Property vs Shares is a lasting debate. But given Australia’s love with real estate the debate seems to be long won. But should it?
Property vs Shares
In this episode Bob Deutsch, Senior Tax Counsel of The Tax Institute, looks at property vs shares from a taxing point of view. Here is what we learned.
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Returns
Bob Deutsch started his quest after reading the ‘Guide to Investing Successfully’ by Michael Yardley.
The book suggests on page 220 that the returns for Australian residential property (7.4%) are better than for Australian shares (5.5%) over the 10 year period to December 2015. Over the 25 year period to December 2015, both returns are around 10% per annum. All figures are pre-tax returns.
Tax Implications
But how do property and shares compare post-tax? Are both returns treated the same for tax purposes?
Shares have the advantage that there is no stamp duty or land tax payable on the purchase of shares in a public listed company.
The franking of dividends applies to shares by not to property, but since company tax is basically just a withholding tax anyway with company profits being really taxed at shareholder level, the franking credits don’t make a difference in this comparison.
There are more generous deductions for property, but you need to incur these expenses to receive the deduction. And some deductions are being wound back anyway.
But either way please listen to this episode with Bob Deutsch. He outlines all this much better than we ever could.
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Disclaimer: Tax Talks does not provide financial or tax advice. This applies to these show notes as well as the actual podcast interview. All information on Tax Talks is provided for entertainment purposes only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.