Transfer System Tax On Housing Decisions -Myassignmenthelp.Com

Question: Discuss About The Transfer System Tax On Housing Decisions? Answer Introduction Housing plays an important role towards the ever increasing population of the ageing Australians. It forms an integral part of the economy of Australia and is a major part for the wellbeing of the individuals. Moreover, it serves as a basic need of human beings for shelter and contributes to the psychological, physical as well as emotional security. It acts as a key determinant of the individuals financial security and wealth in the old age. Housing dwellings and land attributes for more than 50 percent of the total domestic assets and two thirds of the Australian home owners (Agnew, 2013). Housing is an essential part of everyday life and also, it is considered as a major investment. The ageing population of Australia and ever growing longevity, as well as the demographic and structural changes have elevated the policies and helped in driving the decisions of the older people (Barrett et al., 2015). Objectives The purpose of this report is to discuss about the influence of transfer system and tax on housing decisions of older Australian. The overall study aims to explore those drivers of the changes in their decisions and the barriers which affect better outcomes. In addition to this, the report also provides information regarding the future public policy decisions. It has been evident from leaked sources that older Australians like to have their own homes than the younger ones and their standards of living are more dependent in nature. The quality as well as the location of the housing highly influences the physical as well as psychological health of the older segment of the society (Burke, 2012). Research Questions The purpose of this report is to; Analyze the scope of increasing the standards of living of the older Australians through availing the equity of the overall family income in order to back their incomes up at the retirement period. Analyze how the transfer system and tax influences the housing decisions of the older Australian. Provide some recommendations on how the living standards could be improved. Literature Review According to Chomik Piggott (2014), housing is an integral part for the wellbeing of the individuals, especially for the older segment of the society. For the majority of the older people, home ownerships provide independence as well as security at the time of retirement. The older Australians strongly prefer residing in their family homes, although the common notion is that such residences are comparatively bigger in size. Majority of the older Australians assets is in their family homes; however, it remains an unexplored source of income during the retirement period. On considering the influence of tax and transfer treatment of the housing policies, several factors like Age pension, ownership over renting and others come into play. In Yeandle, Krger, Casss (2012) opinion, the principal residence consist the most percentage of wealth of the aged households. Moreover, a majority of the older Australians prefer relying on Age Pension as the source of income and also some other supports from the government for accommodation and aged care. The way by which residential properties are actually treated by the transfer and tax system offers for both equity and efficiency problems. As per gerts (2013) opinion, the transfer and tax systems have the power to affect the choices of the individuals whether to relocate or remain in the current residence. Another factor, that is, drawing on the housing wealth for income also comes into play. In addition to this, a key indicating factor of the equity and efficiency is the transfer and tax system, as it relates to the decisions taken for the housing policies. Moreover, it influences the different types of residential tenures and various types of allocation of funds in a neutral manner. Australias Age Pension is the subject which incorporates assets tests as well as income. A couples or say, individuals asset and income level highly imfluences their overall eligibility of the pension limit, as well as the amount of their pension entitlements. Judd et al. (2012) mentioned that the asset ranges which are subjected to the asset tests are real estate, life interests, granny flat interests, superannuation investments, financial investments in assets, business assets and income streams. Some assets like principal residence and others are excluded from the asset tests. In addition to this, Podger, Stanton Whiteford (2014) commented that retirement village contribution is considered as an extra allowable amount which is also excluded from the asset tests. The principal home residing property is not included in to the means tests for the majority of the Australian Government transfer payments like Child Care Benefit, Parental Leave Pay and Family Tax Advanatages Part A and B (Wang, Caminada Goudswaard, 2012). Moreover, Simpson Clifton (2016) said that those individuals whose assets or level of income make them unfit for receiving full age pension entitlements are actually decreased to some percentage. According to recent researches conducted on this topic, it is evident that for the individuals who receive monthly salary beyond the threshold level, their pension payments will be reduced by fifty cents. In the year 2013, there were around 2.3 million people receiving pensions in the country of Australia, which roughly represented approximately seventy percent of the individuals aged sixty five and over. Furthermore, according to leaked information, the assets test is insignificant to those people who do not have their own homes. This reflects the lower level of the overall assets by the non home owners. On the other hand, Slack Bird (2014) mentioned in their research, that their counterparts had net assets of over $ 700,000 and the home owners had a median wealth of around $ 500,000, wit h a mortgage. However, since the past years, there have been a number of suggestions from the officials to ammend the asset tests so that it enhances the equity and efficiency of the overall system. Research Methodology A research philosophy is generally regarded as a belief in which the existing data is gathered from authentic sources, analyzed as well as used for the purpose. Research philosophies are of three types, positive, negative and interpretative. The interpretative approach is used in this research as the existing information are used and interpreted. Contradictory points are being given based on the existing sources and literature review of existing journals and theses. The overall philosophy deals with the sources, development and the nature of knowledge. In simple words, the existing materials gave an idea regarding the formation of the study. In addition to this, the approach of the research is deductive. A deductive approach is mainly concerned with developing a hypothesis, based on the existing materials, journals and theses. In the deductive approach, hypothesis has been formed from the existing theories and the empirical data has been explored. The data has been collected from the secondary sources in order to test the hypothesis. The design of the research is descriptive. Data and information are collected from several secondary sources and contradictory points are being raised in response to that. In order to support the points, a review of the literary sources is being done. However, the strategy of the research is case study analysis as several case studies has been analyzed in order to support the study. The data is collected from several secondary sources and quantitative research methodology is carried out. The overall research on the existing theories, literatures and theses has helped in identifying the applications and range of them. In addition to this, the nature of data analysis is thematic as it helped in focusing on the existing themes within the data. The method emphasized on the overall topic as well as rich description is being given of the data set. In addition to this, the thematic analysis helped in identifying the explicit and implicit ideas as well as concepts within the data. The interpretation of the wide range of data set helped in supporting the statements made in the research study. However, the overall work is being designed in order to construct the theories and research segments. The overall study has been designed in a way to construct and support the theories and identifying the existing ideas as well as concepts. This approach basically emphasizes on the overall perceptions, experiences and feelings of the existing sources and articles. On considering the ethics of the conducted study, it is worth mentioning that all the literatures are being ethically reviewed. No interpretation of the existing data or numbers is done. All the articles, journals and theses are ethically studied and citations are given. Moreover, quantitative data analysis is done with the help of existing materials and data. The age pension means test comprised many income and asset test. This basically meant that the data was applied to the samples of older Australians. The research indicated that the older couples are more likely to reside in their current home rather than moving to a new house. The most of the senior Australians prefer living in private resident and data shows that the older households strongly prefers staying in their own places rather than moving to some other area. However, few mentioned that they prefer to live in a retirement village. Findings from secondary data analysis: It has been find that the age pension test depends on the income and assets. The assets and income of an individual affects the age pension eligibility and the assets include fixed assets, granny flat interest, financial allocation, superannuation allocation of financial resources, income streams and business assets (Atalay Barrett, 2015). However, it is required to be mentioned here that certain assessments like principal residence and retirement village contribution are exempted from the assets test. It has been observed that principal residence is also excluded from the test on which the age pension is depending. 2.3 million Age pension recipients were recorded in the year 2013 and it has been observed that most of the persons were 65 years old. The persons who are not able to receive full amount of age pension, will be come under the purview of tapering (Chen, 2017). Additionally, the person who has no flat or house of their own will be excluded from the assets test. Therefore, low assets level can be found in case of age pension test (Spicer, Stavrunova, Thorp, 2016). There are certain characteristics recorded in the year 2013 regarding the age pension recipients that can be mentioned as follows: Marital status number total percentage Married/de facto 1336393 57 Single/separated/divorced/widowed 1015746 43 Home ownership Home owner 1766926 75 Non-home owner 585213 25 Payment status Maximum rate 1390152 59 Reduced rate 959775 41 Payment under test Paid under income test 614620 64 Home owner paid under assets test 334923 35 Non-home owner paid under assets test 10232 1 Income/assets test not coded 1555 0.1 Total age pension recipients 2352139 1000 Source: DSS (2014) However, certain changes have been made in the age pension assets to make it efficient enough. According to Daley, principal resident has certain equity effects and it is more suitable for the older Australians. According to Judd (2014), many Australians are facing downsizing due to age pension. According to the statement made in Henry Review, a cap need to be applied to the exception of the major abode and it will enhance the principle of fairness in the respective system. The view was supported by the National Commission of Audit. The superannuation assets have been fixed by Rice Warner for getting eligible regarding the age pension (Temple, McDonald Rice, 2017). Transfer system: In case of transfer system, it has been found that the transfer system of Australia is less progressive and it should not be imposed as a lifetime basis. Certain discriminations can be observed in Australia regarding the transfer payment (Bray, 2015). It has been observed that the richest persons are getting more transfer payment compared to the poor people. In Australia, it has been observed that the tax payers are paying their income taxes and get the benefit of transfer payment for the lifetime. This system allows the incentives of the people to be getting through work and ask to invest in a process so that it can be reinforced. A micro simulation model has been propounded by the commission to investigate the interaction in between the tax payers and the transfer payment receivers (Mller Slominski, 2016). The transfer system is an independent medium of the government and transfer payments are given by the government to the citizens and to their families. The income and assets tes t are playing an important role in case of making the payment. There are four kinds of transfer payment existed such as pensions, allowance, supplementary payments and family payments. A growth in the tax proportion can be observed if the economy of the country becomes weak. Tax Commission estimates It has been observed that the rate of the tax is inconsistent with the income and the growing nature of the income is based on rises in the wealth. There are certain kinds of transfer payments of that aged and disability payments are given to the families with low private incomes. These payments are the largest share of transfer. On the other hand, family payments symbolize the prime share of transfers to middle-income families. Additionally, much Age Pension outflow is directed to families with relatively high levels of wealth. Discussion: It has been observed in the finding parts that some of the economists held that cap is important in case of exemption of the principal residence. According to the Henry Review, for maintaining the fairness in the exemption, a cap is needed to be included in the assets test (Austen, Sharp Hodgson, 2015). The basic function of housing has changed and it has been stated that besides providing shelter, housing can be used as an asset and can be recognized as a medium that generates future return. The same notion has been supported by the Rice Warner and according to him, the superannuation assets of the singles should be $250000 and $350000 in case of the couples. On the other hand, Daley said that the people who have failed to comply with the terms and conditions of the assets test must be getting the opportunity to enter into the age pension system. There was certain density of estimation collection that could not be captured by the scrutiny made by the Commission. While the test fame d between the options such as singles and couples, it did not made any differences between regular couples, and the couples who are separated by illness, the previous category can have greater assets compared to the second group before the part annuity phases out. Productivity Commission estimates based on HILDA release 13.1, wave 10. It is a general fact that the income of the individual is getting low during the retirement age and in case to maintain the lifestyle, it is important to make a balance in between the income and expenditure. One of the acceptable income sources is the home equity (Morgan Lothian, 2017). The value of home equity is based on the growing nature of the house price. Minimum reported equity Median equity Mean equity Number of households Single age pension household 1500 350000 379339 439 Couple age pension household 5000 402174 462729 453 Source: Productivity Commission estimates based on HILDA release 13.1, wave 10. The charts are based on the assets of the individuals. The concept of age pension is also applied to the couple also. The couples are making a bridge in between the disposable income and ASFA modest. The life expectancies of the couples are different compared to the individuals and the conclusion explain that mounting the yearly increase rate of the payment leaves certain residence possessorss with optimistic justness at the end of the life of the household, but that the majority still retains optimistic equity (Fulford, 2015). Housing plays a vital role in Australian society. There are certain usefulness of housing such as it can be used as a source of shelter or people can use it to partake in community. The wealth of the nation is vehemently depending on this and works as a chief source of sequestration savings for home owners. On the other hand, the tax-transfer system influences the housing market by a variety of taxes, concessions and transfers, where the housing tenures or income levels becomes a target. These aspects of the system persuade the type of homes where the people can lead their live or the process of savings or investment and their capability to construct houses. The different aspects of housing affects the tax transfer system and provides assistance to specific classes of Australians and creates impacts on the total equity of tax transfer system (Eskander Greene, 2015). Certain conflicting views can be observed regarding the tax transfer system. Some want to identify the tax transfer system from the aspects of social benefits and some argued that housing should be taxed like the other taxable things. There is no specific submission present about the fair share of tax of the individuals. It has been observed that the people who have their own house are more gainer compared to the persons who do not have their own house. The taxation treatment of owner-occupied housing has two sides: Their asset allotment choice. The amount of tax buckle is depending on the position of the owner-occupied housing (Mller, Slominski, 2016); Their departure savings result. There are certain positive sides of the owner occupied housing as there is no housing cost after the retirement of the individual. The superannuation of the owner occupied house will help to reduce the tax deformation. There are certain conflicts taken place regarding the fair tax distribution system and it has been observed that most of the house owners are possessed high rate of income and the low income gainers do not receive that much benefit. Conclusion This section addresses the aims and objectives of the research, the limitations and the necessary recommendations relevant to the research. The main aim of this research is to point out the Influence of Transfer system and Tax on Housing decisions of older Australian. It can be stated that age pension test depends on the income and assets and therefore, the persons of high rate income gains more benefit compare to the low rated income. It is important to make a balance in between the income and expenditure in the age of retirement. On the other hand, the tax-transfer system creates impact the housing market by way of a range of taxes, concessions and transfers, which in some cases are targeted at certain accommodation tenures or income levels. There are certain other advantages present in case of tax-transfer system as it creates impact on the gross equity. Therefore, it can be stated that the transfer payment influenced the housing sector of Australia. However, there are certain differences present in between the rich and poor people and the principle of fair tax system is not maintained properly in Australia. The first limitation of this research is that the researcher could not get recent and credible information or data on the current subject and therefore, certain laxity in the updated information has been observed in this research. The second limitation regarding this paper is that insufficient budget. There are certain websites that have relevant information about the subject, but the researcher had to login and make an account to those sites. However, researcher could not do so due to money shortage. The third limitation is that the researcher could not able to do extensive research on the topic due to short time period. Therefore, the research has to be completed at a faster pace. The fourth limitation regarding the research is that the researcher got certain documents which were seemed relevant but due to illegible language, it was impossible for the researcher to take any note from those sources. 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