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Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 07/04/2004

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Interview with John Laws
2UE
Wednesday, 7 April 2004
10.20 am

SUBJECTS: Stamp duty, New South Wales taxes, home ownership

LAWS:

Peter good morning.

TREASURER:

Good morning to you John.

LAWS:

What do you make of all of this, what is the justification for a tax on the sale of investment properties for gods sake?

TREASURER:

Well, it is the first time we have seen such a thing in Australia, whereby you are not only being taxed when you buy now, but you are being taxed when you sell. And it is at 2 per cent, which is on the full value of the property which is very step, actually…

LAWS:

You bet it is.

TREASURER:

…and I would think that if you are buying property and you had a choice between investing in New South Wales or another State, I think that would be a pretty strong motivation to go to another State.

LAWS:

Exactly, and what good is that going to do New South Wales. I have had, I think four callers, maybe more this morning under the age of 35 who have investment properties. Now, if they thought they were going to hurt the rich people they were wrong, they are hurting the battlers, the very people that a socialist government should be helping.

TREASURER:

Well, a lot of people do invest in property as an alternative to investing in shares. It is one of the areas in which there have been good returns over recent years, and it is quite widespread in Australia, quite widespread, investment in property…

LAWS:

And with young people.

TREASURER:

…and now of course you have just got a new tax for your pleasure.

LAWS:

Well, I imagine people will be going back and looking at shares more closely, or going and looking at other States.

TREASURER:

Well, other States will obviously try and use this to their benefit because this is a New South Wales specific new tax, and there could be other investments that people will start looking at. That is what happens, if you pluck the golden goose with too many taxes, people move to other investments.

LAWS:

They will, and really is it, I don’t think too many taxes are fair, but is it fair to impose a sales levy, given that you have offered a tax break on capital gains?

TREASURER:

Well, this is the thing you see, the Commonwealth Government cut Capital Gains Tax, that is we were trying to reduce the tax that people paid on investments and that was to encourage them to save, long term if you encourage them to save, and they have investments that is going to be good for the ageing of the population. Along comes the New South Wales Government, and tries to claw some of that back with a new tax. The thing that you should bear in mind here is that nobody told the people of New South Wales before the last State election that if Mr Carr was going to be re-elected, there would be some new taxes. And I have always said that when New South Wales got itself into trouble it was because its financial management wasn’t as good as it should have been, they were forecasting deficits, and if you don’t have good financial management, you get new taxes, and there is a lesson for Mr Latham, I’ll tell you.

LAWS:

Yes, well, they have dug a big hole in New South Wales, I mean the money that they got from land tax was extraordinary because as you know, property prices went up, property prices in Sydney became absolutely ridiculous and probably still are, so they made a bundle of money out of that, but we don’t even know where that money has gone.

TREASURER:

No, he didn’t successfully manage it, and a lot of it went into public sector wage claims as we know, and then as the market began to cool, New South Wales found themselves having lived on the hog, in financial trouble, and the consequence of all of that, is after all of those golden years of property prices going up, you are going to get lumbered with some new taxes for your trouble.

LAWS:

Well, this obviously will add the Mark Latham’s challenge to win voters in New South Wales, won’t it?

TREASURER:

I think this is a big lesson here, I have said this John, Mr Latham will be, because of his spending promises, will be in a position if he gets elected to be increasing taxes. We know for example, he has got a proposed payroll tax on business, which will be bad for jobs, and here is a lesson as to what happens if people can’t get good financial management, at the end of the day, the taxpayers will get new taxes, and you have seen it happen with Mr Carr, and hear warning signs, flashing neon signs should be going off all over Mr Latham at the moment. This is an example as to what could happen if Mr Latham becomes Prime Minister.

LAWS:

The thing I don’t understand is that it is affecting the very people they should protect. I mean, despite the New South Wales Government’s obsession with property taxes, and it would appear it is an obsession, there is no provision for one piece of public housing, not one extra piece of public housing.

TREASURER:

No, well, it really is just a tax, a new tax area basically to go into revenues, and then what they have done, is they seem to have switched spending in various of their portfolios, but what they certainly have not restrained spending, overall they have not restrained spending, in fact this announcement is for increased spending and increased revenue.

LAWS:

I know, it is amazing, to me it is quite extraordinary, I was quite shocked by it, because I think they haven’t aimed straight, I think they thought they were going to hurt the rich people if they were going to hurt anybody, but they are forgetting that Australians are very enterprising people, particularly young Australians, and because you are only 32 or 33, I have spoken to so many this morning, they are out buying investment properties, they are not going to want to do it now.

TREASURER:

No, well they are trying to save, they are trying to advance themselves in life, and property has been a good investment…

LAWS:

I think you should be rewarded for achievement, not punished.

TREASURER:

…but there you go, if you actually make a gain now, you are slugged with a tax for the privilege of selling your own property.

LAWS:

Yes, and as you say, 2 per cent, you look at the value of property, and of course the other thing is that they are in bed with the valuer general aren’t they.

TREASURER:

Well, it is, as I understand, it is 2 per cent, not on the gain, but on the total value…

LAWS:

Yes, on the total value of the property.

TREASURER:

…so you have paid a tax on the total value of the property when you have bought it, you will pay the land tax whilst you hold it, and then you will pay a tax on the total value of the property when you sell it.

LAWS:

And there are 250 thousand to a quarter of a million people are suddenly going to be paying land tax that they have never paid before.

TREASURER:

Well, this is the other thing of course, people would have bought these properties assuming that the current tax regime would apply. But whilst they are holding them, they are told that a new tax will come in if they intend to sell. You would have gone in, many of these people would have gone in to these investments, and they would have outlined all of the taxes, they would have know about the taxes on the way in, and the taxes on land tax, but when they bought their properties, they certainly had no inclination that a new tax would come in which would apply to the sale, so they have been caught with this asset which will now become the subject, whilst they are holding it, of a new tax if they ever get rid of it.

LAWS:

Well, I mean you are very capable of double dipping, but we won’t go into that, but what they are doing here is triple dipping.

TREASURER:

Well, it is, it does make property in New South Wales a very highly taxed commodity and as I said earlier, investors may in fact look outside the State of New South Wales as a consequence.

LAWS:

Yes, well, I would think that land developers in Queensland in particular, will be salivating over this. OK, good to talk to you Peter Costello.

TREASURER:

All the best.