An everyday Aussie property investor makes a $1.7 million bigger taxation contribution to the country than another household couple of the same age and same wage but different life choices.
The nutters who accuse property investors of (somehow) getting ‘preferential tax treatment’ must be called out. Not only is it absolute nonsense, but their suggestions of what should happen are also outright vicious.
Policymakers must give serious consideration to significantly reducing regressive taxes such as capital gains tax, stamp duty and land tax.
Moreover, a national vision and policy framework that supports aspirational attitudes (a society of ‘lifters’) is essential for placing downward pressure on the $51 billion of taxpayer funds spent last year alone to pay aged pensions to 2.6 million people.
Case Study
Ian (a 45yo teacher) and Sarah (a 45yo nurse) made the life choice of being a ‘lifter’ in society.
They each earn a gross annual wage of $100,000 (^*).
In 2024, as part of a long-term goal to one day retire without being reliant on a miserly taxpayer-funded aged pension, they decided to use $80,000 of their post-tax savings to purchase an investment property worth $800,000.
Related article: Lifters and leaners
Their investment property was rented at the 2024 market rate of $560pw for 48 weeks of the financial year.
After paying all operating expenses, including loan interest at the rate of 6 percent, the property produced a net loss in each of the first 19-years (starting at $26,500 in Year 1).
Ian and Sarah absorbed each annual loss on the rental property.
As with every other owner of an income-producing asset, they declared 100 percent of their income, they claimed all expenses, and they offset the net loss from their investment against their personal wages (commonly referred to as ‘negative gearing’).
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On a year-to-year basis, the pre-tax loss of $26,476 in year 1 (scaled down to a $4,893 loss in year 17) is reduced to a more manageable, although still significant, post-tax loss of $20,500 (reducing to a loss of $4,700 in year 17).
20-years after buying the property, Ian and Sarah enter retirement and decide to sell their investment property.
The sale price of $2.56 million equates to an average annual capital growth rate of 6 percent, which is consistent with growth rates over the previous 20-years.
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The capital growth of $1.76 million (less transaction costs) triggers a capital gains tax of $344,000.
Below is a back-of-the-beer-coaster calculation of Ian and Sarah’s tax contribution over the 40-years in this scenario (20-years in the workforce, followed by 20-years of retirement).
The comparison is that of a couple of the same age and same wage, but they made different choices. The ‘leaner’ did not save, they did not invest, and they therefore depend on others.
| ‘Lifter’ (investor) |
‘Leaner’ (non-investor) |
|
| Stamp duty [state government]: | $35,000 | $0 |
| Land tax (^) [state government]: | $40,000 | $0 |
| Council rates (#) [local government]: | $72,000 | $0 |
| Income tax (**) [federal government]: | $1,152,275 | $1,243,750 |
| Capital gains tax [federal government]: | $344,000 | $0 |
| Total tax paid over 20-years | $1,643,275 | $1,243,750 |
| Taxpayer-funded pension (+) [federal government]: | $0 | ($1,152,000) |
| Total contribution to community: | $1,643,275 | ($91,750) |
Notes:
^* $100,000 wage for each person, increasing by 3% per year
^ $1,000 land tax, increasing by 6% per year
# $2,500 council rates, increasing by 3% per year
^^ $2,400 depreciation claimed in year 1, reducing by 5% per year
** includes negative gearing benefit
+ $1,650pf aged pension, increasing by 3% per year
Ian and Sarah’s choice to be a ‘lifter’ enabled them to enjoy 20-years of retirement life without putting their hand out for a taxpayer-funded pension.
When calculating the various taxes that they paid during their last 20-years in the workforce (45-65yo) followed by 20-years of retirement (65-85yo), Ian and Sarah contributed $1,735,025 more tax than the ‘leaner’.
Ian and Sarah also prevented the government having to use $800,000 worth of taxpayer funds to supply the community with the same rental property, plus the ongoing operational expenses.
More people with attitudes like Ian and Sarah means a Australia will be a better place.
So-called federal and state ‘leaders’ would be wise to review the numbers in this Case Study and implement policies that provide better support for ‘lifters’ like Ian and Sarah.
It beggars belief that there are people (mostly ‘leaners’) who frequently criticise the actions and achievements of the ‘lifters’ and advocate for lifters paying even more tax.
As prominent American philosopher, Thomas Sowell, put it so eloquently: “I have never understood why it is ‘greedy’ to want to keep the money that you’ve earned, but not greedy to want to take somebody else’s money.”
Property taxes must be slashed. Investors are contributing significantly more than their fair share.
Leaners need an attitude change. And vicious streaks need to be called out for what they are – vicious.
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