Lindsay Riddick

Keith Melville’s letter of Beacon, October 15, Landlords still pay the price, quotes Alison Pavlovich; “There was a fundamental and long-standing principle in tax law that the costs associated with producing taxable income could be offset against that income”.  

Most of us will agree that this is a worthy principle and should be followed. It is, however, predicated on all relevant income being taxed.  

What we see with many landlords/property traders, however, is that a major source of income is capital gain from buying and selling properties.  This income is not taxed unless the property trader makes a mistake and allows it to fall under the “Bright Line” test.  

When landlords/property traders pay tax on the profit made by purchase and sale of their stock in trade (properties), as retailers and other traders do, then and only then should interest payments be tax deductible.  

Perhaps the Labour scheme to stop interest being tax deductible was not the best regime.  It was, however, one attempt to rectify the very real inequalities being witnessed at the time, and that continue.  

The Coalition Government chose to abolish the Labour scheme but failed to introduce any suitable replacement system. It may be more correct to describe the Coalition Government’s bribe as a tax break for property traders.  We all realise, however, that it is mainly landlords who are the property traders.