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Sent: 25-08-2009 10:27:01
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Slogans versus AnalysisEmail Marketing Business Opportunity - Helen BairstowThe Easiest way to do a Client NewsletterWhat's a Blog without Comments?Why Warren Buffett won't buy a NewspaperStates rights, CGT on houses and SMSFs safe
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States rights, CGT on houses and SMSFs safe

Click here to buy - A How To Book of SMSF's by Tony Negline
Tony Negline

This week I discuss three topics:

States Rights

Last week I mentioned an article that appeared in The Spectator about the recent Pape decision and said that I would return to the issue of our State Governments.

Our three tiers of government often appears quite silly and it's quite common to hear people argue quite passionately that the States need to be done away with primarily because they are seen as an unnecessary extravagance.

There is no doubt that three governmental layers do allow one layer of government to escape responsibility for inaction or incompetence by blaming "them over there".

No doubt one reason this blame shifting works is because many people don't seem to know what each layer of government is actually responsible for. Part of the reason for this is our collective lack of knowledge about our Constitutional arrangements. Also the fact the Commonwealth raises most of their revenue helps the State authorities absolve themselves of responsibility and vice versa in relation to the Commonwealth.

Personally I think State Governments make a lot of sense. It's better to have government decisions closer not further away from the populace. It is sheer folly to think that centralised decision-making will somehow lead to a better system than what State Governments tend to achieve.

What doesn't make sense is the less than impressive performance of State Government operations.

All that said many years ago I saw a QCs opinion that the super laws were probably unconstitutional because of the powers relied on to control the behaviour of trusts. The High Court has not looked at our current superannuation laws. Perhaps post-Paper they might be asked to look at the constitutionality of the super laws.

This QCs opinion is only that - one opinion but imagine the feathers flying everywhere if our super rules were deemed invalid by the High Courts!

CGT on houses

Last Friday, The Australian carried an article on the issue of the home-owning CGT concessions. It was pointed out that CGT on profits on family homes would make that part of our tax system close to the US Internal Revenue System code. The article said that it doesn't make sense for us to follow the US lead on this tax issue given that the US is just emerging from a housing price bubble which caused so many problems.

But the tax on US family homes and the problems caused by the housing price bubble are not related and no one should pretend otherwise.

Those of you interested in understanding the causes of the US house price bubble should read a book written by Thomas Sowell called "The Housing Boom and Bust".

In The Weekend Australian a letter written by the President of the Real Estate Institute of Australia appeared about the home CGT concessions. "We pay for our homes and mortgages with taxed dollars and we should all be entitled to reap the benefits of any gain untaxed."

"Hear, hear!!"

I hope, for consistency sake, the same rule will apply to any investment made with after-tax dollars. Such a policy would see the end of CGT for almost everything.

SMSFs safe?

Also on Friday the Minister responsible for superannuation is quoted as saying that he is not worried about the growth of Self Managed Super Funds. "... I support choice is super. Some self-managed super funds will do well, some won't. The Cooper review will look at self-managed funds and whether any reforms are needed, such as the education of trustees of self-managed funds. It's all about choice. It's not something I have a philosophical objection to. If that's what people want to do to minimise fees and have more control [over their superannuation], it's fine with me."

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