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Is there a case for further increasing property taxes?

By Louise Morrin

Taxes are something everyone faces almost on a daily basis. From buying goods at the supermarket to investing in Carlton property, tax is a necessary evil we have to come to terms with.

However, one group believes there's a strong case for increasing taxes within the property sector, which could save the Commonwealth government as much as $5.3billion per year. The Grattan Institute emphasised that a smaller capital gains tax discount should be offered to property buyers, which would help create a leveller – and more profitable – playing field across the nation.

Hot property: negative gearing and capital gains tax reform showed that a 50 per cent capital gains tax discount alongside negative gearing "distorts investment decisions", which in turn prevents people from getting onto the property ladder and makes the market more volatile.

Instead, the Institute argues that the capital gains tax discount should be lowered from 50 to 25 per cent, while preventing negatively geared investors from deducting losses on their investments from their labour income.

Would this scheme really work?

The Property Council of Australia has expressed its concern over this type of system, suggesting it could cause unnecessary problems for buyers of property in Carlton and other types of real estate.

Chief executive Ken Morrison explained that it would likely result in more restricted investment in housing, while forcing up rents and making fewer jobs available in the real estate sector.

"This is a sloppy proposal that has given no thought to second and third order affects – including the impact on the 1.1 million employed in the property industry and the millions of Australians who would face higher rents because of these new property taxes," Mr Morrison emphasised.

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