Tax attack

The neighbour’s 23-year-old kid just returned after three months in Australia. Too expensive. Too few jobs. Despite having relatives there and a work permit, it was a desert of opportunity. No future. But the beaches are totally lit.

Like Canada, that country has a real estate fetish and is paying dearly for it.

The average house in Sydney is akin to Toronto, at $1,7 million. The average household income is also similar, at $120,000. So a regular house costs 14 times a regular family’s earnings – making this (like Vancouver) a ‘severely unaffordable’ city, according to Demographia International.

One difference: Aussies are paying 6.5% for a typical mortgage, seriously more than the sub-4% rate most Canadians opt for.

So what are the kangaroo people doing about the situation?

Attacking investors.

This week Australia brought in the most sweeping and profound tax changes this century designed to whack landlords so hard they give up and sell their properties to struggling first-time homeowners. The initial estimate is that 75,000 more kiddos will be happily and deeply mortgaged soon as a result.

Until now, like here, real estate investors have been getting a sweet deal. Mortgage interest and all costs are deductible form income. Appreciation on the property gets a fat discount from capital gains taxation. And in Australia any investment losses can be offset against taxable income.

No more. And this is a stunning political reversal for a government facing widespread social upheaval (made way worse by fuel shortages and rationing, thanks to Trump’s War).

Effective in a year, cap gains on rental property won’t get a 50% break (as in Canada), but all gains will face a minimum 30% tax on inflation-adjusted increases. In fact this is the new rule for all capital gains on all assets, held by anyone.

The only notable exemption to the huge bump in tax and restrictions on claiming losses (called ‘negative gearing’) will be newly-built homes, since the government there (like here) is obsessed with increasing supply.

The Labour government says these reforms are being driven by generational pressure, aimed at reducing the vast inequity between the wrinklies and the kiddos. Economists there estimate the changes could force down housing prices overall by about 3% more than would normally take place.

So how are Canadian landlords taxed?

Nicely.

Selling a rental unit means paying cap gain tax on half the profit – after all costs have been taken into account. The ACB (‘adjusted cost base’) is the original price paid plus fees, land transfer taxes, legals and improvements deducted from the sale price, minus all commissions, fees, taxes and expenses incurred in selling.

What if there is no profit, and instead a loss?

No worries. Losses are good. In Canada an investment loss can be used to reduce a capital gain on any other asset (like stocks or ETFs) in the same year, or carried back three years to offset taxes on prior gains. That loss can also be held and applied to any future profit – indefinitely.

The one and only negative spanking Canadian feds have given investors comes in the form of the flipping rule – which means any gain made on a property bought and sold within 12 months is fully taxable as business income. Of course, that’s easy to navigate around by adjusting a closing date.

By the way, there is a strong lobbying effort to change the tax structure in Canada, too.

For example, the CMHC-funded Generation Squeezed wants a progressive annual surtax placed on all properties, whether held by homeowners or investors. It would start at market value of $1 million (0.2%) and increase for real estate worth $2 million or more (1% of value per year). That tax could be deferred until the property is sold – with the potential to wipe out a big portion of any capital gains tax break.

As with the left-leaning Aussie government, this group says real estate has created two classes of citizenry. Increasingly, sadly, this also breaks along generational lines.

Look out below.

About the picture: “Here are two Border Collies (brother and sister),” writes Ron in the Okanagan, “waiting for the train in Summerland, BC.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/05/13/tax-attack/