NZ. And as I have always said, a diminishing taxable critical mass will end up generating less aggregate tax for the Crown.
Not surprisingly, in capital cities like Melbourne, people are renovating and not trading up. They see the trade up stamp duty as dead money, hard-earned money disappearing into the ether and lost-forever. The “renovating
set” prefer to pump that stamp duty into personal added value; they prefer to realise something tangible, something that they can feel, see and enjoy.
As a result, the Crown will increasingly miss out because stamp duties are simply too high. Unlike NZ in the case of the bourgeoisie, where the Kiwis have at their disposal another 13 cents per dollar in after tax income, the poor devil Australian with less disposable income has less room to move.
On top of that, when members of the middle class retire in NZ they qualify for the pension without the need for means testing. In Australia, meanwhile, the means test does apply, so the middle class tax payer – the tax paying “rank and file” if you will – those good law abiding, hardworking citizens that have supported the system decade upon decade, don’t qualify for the pension.
It’s a bit of a worry, don’t you think?