Australian Federal Election - 2022

[sptrawler]

Negative gearing isn't why house prices are high. It ain't going to do a lot either if you get rid of it.

That has been shown to be true and it has helped many grass roots people get some investments going, usually by purchasing a cheap rental and trying to pay it down then flip it to buy another better one etc.
If the only investment properties were new builds, who would supply the cheap rentals? Just a thought, but if most of the investment properties were new builds, would that force up rents as the investor tries to get a decent rate of return.

 

[moXJO]

That has been shown to be true and it has helped many grass roots people get some investments going, usually by purchasing a cheap rental and trying to pay it down then flip it to buy another better one etc.
If the only investment properties were new builds, who would supply the cheap rentals?

There's a lot of countries where house prices are expensive. None have negative gearing. It's a bit of a bunk argument. Tightening lending requirements would nuke the market.

There's no need to anyway. Tides going out and the property clock is slowly ticking. Just let the market do its thing.

 

[Eager]

I think the simplest way to deal with franking credits is to make sure that they only get returned to taxpayers to offset any tax paid. I'd be surprised if that hasn't been discussed before (until recently, I hadn't visited these pages since well before the last fed election when this issue was hot). It would be to the detriment of my household, but why is it fair that my wife gets a tax refund around $2k per year, which I then re-invest for her, when her total income from dividends and other sources dosn't even come close to the tax free threshold? But, it has been allowed to continue, and will do so regardless of what happens on Saturday, so we'll continue to enjoy receiving it. Yes, it would be a bummer if we no longer enjoyed it, but it's not like we budget to receive it. Pensioners and the like who say that they rely on franking credits as part of their income strategy, to me, is a flawed business model. I remember when this issue was widely covered in the media before last election, an example was given about one old coot who would stand to lose (from memory) about $40k per year if franking credits were removed. What wasn't said in the (Murdoch) press and from Geoff Wilson was that for him to receive that amount in franking credits, based on an assumption that all his shares were fully franked and his average yield was 5% (reasonable at the time), he would be in possession of around $2m of shares. Cry. Me. A. River.

Negative gearing is a whole different ball game. With regular interest rate rises on the way for the next year or so, the dynamics will change and it will progressively become easier for property investors to lose money and secure a lucrative tax break, but also more lucrative for the government to do something about it. Hopefully they eventually do.

My 2c.

 

[sptrawler]

There's no need to anyway. Tides going out and the property clock is slowly ticking. Just let the market do its thing.

The issue seems to be very localised on the East coast, over here in the West, house prices are still reasonable.
In the area I am, the unit over the back of mine just sold for $280k, I paid $290k for mine exactly the same building in 2011, after the GFC when prices crashed.
So as I say the issue isn't Australia wide, people here seem more focused on holidays, 4x4 fully bombed dual cabs and toys, more than bidding up houses.
Maybe here people think life is short enjoy it, more than those on the East coast, who knows.

 

[sptrawler]

I think the simplest way to deal with franking credits is to make sure that they only get returned to taxpayers to offset any tax paid. I'd be surprised if that hasn't been discussed before (until recently, I hadn't visited these pages since well before the last fed election when this issue was hot). It would be to the detriment of my household, but why is it fair that my wife gets a tax refund around $2k per year, which I then re-invest for her, when her total income from dividends and other sources dosn't even come close to the tax free threshold?

I guess it is the same as if your wife worked a job and she earned $17,500, but each week the employer had removed tax of 30% to cover her expected liability, but when she did her tax she found they had taken $5,200 out. So she really only took home $12,300, by your reasoning that's fine because she is under the tax free threshold so it doesn't matter that she paid 30%.
As the rules are currently, she would get the $5,200 as a tax refund, because any earnings under the $18k threshold is tax free so she shouldn't have paid it.

When the company gives your wife a dividend, they have paid 30% tax on it, if she is under the $18k tax free threshold why shouldn't she get it refunded? When someone who has hundreds of thousands of the same shares can reduce their tax by millions, because they received the same dividend and the same franking credit?

So if you have enough shares, that you get a big enough dividend that you have to pay tax, you can use the tax the company paid to reduce your tax bill. But if you don't have enough shares to have to make $18k of dividends, you lose the tax the company paid, sounds a bit weird to me sounds like double standards if your rich you get the 30% break, if your poor the government takes it off you.
Your reasoning might be sound, but i don't follow it, obviously a lot of other people thought the same as it has been dropped.

 

[moXJO]

The issue seems to be very localised on the East coast, over here in the West, house prices are still reasonable.
In the area I am, the unit over the back of mine just sold for $280k, I paid $290k for mine exactly the same building in 2011, after the GFC when prices crashed.
So as I say the issue isn't Australia wide, people here seem more focused on holidays, 4x4 fully bombed dual cabs and toys, more than bidding up houses.
Maybe here people think life is short enjoy it, more than those on the East coast, who knows.

There's no rentals either. So it's most likely a house shortage here. Perhaps all those new years of 1999 babies have finally hit legs and want out.
Either way stock is short.

But as of the last two weeks a lot of houses going on market. So the interest rates must have spooked a few.

 

[wayneL]

I guess it is the same as if your wife worked a job and she earned $17,500, but each week the employer had removed tax of 30% to cover her expected liability, but when she did her tax she found they had taken $5,200 out. So she really only took home $12,300, by your reasoning that's fine because she is under the tax free threshold so it doesn't matter that she paid 30%.
As the rules are currently, she would get the $5,200 as a tax refund, because any earnings under the $18k threshold is tax free so she shouldn't have paid it.

When the company gives your wife a dividend, they have paid 30% tax on it, if she is under the $18k tax free threshold why shouldn't she get it refunded? When someone who has hundreds of thousands of the same shares can reduce their tax by millions, because they received the same dividend and the same franking credit?

So if you have enough shares, that you get a big enough dividend that you have to pay tax, you can use the tax the company paid to reduce your tax bill. But if you don't have enough shares to have to make $18k of dividends, you lose the tax the company paid, sounds a bit weird to me sounds like double standards if your rich you get the 30% break, if your poor the government takes it off you.
Your reasoning might be sound, but i don't follow it, obviously a lot of other people thought the same as it has been dropped.

Note that this only applies to divs, not earnings (which are taxed at company rate).

Consistency... Look at total tax burden per earnings, from whatever source.

 

[IFocus]

I think the simplest way to deal with franking credits is to make sure that they only get returned to taxpayers to offset any tax paid. I'd be surprised if that hasn't been discussed before (until recently, I hadn't visited these pages since well before the last fed election when this issue was hot). It would be to the detriment of my household, but why is it fair that my wife gets a tax refund around $2k per year, which I then re-invest for her, when her total income from dividends and other sources dosn't even come close to the tax free threshold? But, it has been allowed to continue, and will do so regardless of what happens on Saturday, so we'll continue to enjoy receiving it. Yes, it would be a bummer if we no longer enjoyed it, but it's not like we budget to receive it. Pensioners and the like who say that they rely on franking credits as part of their income strategy, to me, is a flawed business model. I remember when this issue was widely covered in the media before last election, an example was given about one old coot who would stand to lose (from memory) about $40k per year if franking credits were removed. What wasn't said in the (Murdoch) press and from Geoff Wilson was that for him to receive that amount in franking credits, based on an assumption that all his shares were fully franked and his average yield was 5% (reasonable at the time), he would be in possession of around $2m of shares. Cry. Me. A. River.

Negative gearing is a whole different ball game. With regular interest rate rises on the way for the next year or so, the dynamics will change and it will progressively become easier for property investors to lose money and secure a lucrative tax break, but also more lucrative for the government to do something about it. Hopefully they eventually do.

My 2c.

Yes its been argued endlessly, I completely agree with you and I would also be disadvantaged if franking credits were removed but you will be howled down by the pack.

However no one wants to talk about the drag on revenue ($12 bil and growing?) for the government and how to plug the hole.

Over to you SP

 

[PZ99]

Negative gearing isn't why house prices are high. It ain't going to do a lot either if you get rid of it.

Well that's good then because getting rid of it won't crash the housing market despite all the hoo-haa + we can find something better to do with that $13b per year of taxpayers' money.

NZ got rid of it - I think Labor should grow a pair and follow suit.

 

[Eager]

I guess it is the same as if your wife worked a job and she earned $17,500, but each week the employer had removed tax of 30% to cover her expected liability, but when she did her tax she found they had taken $5,200 out. So she really only took home $12,300, by your reasoning that's fine because she is under the tax free threshold so it doesn't matter that she paid 30%. As the rules are currently, she would get the $5,200 as a tax refund.

I know that your exapmple was just for demonstrative purposes, but it is a shocker. If she was working and had paid $5.2k tax for $17.5k gross earnings, before hypothetically/unexpectedly not working and earning again for that FY, that extrapoplates to an expected weekly/annual salary of $3083/$160.3k! Of course she would be entitled to a full tax refund that FY, for the simple reason that she had already paid the tax. What tax has SHE *already* paid on her dividends?

 

[sptrawler]

Note that this only applies to divs, not earnings (which are taxed at company rate).

Consistency... Look at total tax burden per earnings, from whatever source.

Very true, but as @Eager said:

" It would be to the detriment of my household, but why is it fair that my wife gets a tax refund around $2k per year, which I then re-invest for her, when her total income from dividends and other sources dosn't even come close to the tax free threshold?"

That is fine when a person is in the situation of his wife, but what about the person who is in a similar position without the luxury of a husband and their total income income is less than the $18k threshold. Is it then fair on them also?

 

[sptrawler]

What tax has SHE *already* paid on her dividends?

She has paid the same tax as the wealthy person, you are saying is entitled to use it, as an offset to reduce their tax. Why is it ok for someone to use the tax credit to reduce their tax, yet someone who doesn't earn enough to pay tax loses it.
Don't you see the irony, people say they care about those less fortunate, but then penalise them for not earning enough.Weird
Your using your own circumstances, to judge other people's situations, when really the principle should be applied consistently.
Or just take it off everyone.

 

[Eager]

Why is it ok for someone to use the tax credit to reduce their tax, yet someone who doesn't earn enough to pay tax loses it.

Because they didn't pay any tax to start with!!!

 

[sptrawler]

Because they didn't pay any tax to start with!!!

The dividend they received had 30% tax paid on it, if the company paid the dividend pre tax, they would get 30% more dividend.
Then the high income earner would pay tax on the dividend at their marginal rate, the person on less than $18k would get to keep the whole larger dividend, that would be fairer.
What part of that can't you understand.

 

[PZ99]

Very true, but as @Eager said:

" It would be to the detriment of my household, but why is it fair that my wife gets a tax refund around $2k per year, which I then re-invest for her, when her total income from dividends and other sources dosn't even come close to the tax free threshold?"

That is fine when a person is in the situation of his wife, but what about the person who is in a similar position without the luxury of a husband and their total income income is less than the $18k threshold. Is it then fair on them also?

Your last sentence is why I changed my mind on the policy and decided to leave it as is.... It's a double edged sword though. If the refund is applied then that parcel of company tax isn't paid.

 

[sptrawler]

Your last sentence is why I changed my mind on the policy and decided to leave it as is.... It's a double edged sword though. If the refund is applied then that parcel of company tax isn't paid.

That's true and like I said if Labor was serious about franking credits, they would have just applied it like I said, companies pay the dividend in pre tax dollars.
But that then becomes a bigger problem for the ATO collecting the tax.
It was just a nasty piece of legislation to force SMSF into industry funds, thankfully Albo seems to realise the backlash from the rank and file was huge.
Take it off everyone, or apply it as it is currently IMO.

 

[Eager]

The dividend they received had 30% tax paid on it, if the company paid the dividend pre tax, they would get 30% more.
Then the high income earner would pay tax on the dividend at their marginal rate, the person on less than $18k would get to keep the whole dividend, that would be fairer.
but no people would rather pull crap out to justify stupid reasoning and why even Labor tossed it.

At the end of the day, no-one will ever be able to justify to me why non-taxpayers should get a tax refund for tax that they didn't pay to begin with. How is it a 'refund'?

I'll accept the extra and unneccessary $2k that this household receives every year, and pretend that I don't care how that money could have been better spent to look after those who desperately need it, and think, how good is middle and upper class welfare.

"but no people would rather pull crap out to justify stupid reasoning and why even Labor tossed it." You have described the opponents of the proposal to remove franking credits to a tee. The populist/sensationalist/fear stoking media got on board and it was all over.

 

[sptrawler]

At the end of the day, no-one will ever be able to justify to me why non-taxpayers should get a tax refund for tax that they didn't pay to begin with. How is it a 'refund'?

I'll accept the extra and unneccessary $2k that this household receives every year, and pretend that I don't care how that money could have been better spent to look after those who desperately need it, and think, how good is middle and upper class welfare.

"but no people would rather pull crap out to justify stupid reasoning and why even Labor tossed it." You have described the opponents of the proposal to remove franking credits to a tee. The populist/sensationalist/fear stoking media got on board and it was all over.

If you can't see the logics, you may as well get rid of the tax free threshold completely and just tax every dollar, that would make it easier.
The proposal was nonsense, even by your statement.

" no-one will ever be able to justify to me why non-taxpayers should get a tax refund for tax that they didn't pay to begin with. How is it a 'refund'?


As I said if the dividend was paid pre tax, the dividend would be larger and those earning under $18k would not have to pay tax on it, which is exactly what is happening now.
Just because you can't get your head around it, doesn't make it incorrect.
That is why we have a tax free threshold and also super in the pension phase is tax free, they can change that, but currently that is how it works.

Your quote:
I'll accept the extra and unneccessary $2k that this household receives every year, and pretend that I don't care how that money could have been better spent to look after those who desperately need it, and think, how good is middle and upper class welfare.

You could always donate it to a worthy cause, rather than smuggly use it as a badge of honour, to pretend you care.

 

[PZ99]

Here's a curly one... if the dividend is paid pre tax and becomes say... 30% larger does that mean the fall in the share price is 30% greater when it goes ex-dividend ?

Hmm...

 

[sptrawler]

Here's a curly one... if the dividend is paid pre tax and becomes say... 30% larger does that mean the fall in the share price is 30% greater when it goes ex-dividend ?

Hmm...

If the company pays the 30% on the dividend to the ATO, or to the shareholder, wouldn't it be the same effect on the bottom line?
The big difference would be the people who currently reduce their taxable income by the 30% offset, would have to pay tax on their dividend at their marginal rate, which could be 15% higher. But that isn't seen as middle and upper class welfare.

Twiggy's biggest pay day: Fortescue to pay record dividend

Iron ore miner Fortescue is tipped to pay record dividends on Monday, with total distributions to Andrew Forrest for the year expected to nudge $1.9 billion.

www.afr.com

From the article:
If those forecasts are correct, Dr Forrest's various entities will receive just over $1 billion of fully franked final dividends.

When combined with the 76¢ per share interim dividend announced in February, the Forrests will have received close to $1.86 billion of fully franked dividends from Fortescue in just one year.