Capital gains, negative gearing and effective tax rates on income from rented houses in Australia

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Capital gains, negative gearing and effective tax rates on income from rented houses in Australia

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George Fane ()
Martin Richardson ()

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Martin Richardson

Abstract

This paper reports estimates of effective tax rates on rental property income in Australia. We consider three capital gains tax regimes - the current Australian system, that which prevailed between 1985 and 1999 and a realisation tax that attempts to mimic an accruals tax. We report estimates for each regime in two scenarios - slow anticipated real capital gains and very rapid unanticipated real capital gains. Our results suggest that negative gearing should be retained and capital gains taxation reformed to approximate an accruals tax. We argue that this desirable package would be no harder to administer than the current regime.

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Paper provided by Australian National University, Economics RSPAS in its series Departmental Working Papers with number 2004-06.

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Length: 30 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:pas:papers:2004-06

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Find related papers by JEL classification:
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-08-02 (All new papers)
NEP-URE-2004-08-02 (Urban & Real Estate Economics)

References listed on IDEAS
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Alan J. Auerbach, 1991. "Retrospective Capital Gains Taxation," NBER Working Papers 2792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Auerbach, Alan J, 1991. "Retrospective Capital Gains Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 167-78, March. [Downloadable!] (restricted)
Green, Jerry R & Sheshinski, Eytan, 1978. "Optimal Capital-Gains Taxation under Limited Information," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1143-58, December. [Downloadable!] (restricted)

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