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Land tax: Time to shop around? · The Money Puzzle

0:06
Speaker 1: Hello and welcome to the Australian's Money Positive podcast. I'm
0:08
Speaker 1: James Kirby, the world editor at The Australian. Welcome aboard, everybody. Well,
0:13
Speaker 1: you may have dealt, if you are a property investor
0:17
Speaker 1: or want to be a property investor, you probably know
0:19
Speaker 1: that a lot of property investors seem to be a
0:20
Speaker 1: little bit obsessed with land tax and forever complaining about it.
0:26
Speaker 1: But here's the thing. It's really changing as to what
0:29
Speaker 1: land tax is and the difference it's going to make
0:32
Speaker 1: if you're a property investor. It all started about two
0:36
Speaker 1: years ago, the budget before last in Victoria, where there
0:39
Speaker 1: was a threshold for a long time. We didn't pay
0:41
Speaker 1: land tax unless the valuation was over 300,000. They cut
0:44
Speaker 1: that 50 and they brought just about everybody who ever
0:48
Speaker 1: had an investment property or a holiday home or any
0:51
Speaker 1: type of property in Victoria into the tax net. And
0:55
Speaker 1: actually hundreds of thousands of people across Victoria getting their
0:59
Speaker 1: first ever land tax bill at these weeks, which I'm
1:02
Speaker 1: sure they're delighted to see coming in the post. Now,
1:06
Speaker 1: that had an amazing impact. In the year and a
1:10
Speaker 1: half since that rule change happened in Victoria, Victoria is
1:14
Speaker 1: the weakest state in terms of price growth in Australia.
1:18
Speaker 1: It also has the least investment activity. And I'll just
1:23
Speaker 1: give you an idea, about 30% only of loans going
1:27
Speaker 1: through the system in Victoria are for investors. That would
1:31
Speaker 1: be more like 40% in other states. So what's happened?
1:35
Speaker 1: Believe it or not, the New South Wales state budget
1:39
Speaker 1: coming through this week, they jumped on the exact same pivot,
1:43
Speaker 1: if you like, and found a way to drive more
1:46
Speaker 1: tax revenue out of the land tax area. What they
1:48
Speaker 1: did at the Minsk government in New South Wales, what
1:51
Speaker 1: they've done is they've done a thing called a freeze
1:54
Speaker 1: the indexing. What that means is that it should be
1:57
Speaker 1: inflation indexed and it should rise all the time. By
2:00
Speaker 1: the way, it's a million dollars in Sydney as opposed
2:05
Speaker 1: to 50,000 in Victoria. However, having said that, by freezing
2:10
Speaker 1: it at that level and not indexing it for inflation,
2:14
Speaker 1: inflation running at about 4% a year, thousands of investors
2:17
Speaker 1: will be brought into the tax net and roughly over
2:20
Speaker 1: a billion dollars will be brought in. over four years
2:23
Speaker 1: by the men's government, but that's small change. So what's
2:25
Speaker 1: happening is basically there's a nationwide move by the states
2:31
Speaker 1: on land tax. Queensland remains sitting there. The threshold there
2:36
Speaker 1: for land tax is 600,000. It's been there for 10
2:39
Speaker 1: years or more. We have to think that that will
2:43
Speaker 1: change as well. I've got someone to talk about this
2:45
Speaker 1: this morning. She's on the ground. She's a regular on
2:47
Speaker 1: the show and it's Kitty Parker. who operates as a
2:51
Speaker 1: buyer's advocate in the Sydney market and was very happy
2:55
Speaker 1: about the Sydney market the last time I talked to her.
2:58
Speaker 1: And then she wasn't quite as happy yesterday when he
3:00
Speaker 1: had just got the news of the land tax. Tell
3:03
Speaker 1: us your reaction and what it means, Kitty.
3:07
Speaker 2: Hi there, James. Thanks for having me today. And yes,
3:11
Speaker 2: you are correct. When we chatted yesterday, I went, oh, goodness,
3:14
Speaker 2: here we go. The first thing for your listeners, obviously
3:21
Speaker 2: the land tax that's proposed to be implemented in New
3:26
Speaker 2: South Wales is slightly different to Victoria. So obviously the
3:31
Speaker 2: threshold is much higher. So it will be less likely
3:36
Speaker 2: to attract such a huge cohort of investors. There are
3:41
Speaker 2: those nuanced differences. However, Obviously, as soon as the government
3:48
Speaker 2: introduces a tax for property investors, typically what happens is
3:53
Speaker 2: the investment market reshuffles. So will it have an impact on,
4:01
Speaker 2: in particular, we're talking about Sydney. Obviously, it covers New
4:03
Speaker 2: South Wales, but predominantly Sydney. Will it have a reshuffling?
4:09
Speaker 1: Yes, it will.
4:09
Speaker 2: I believe it will. I understand as far as the
4:13
Speaker 2: data goes, there will be naysayers that suggest it will
4:17
Speaker 2: have less of an impact than one would believe, that
4:21
Speaker 2: there's only a small cohort that this land tax will affect. However,
4:28
Speaker 2: what it does is people forget there's that ripple effect.
4:33
Speaker 2: It will force a number of investors to, I believe,
4:38
Speaker 2: restructure their cash flow. And I think it will have
4:42
Speaker 2: implications in other areas that I don't think the government
4:46
Speaker 2: has even touched on as yet.
4:49
Speaker 1: Okay. And obviously, in Victoria, there was a straight correlation
4:53
Speaker 1: between the introduction of the taxes.
4:55
Speaker 2: Yeah.
4:56
Speaker 1: And investors moving out of the market and prices softening. Now,
5:00
Speaker 1: there are other reasons for that, but it's a major
5:02
Speaker 1: reason and cited as a major reason all the time
5:04
Speaker 1: by the industry. Do you think there's something of investors
5:10
Speaker 1: being boxed out around the country where if they're looking
5:13
Speaker 1: for the lowest tax regime for investing in property, the
5:18
Speaker 1: gold posts keep moving on them?
5:21
Speaker 2: That's true. And I think with the Victorian model, by
5:26
Speaker 2: setting the land tax threshold so low, they literally caught
5:31
Speaker 2: in their net nearly every property investor. The New South
5:36
Speaker 2: Wales land tax proposition sitting at currently just over a mil.
5:42
Speaker 2: It's not as dire as the Victorian situation. However, it
5:47
Speaker 2: will absolutely inexplicably force property investors in New South Wales
5:53
Speaker 2: to consider other options. Whether they fall into that cohort
5:58
Speaker 2: or not, this will absolutely.
6:02
Speaker 2: Lead to, I believe, a focus slightly away from Sydney
6:07
Speaker 2: property investment, as you rightly note, to other states that
6:12
Speaker 2: offer a little bit more of a favourable tax position.
6:16
Speaker 1: Right. If you were a rational person, you'd say, perfect
6:21
Speaker 1: opportunity for Queensland to say, hey, listen, you know, we're
6:26
Speaker 1: the state, we're the tax attractive state. But do you
6:31
Speaker 1: think That's how they're thinking. Or do you think they
6:33
Speaker 1: will actually just be next?
6:36
Speaker 2: I don't think they're necessarily thinking that way just yet.
6:42
Speaker 2: I think it's early days still. But over the next
6:45
Speaker 2: 12 to 18 months, I think inadvertently a number of
6:49
Speaker 2: property investors will look to other states to consider. And obviously,
6:55
Speaker 2: Queensland has some very good capital growth stats on the cards. So,
7:01
Speaker 2: it would make sense that there will be investors that
7:05
Speaker 2: pivot away from the Sydney market and towards states such
7:09
Speaker 2: as Queensland for the tax breaks.
7:12
Speaker 1: Right. Yeah. So you get that tax hunting, which is
7:16
Speaker 1: entirely understandable for an investor. Is there anything people can
7:20
Speaker 1: do in relation to land tax? If you are an investor,
7:25
Speaker 1: is there anything you can do to minimise it as
7:30
Speaker 1: an investor before you start? into property or before you
7:33
Speaker 1: make your next move?
7:35
Speaker 2: I think this leads into, yes, the short answer is yes.
7:38
Speaker 2: And I think this leads into, as I mentioned, that
7:41
Speaker 2: ripple effect that I think we will start to see
7:46
Speaker 2: a higher level of interest-only mortgages and potentially investors switching
7:53
Speaker 2: from principal and interest to interest-only mortgage repayments to free
7:58
Speaker 2: up a bit of cash flow, but also to redistribute, say,
8:03
Speaker 2: their debt. So, they have higher interest usually it's a
8:10
Speaker 2: higher variable interest rate. They will redistribute their debt into
8:16
Speaker 2: other avenues that are a little bit more cost effective.
8:20
Speaker 2: So I think the ripple effect will actually be quite
8:23
Speaker 2: a change in the distribution of mortgage loans. I think
8:31
Speaker 2: that will be one of the A savvy investor is
8:36
Speaker 2: wanting to maximize their returns, minimize their tax, and something
8:42
Speaker 2: like this land tax. I think there'll be a lot
8:46
Speaker 2: of smart folk out there that will look into how
8:50
Speaker 2: to circumvent paying this tax via tax. If I have
8:56
Speaker 2: to pay this tax, where can I redistribute to pay
9:00
Speaker 2: less tax elsewhere? And I think that will be with
9:05
Speaker 2: mortgage loans and the type of loan people utilize. And
9:10
Speaker 2: these are the things that I don't think the government
9:12
Speaker 2: or a lot of folks have considered just yet.
9:18
Speaker 1: This is an unlikely time to go interest only, isn't it?
9:21
Speaker 1: Because we were told that the rates are at their peak.
9:26
Speaker 2: This is true. However, without wanting to get into the nitty-gritty,
9:34
Speaker 2: obviously if you are somebody that will fall into the
9:38
Speaker 2: cohort of this land tax and having to pay this
9:42
Speaker 2: land tax, you will be speaking with your accountant or
9:46
Speaker 2: financial advisor and probably looking at ways to minimize tax
9:52
Speaker 2: and going interest only and the– situation that you can
9:58
Speaker 2: set yourself up with with that will free up some
10:01
Speaker 2: cash flow and allow you to often offset those interest
10:06
Speaker 2: charges against your personal income tax, and even help you
10:13
Speaker 2: save money on your principal place of residence and your
10:18
Speaker 2: debt towards that. So there are high-level ways and means
10:22
Speaker 2: that you can restructure your debt in this situation.
10:26
Speaker 1: Yeah.
10:27
Speaker 2: To help soften the blow of this?
10:31
Speaker 1: You got new taxes coming in one door, so you
10:34
Speaker 1: can get some new offsets, basically, by getting more tax-deductible debt,
10:39
Speaker 1: or at least restructuring existing debt that more of it
10:42
Speaker 1: is tax-deductible. Have I got that more or less right
10:45
Speaker 1: in the chain of things? Okay, yeah, very interesting. Yeah, well,
10:49
Speaker 1: it's definitely beyond doubt now that whether it's coordinated or
10:53
Speaker 1: not doesn't really matter, but the major states already... Victoria
10:58
Speaker 1: and New South Wales have basically tightened up and moved
11:04
Speaker 1: to make more money out of land tax, which is
11:07
Speaker 1: already a controversial tax in the eyes of many investors
11:12
Speaker 1: for a variety of reasons. Okay. Now, while we might
11:15
Speaker 1: do a short break, I want to talk, Kitty, about
11:17
Speaker 1: a couple of issues that have come up in questions
11:20
Speaker 1: in recent times. One is about whether, for instance, you
11:26
Speaker 1: should ever buy with friends or mates. But it comes
11:30
Speaker 1: up regularly as an issue and I want to talk
11:32
Speaker 1: to her about that and a few other things in
11:34
Speaker 1: a moment. Hello, welcome back to the Australian's Money Puzzle Podcast.
11:39
Speaker 1: I'm James Kirby. It's Tuesday, we're talking property. I'm talking
11:42
Speaker 1: to Kitty Parker, buyer's advocate in Sydney, regular friend of
11:46
Speaker 1: the show. And she is with us this morning. Tell me,
11:50
Speaker 1: we get a lot of people... asking because of prices,
11:54
Speaker 1: because of how difficult it is now, it would seem
11:57
Speaker 1: to make a lot of sense to go in with
11:59
Speaker 1: another person to buy a property. Have you come upon us?
12:04
Speaker 1: Have you ever worked as an advocate for what might
12:08
Speaker 1: be effectively a loose partnership?
12:12
Speaker 2: Yes, I actually have, James, I have. Probably not as
12:18
Speaker 2: loose as just some friends that have recently met and
12:22
Speaker 2: they want to get into the property market. But you
12:26
Speaker 2: are absolutely correct with property prices, especially in Sydney, where
12:31
Speaker 2: they're sitting at the moment. Folks are really trying to
12:35
Speaker 2: think of innovative ways to get into the markets. One
12:39
Speaker 2: of those ways is absolutely purchasing with, say, a trusted
12:43
Speaker 2: co-worker or a trusted friend. I recently helped, ironically, this
12:51
Speaker 2: is probably the biggest one I've done, five siblings, five
12:56
Speaker 2: people joined forces. Because each of them had such low
13:00
Speaker 2: borrowing capacity but wanted to get into the Sydney market.
13:05
Speaker 2: And so there were literally five siblings joining forces just
13:09
Speaker 2: to try and get into Sydney. But I think as
13:13
Speaker 2: housing affordability moves further and further away from the average Aussie,
13:21
Speaker 2: especially in Sydney... More and more, there will be people
13:25
Speaker 2: joining forces with friends or co-workers just to be able
13:30
Speaker 2: to get a footprint in the Sydney market.
13:33
Speaker 1: Your initial response to that, did you say, oh no,
13:35
Speaker 1: this is going to be trouble?
13:38
Speaker 2: Initially, intuitively, of course, you think this is going to
13:43
Speaker 2: be trouble. But the handful of times I've undertaken a
13:47
Speaker 2: buy for friends, I do see in the background they
13:51
Speaker 2: get a legal– besides the obvious purchasing contract and that situation–
13:57
Speaker 2: They go to a solicitor and they get a legal
14:00
Speaker 2: contract written up between them. So they do usually, or
14:06
Speaker 2: I hope most of them will have a legal contract
14:10
Speaker 2: drafted to lock things in with a bit of a
14:14
Speaker 2: watertight framework. I would certainly suggest that as buying property,
14:21
Speaker 2: especially in Sydney, you know, it's a substantial purchase. You'd
14:25
Speaker 2: not want to have a mate one day that you're
14:28
Speaker 2: having a beer with and you decide to buy property with.
14:32
Speaker 2: And a few months later, that all turns south and
14:36
Speaker 2: you're committed to a mortgage or whatnot at quite a
14:40
Speaker 2: substantial debt with someone that you don't feel favorably for.
14:46
Speaker 1: So I imagine it's straightforward enough to buy. and you
14:55
Speaker 1: divide up the equity and who owns what, but it's
14:58
Speaker 1: the other end when you go to sell, if someone
15:00
Speaker 1: wants to sell, if someone doesn't want to sell, do
15:03
Speaker 1: you know, can you remember with the people you worked
15:05
Speaker 1: with or the five siblings, did they have any sort
15:07
Speaker 1: of exit clause?
15:10
Speaker 2: They didn't, to be fair. And I can even say
15:13
Speaker 2: even over the last number of years, the number of times,
15:18
Speaker 2: not my clients, but when we're purchasing a property, the
15:22
Speaker 2: actual vendors, I see more often than I would like
15:27
Speaker 2: to see vendors who are either siblings or family members
15:33
Speaker 2: or whatnot squabbling over coming to an agreement to sell property.
15:39
Speaker 2: And so I think it really does disadvantage at that
15:43
Speaker 2: sales end if all parties aren't on the same page.
15:49
Speaker 2: But it's also while holding the property, because obviously there's
15:53
Speaker 2: costs to maintain a property. And if you're not on
15:56
Speaker 2: the same page with your fellow owner... Even things like financially,
16:03
Speaker 2: if one folk, you know, comes across hard times with
16:08
Speaker 2: work and they may not be able to pay, you know,
16:12
Speaker 2: certain council rates or even things like that. And then
16:15
Speaker 2: if that debt falls on one other party because it
16:18
Speaker 2: has to be paid, that can cause friction.
16:23
Speaker 1: Of course. Yeah. And what about when you're talking about
16:26
Speaker 1: when people are selling and there's a I imagine typically
16:29
Speaker 1: this might happen with an inherited property, and the brother
16:32
Speaker 1: and sister get the property. What happens? Are they invariably
16:38
Speaker 1: squabbling over what is an acceptable amount to sell at?
16:43
Speaker 2: Usually it's price. Sometimes even the process. It can really
16:48
Speaker 2: come down to one party saying, I absolutely want to
16:52
Speaker 2: take this property to auction. Oh, yeah. other parties saying, gee,
16:56
Speaker 2: we've just received a fantastic free option offer. We would
17:00
Speaker 2: really like to pull the trigger and just say yes. Obviously,
17:05
Speaker 2: if you're a buyer, you're not going to wait around
17:08
Speaker 2: for days or a week for these two owners to
17:13
Speaker 2: squabble it out and come to a resolution. So time
17:17
Speaker 2: is very much of the essence when both buying and
17:20
Speaker 2: selling property And I can say I've picked up some
17:24
Speaker 2: very good bargains for clients because the seller has been squabbling.
17:29
Speaker 2: The parties have been squabbling.
17:31
Speaker 1: Right.
17:32
Speaker 2: And so it's almost like work to their disadvantage and
17:37
Speaker 2: politely utilize that psychologically to drive a hard bargain.
17:43
Speaker 1: Right, because they're not in an optimum negotiating position. Yeah, right. Okay.
17:48
Speaker 1: Tell me about the five siblings. Did they buy something?
17:51
Speaker 2: They did. Yes, they did.
17:53
Speaker 1: Is it an investment property or are they living there?
17:59
Speaker 2: One, I've done it twice now. One, it was an
18:02
Speaker 2: investment property and the other was actually planning on being
18:06
Speaker 2: an investment property that ended up being the principal place
18:11
Speaker 2: of residence for one of the family members. But I
18:15
Speaker 2: think you have to have such a close and very
18:21
Speaker 2: open relationship within that family to be able to adequately
18:27
Speaker 2: undertake that task and maintain ownership over typically the medium
18:34
Speaker 2: to long term that you would hold a property. It's
18:38
Speaker 2: not a one or two year framework. You're looking at
18:42
Speaker 2: holding that property for, I would say, at least five, seven,
18:46
Speaker 2: ten years. Want to hope that everyone gets along and
18:50
Speaker 2: that lifestyle changes with those family members don't inadvertently cause
18:56
Speaker 2: a wedge between Right. In the process.
19:00
Speaker 1: Yeah. Very interesting. Obviously, it's the thing that comes up.
19:02
Speaker 1: I imagine, in principle, it's a good idea with some people.
19:07
Speaker 1: As you say, you need trust. You need constant communication.
19:10
Speaker 1: And I think you need a plan, not just to buy,
19:13
Speaker 1: but you need a plan to manage it, as you say,
19:15
Speaker 1: as the years go by. And you probably need an
19:18
Speaker 1: exit plan, too. I remember dealing with the biggest joint
19:22
Speaker 1: venture that had ever been done at the time. between
19:27
Speaker 1: a bank and an IT company. I was the head
19:31
Speaker 1: of one of the top four banks and one of
19:33
Speaker 1: the major IT companies in the world. And I was
19:35
Speaker 1: with this banker. And I remember he said, and I'll
19:38
Speaker 1: never forget, I was asking him all these questions about
19:40
Speaker 1: the joint venture. And he said, listen, the most important
19:41
Speaker 1: thing in the joint venture is knowing how to get out.
19:45
Speaker 1: I kept that in mind forever. And this applies whether
19:48
Speaker 1: there's three mates buying a house or a bank is
19:51
Speaker 1: doing a 10-year IT outsourcing deal for a billion dollars.
19:54
Speaker 1: We'll take a short break. We'll be back in a
19:56
Speaker 1: moment with some questions. Hello, welcome back to the Australian's
20:00
Speaker 1: Money Puzzle Podcast. I'm James Kirby. We're talking all things
20:05
Speaker 1: property and investments. Very interesting, the first part of the
20:09
Speaker 1: show there in terms of the news, a very newsy
20:12
Speaker 1: week in property because it's becoming apparent this week and
20:15
Speaker 1: I think this year that the way it goes with
20:18
Speaker 1: the national economy, economy, national economics, is that the states,
20:22
Speaker 1: many of them, particularly Victoria, are in debt, higher levels
20:25
Speaker 1: of debt than they've had for many years. They have
20:27
Speaker 1: to find new sources of revenue. One of the few
20:30
Speaker 1: sources of revenue they can get at is their own
20:33
Speaker 1: property market. That's why we have stamp duty. And that's
20:36
Speaker 1: why it's very hard to shift any of these things.
20:38
Speaker 1: And land tax. And of course, we're now seeing two
20:43
Speaker 1: state governments, the two big ones, Victoria and New South Wales,
20:45
Speaker 1: making moves on land tax. It's going to become a
20:48
Speaker 1: real issue this year for an investor. You need to
20:50
Speaker 1: be across that, what's happening in your state on land
20:52
Speaker 1: tax and the differences in the different states in land
20:55
Speaker 1: tax because they are now enormous, enormous range of land tax.
21:02
Speaker 1: Both the tax and the net, if you like, which
21:06
Speaker 1: is particularly deep in Victoria. Basically, if you own anything,
21:08
Speaker 1: you want to pay land tax. In Sydney, well, you
21:11
Speaker 1: want anything over a million. I think it's 1.075, to
21:15
Speaker 1: be precise. I only know this because I was writing
21:17
Speaker 1: about it. during the week. Okay, now some questions and comments. Billy,
21:23
Speaker 1: you mentioned in Victoria, property prices have not grown as
21:25
Speaker 1: strongly as they have in other states. And you also
21:28
Speaker 1: suggest that this is due to a new land tax regime.
21:31
Speaker 1: And I agree, this may be the cause, but it's
21:34
Speaker 1: also valid to say it's a positive for young families
21:37
Speaker 1: who are trying to buy their first home. It seems
21:39
Speaker 1: to me that one of the intentional outcomes of this
21:41
Speaker 1: new tax is to discourage investors from bidding property prices
21:44
Speaker 1: ever higher. Therefore, this land tax may be helping to
21:48
Speaker 1: improve housing affordability in Victoria? Yeah, if the job was
21:55
Speaker 1: to suppress prices, it's done that. That's the slowest growing
21:59
Speaker 1: state in the land. And if you were a first
22:01
Speaker 1: home buyer, then you'd be happy with that. Yes, take
22:04
Speaker 1: that point on board, Billy. I think that's about all
22:08
Speaker 1: we could say on that one. Is there anything you
22:09
Speaker 1: want to add to that, Kitty?
22:11
Speaker 2: I would probably say that it's a misnomer that people
22:17
Speaker 2: believe In my experience, those that are the most likely
22:25
Speaker 2: to drive up property prices are owner-occupiers as they have
22:29
Speaker 2: a stronger emotional investment in property. Investors actually tend to
22:34
Speaker 2: be quite level-headed and very price-conscious.
22:37
Speaker 1: So I.
22:39
Speaker 2: Understand why the layperson may feel that investors negatively impact
22:47
Speaker 2: the market with regard to pricing. I would say in
22:50
Speaker 2: my experience, it's owner-occupiers that drive the prices far more
22:56
Speaker 2: substantially than investors.
22:58
Speaker 1: Have you any data to back that? I wonder, has
23:01
Speaker 1: anyone ever done a doctorate on that one in the
23:03
Speaker 1: business schools? Maybe they should.
23:06
Speaker 2: Absolutely. I wish I had data on hand, but I
23:10
Speaker 2: would say it's just my own– undertakings and what I
23:17
Speaker 2: experience on the ground every single day.
23:20
Speaker 1: All the time. Yeah.
23:24
Speaker 2: Um, actually at one interesting point would be the post
23:27
Speaker 2: COVID price surge. That was a time where we had
23:32
Speaker 2: border closures and we had very low investor activity and
23:37
Speaker 2: those prices went through the roof. And that was very
23:40
Speaker 2: much led by first home buyers and, um, own occupiers. Very,
23:46
Speaker 2: very little investor activity.
23:49
Speaker 1: Home space as such. OK, yeah, very interesting. All right.
23:52
Speaker 1: And if anyone has anything to add to that, let
23:54
Speaker 1: us know. All right. Melanie says, are foreign investors pushing
23:58
Speaker 1: up prices in the market or not? I read about
24:01
Speaker 1: this all the time. What are the numbers? OK, Melanie,
24:04
Speaker 1: the numbers are strange. The numbers, I won't say they're
24:07
Speaker 1: all over the place. The headline number is that foreign
24:09
Speaker 1: investors are not particularly important. in the market. That is,
24:12
Speaker 1: they represent only 1% or 2% of prices. You wonder
24:16
Speaker 1: sometimes what people really mean when they say foreign investors.
24:21
Speaker 1: But strictly, as to that someone sitting offshore and buying
24:23
Speaker 1: a house here domestically, it's quite a small number. However,
24:29
Speaker 1: you get some really strange variations. In the first three
24:32
Speaker 1: months this year, according to National Australia Bank, in one market, Victoria,
24:37
Speaker 1: the number of new homes In the city of Melbourne,
24:41
Speaker 1: in the suburbs, newly built homes, there was more foreign
24:45
Speaker 1: buyers of those homes than there were investors. Domestic investors,
24:49
Speaker 1: that's extraordinary. But there's two things going on there, right?
24:51
Speaker 1: You have the exceptional immigration attraction of Victoria and you
24:56
Speaker 1: have the exceptional turnoff of Victoria for the domestic investor
25:02
Speaker 1: who's got the highest taxes. So those two things explain that.
25:05
Speaker 1: So a shifting situation there, Melanie. But very broadly, on
25:11
Speaker 1: a headline level nationally, in terms of big volumes, they're
25:15
Speaker 1: not particularly important. But then there are quite curious variations
25:19
Speaker 1: to that. And one of them was in Victoria this year.
25:24
Speaker 1: Have you acted for foreign investor kitty in buying in Sydney?
25:28
Speaker 1: Or do you come up against advocates that have it
25:31
Speaker 1: as part of their business?
25:34
Speaker 2: Good question, James. I do manage a lot of foreign
25:39
Speaker 2: investor purchases. But proportionally within my business, it's a very
25:45
Speaker 2: low number. I'm sure there are some other buyers advocates
25:49
Speaker 2: where that is their bread and butter. Like that is
25:52
Speaker 2: particularly their cohort. But I agree with you. And with
25:58
Speaker 2: regard to the data, it very much depends where you look.
26:02
Speaker 2: As you mentioned, there's a bit of a spread of data.
26:04
Speaker 2: The numbers jump around. The one thing that is very, very...
26:10
Speaker 2: common between any data that you look at with regard
26:13
Speaker 2: to this is the numbers are reasonably low overall it's
26:18
Speaker 2: definitely not a case and again it's i understand there's
26:23
Speaker 2: a a sentiment in in uh in this country that
26:29
Speaker 2: the foreign investors are coming along and they're buying out
26:32
Speaker 2: all the property and that this is why there's no
26:35
Speaker 2: property here for Aussies or this is why prices are
26:39
Speaker 2: going up. And it really is not the case. There's
26:43
Speaker 2: lots of hurdles and regulations that foreign investors must jump
26:49
Speaker 2: through as well as the additional costs with regard to
26:53
Speaker 2: stamp duty, et cetera. There are a lot of hurdles
26:56
Speaker 2: foreign investors must jump through to purchase property here. So
27:00
Speaker 2: it's not as widespread and voluminous as I think Melanie
27:06
Speaker 2: may feel it is.
27:07
Speaker 1: Okay, terrific. And thank you for that answer. Very good. Okay.
27:11
Speaker 1: Final question is not hard property investment, but it does
27:15
Speaker 1: involve your home. And it's from Clint. And Clint asks
27:21
Speaker 1: a quick question relating to claims on vehicle expenses when
27:27
Speaker 1: working between your home property and elsewhere. Many people now
27:30
Speaker 1: working from home. I'm wondering if it's a case to
27:33
Speaker 1: attribute all the kilometers driven between home and work in
27:36
Speaker 1: a situation where someone works a few hours in the morning,
27:38
Speaker 1: drives to the office and returns home to work for
27:40
Speaker 1: a few more hours. Clint, you are absolutely on the money,
27:43
Speaker 1: on the zeitgeist there. OK, everyone's working from home now.
27:46
Speaker 1: We know that. I certainly know that this morning in
27:49
Speaker 1: our office downstairs. It's one of those days where you say, gosh,
27:53
Speaker 1: the working from home thing is still alive and kicking.
27:56
Speaker 1: And you say, well, if I'm really working from home
27:59
Speaker 1: and I just went in for an hour, then surely
28:03
Speaker 1: it's an expense for me, the person who works from home,
28:08
Speaker 1: that I drove in and out to the office. And
28:10
Speaker 1: you would like to think that that's how it works.
28:12
Speaker 1: And as always, our friends at the ATO make sure,
28:14
Speaker 1: they make sure that that's not how it works. Sorry
28:19
Speaker 1: to say. I've asked James Gerard, a friend of the show,
28:22
Speaker 1: who you know, I'm sure Kitty, and I think Kitty
28:24
Speaker 1: was introduced to the show through James Gerard. And he
28:28
Speaker 1: in turn went to an accountant, Tim Ricardo. So thorough
28:32
Speaker 1: research here, folks. And here's the thing. I could read
28:35
Speaker 1: the whole thing off you, but basically, if there's an
28:38
Speaker 1: office in the city, then you can claim it. So
28:43
Speaker 1: if you work for BHP and BHP have an office
28:47
Speaker 1: in Melbourne, then you can claim it because you could
28:51
Speaker 1: have gone in to, you could work in their office
28:55
Speaker 1: in there. So I think the only chance in terms
28:59
Speaker 1: of claiming that work from home is where the employer
29:01
Speaker 1: does not provide any position or facility for you to
29:04
Speaker 1: work in the city. And of course they don't have
29:06
Speaker 1: to do much to do that these days. All they
29:08
Speaker 1: have to do is provide a desk somewhere So, I'm afraid,
29:11
Speaker 1: just to clarify, you can claim a tax deduction for
29:14
Speaker 1: the cost of transport on trips to perform your work duties.
29:18
Speaker 1: Attend work-related conferences are to go between two or more
29:22
Speaker 1: separate places of employment, such as if you have more
29:26
Speaker 1: than one job. But guess what? 99 times out of 100,
29:32
Speaker 1: you can't because they always say no. And you have
29:34
Speaker 1: to be very, very clever to find a place. And
29:36
Speaker 1: I think it's about time they review that because really
29:38
Speaker 1: the world has changed, but... the ATO isn't going to
29:41
Speaker 1: do it anytime soon. That's about it, I'm afraid, for today.
29:46
Speaker 1: Sorry to end on such an unfortunate note. You can't
29:50
Speaker 1: claim dropping into the office when you are from home
29:52
Speaker 1: as a travel expense. You can watch out for land tax.
29:56
Speaker 1: You should know what's going on. The goalposts are changing.
30:00
Speaker 1: They really are. And they're making interstate competition quite interesting.
30:04
Speaker 1: As Kitty was saying earlier, just now Queensland is sitting
30:09
Speaker 1: there doing pretty well anyway. And if they were of
30:15
Speaker 1: that disposition, they could make themselves the attractive tax state
30:17
Speaker 1: for property investors. We don't know if they'll do that.
30:19
Speaker 1: They've got an election, so they're not going to do
30:21
Speaker 1: anything anytime soon. But we'll see. Hey, thank you very
30:24
Speaker 1: much for today, Kitty.
30:26
Speaker 2: You're welcome. Thanks for having me, James.
30:28
Speaker 1: Your moving house, which is always hell. It's a bit messy.
30:32
Speaker 2: I know this sounds not great. There's a little bit
30:35
Speaker 2: of chaos here.
30:37
Speaker 1: You did very well to even concentrate. Are you moving
30:39
Speaker 1: out today or moving in today? Where are you?
30:41
Speaker 2: Moving out.
30:42
Speaker 1: Moving out. Well, best of luck with it all, I'm sure.
30:46
Speaker 1: I'm sure it'll all work out and be a greatly,
30:49
Speaker 1: a prosperous move, I'm sure, in the fullness of time.
30:52
Speaker 1: Best of luck with it.
30:53
Speaker 2: Thank you so much.
30:55
Speaker 1: Thanks, Kitty, and talk to you soon. Okay, folks, let's
30:57
Speaker 1: have some more questions. Keep those questions rolling. You know
31:00
Speaker 1: the email, themoneypuzzle at theaustralian.com.au. Talk to you soon.