Property Developers got special low income tax rate

[Brendan Burgess]

It's not so long ago that there was a huge outcry against developers for "hoarding land banks" when there was a shortage of housing.

It's very difficult to get tax incentives and taxation generally right.

Brendan

 

[Joe_90]

I think that the thread title should be edited to say

"Property Developers pay Capital Gains Tax at 20% like everyone else"

This is not the case.

A special rate of Income Tax was introduced in 1999 to increase supply of development land it was available to anyone dealing in residential development land. It does not apply to land for commercial development.

It has nothing to do with Capital Gains Tax. If someone purchases land with the intention of selling it is subject to Income Tax whether that person is Joe Bloggs or Joe Bloggs Developer.

Capital gains tax was 40% up to 3 Dec 1997 when it was reduced to 20%. Perhaps there was merit in the special rate when it was first introduced but it should have been abolished when the building boom started.

There was a sustained effort to increase the tax take by reducing the rate.

There was also an anomly in the system that a gain was taxed at 20% but a loss incurred was deductable against total income at 46% in 2008.

There is now an 80% tax on profits on land subject to rezoning.