Australian Federal Election - 2022

[Value Collector]

You might like to research that one mate. Last time I checked there were a million homes sitting empty.

Why? Because the current distortions driven by NG are causing landlords to enjoy the higher / faster cap gains as opposed to servicing debt by renting out the properties.

where did you find that figure?

 

[PZ99]

where did you find that figure?

A million homes sitting empty, ABS Census reveals - Australian Property Journal

AUSTRALIA is currently facing a housing crisis but there are one million vacant homes across the country, representing just over 10% of the total number of homes, according to the newly released Census figures, while the types of housing being built are not reflective of living habits as...

www.australianpropertyjournal.com.au

 

[Value Collector]

The taxpayers forgo revenue for negative gearing so they should have a say in where that revenue goes.

Taxpayers aren't forgoing any revenue, the tax office is only entitled to tax based on the investors profits, and the losses the investors are taking are real genuine losses, and the revenue from the interest payments which generate the loss flow through to the banking industry, where they increase banks profits, pay staff wages and fund dividend payments to all of which generate taxes too.

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But as I said its not something I do, my real estate investments are all positively geared (zero net debt actually), so its not something I want to waste to much time discussing, however they was about a 5 year period from 2001-2006 where I had two negatively geared properties, thats just how it works when you are starting out. Most new property investors will be negatively gear for the first few years until inflation catches up or they can pay down their debt. Absolutely nothing wrong with that in my opinion.

 

[Value Collector]

A million homes sitting empty, ABS Census reveals - Australian Property Journal

AUSTRALIA is currently facing a housing crisis but there are one million vacant homes across the country, representing just over 10% of the total number of homes, according to the newly released Census figures, while the types of housing being built are not reflective of living habits as...

www.australianpropertyjournal.com.au

That figure includes houses that are vacant due to being finished but awaiting sale or settlement, renovated, knocked down rebuilt, deceased estates, occupants in hospital or aged care, properties in-between tenants, owned by someone that is working over seas, condemned and many other reasons, it could also include houses where people just didn't fill out the census form

you can expect up to 3% of properties to be vacant on any given day just due to being in between tenants or owners etc, that doesn't mean they were vacant all year, as I said the other 7% (if that is even accurate) can have valid reasons too. What is important to your argument is not the total that are vacant, but the total that are purposefully left vacant due to negative gearing, which as I said would be small, and if they are purposefully being left vacant they don't qualify for negative gearing anyway.

One of my own rental properties was vacant on census night due to a large renovation I was doing, the units are now fully tenanted, generating taxable income, that more than offsets the couple of years of negative gearing I claimed on it in the early 2000's

 

[PZ99]

That figure includes houses that are vacant due to being finished but awaiting sale or settlement, renovated, knocked down rebuilt, deceased estates, occupants in hospital or aged care, properties in-between tenants, owned by someone that is working over seas, condemned and many other reasons, it could also include houses where people just didn't fill out the census form

you can expect up to 3% of properties to be vacant on any given day just due to being in between tenants or owners etc, that doesn't mean they were vacant all year.

One of my own rental properties was vacant on census night due to a large renovation I was doing, the all units are no fully tenanted.

What is important to your argument is not the total that are vacant, but the total that are purposefully left vacant due to negative gearing, which as I said would be small, and if they are purposefully being left vacant they don't qualify for negative gearing anyway.

Whether they qualify or not isn't the point. The point is the market distortions driven by NG are giving faster realised gains at the expense of renters and it's not something I want my taxes supporting.

There's been plenty of articles detailing houses / units purposefully being left vacant. If you're interested in this subject, you'll find them. They are there.

I'm not going to look for them simply because there's no way anyone is going to convince me that NG is a good thing for the housing market.

 

[Value Collector]

Whether they qualify or not isn't the point. The point is the market distortions driven by NG are giving faster realised gains at the expense of renters and it's not something I want my taxes supporting.

good thing your taxes don't support it then, because negative gearing only allows people to deduct the loss from their own income sources, not yours.

I have no doubt some silly people leave their apartments empty, but these people are not allowed to claim negative gearing deductions, and as I said they would be a small subset.

 

[PZ99]

good thing your taxes don't support it then, because negative gearing only allows people to deduct the loss from their own income sources.

I have no doubt some silly people leave their apartments empty, but these people are not allowed to claim negative gearing deductions, and as I said they would be a small subset.

My taxes do support it. If they didn't, there would be no "deductions"

See my previous post on your second sentence. Just because people can't claim NG doesn't mean they don't benefit from the cap gains in a market distorted by NG.

 

[InsvestoBoy]

I am not sure what you mean by primary and secondary investments.

Primary investments are new money entering a venture, starting a new business, funding an IPO or capital raise, etc.

Secondary investments are the transfer of existing assets from one entity to another, especially in heavily geared markets marginal asset pricing is usually determined by procyclical debt and less by rational investment valuation.

But, let’s say I some one has a some CBA, BHP, FMG and WOW shares and they are all paying a decent dividend.

But then that person decides to buy into a 5th company let’s say CSL using some debt. Are you saying if that leveraged CSL investment generates a negative cashflow that the investor shouldn’t be able to deduct this loss from the dividends of the other companies or other investment income?

It doesn't have to be that granular, many countries have solved this problem by grouping income, see e.g. https://en.wikipedia.org/wiki/Negative_gearing#Netherlands or https://en.wikipedia.org/wiki/Negative_gearing#United_Kingdom .

I mean we can claim other losses from other profits all the time, I if he sold the CSL shares for a loss no one would have a problem with him deducting his CSL loss from his BHP capital gain.

We are not talking about capital gains we are talking about the tax treatment of geared investments, hopefully through the lens of incentives the Government wishes to encourage.

It makes perfect sense to me that an investor should only pay tax on his total net profit or loss over all, and any losses should be deducted from any profits to arrive at a net taxable income.

From a balance sheet perspective of a single individual or entity it makes sense, if you zoom out economically, hopefully it's obvious that it has negative externalities.

I mean how far does it go, if I lose money on CSL do I have to actually go and try to make that capital gain back on CSL to be able to claim the loss?

Again, we are not talking about capital gains tax.

 

[Value Collector]

We are not talking about capital gains we are talking about the tax treatment of geared investments, hopefully through the lens of incentives the Government wishes to encourage.

I am talking about cashflow losses.

eg, Would you be ok with some deducting the negative cashflow from property A, from the positive cashflow they earn on property B.

If you are ok with negative cashflows from one property, offsetting the positive cashflows from another property, why not also let them offset some of their positive dividend income they get from some BHP shares they own?
if you are ok with property losses offsetting income from dividends etc, why not their income from Uber driving ?

To me it just makes sense to deduct all expenses/losses from all income/profits and pay tax on your net income, regardless of the source of that income.

 

[SirRumpole]

To me it just makes sense to deduct all expenses/losses from all income/profits and pay tax on your net income, regardless of the source of that income.

Not really, it just allows good investments to subsidise bad ones from a tax point of view.

If people want to engage in loss making investments, the other taxpayers shouldn't have to pay for it.

 

[InsvestoBoy]

I am talking about cashflow losses.

You were literally quoted just a few seconds ago talking about capital gains.

eg, Would you be ok with some deducting the negative cashflow from property A, from the positive cashflow they earn on property B.

Let's start with that.

If you are ok with negative cashflows from one property, offsetting the positive cashflows from another property, why not also let them offset some of their positive dividend income they get from some BHP shares they own?
if you are ok with property losses offsetting income from dividends etc, why not their income from Uber driving ?

Because, as I said already, it should be obvious that it has negative externalities for large portions of the economy.

It forces the economy straight into what Hyman Minsky coined as the "money manager" phase of capitalism. It encourages procyclical behaviour in the property market. It incents wealth transfer over primary investment. On and on.

To me it just makes sense to deduct all expenses/losses from all income/profits and pay tax on your net income, regardless of the source of that income.

Please take a moment to consider that your views may be influenced by your position in life and that it's possible what makes sense to you the individual may not make sense for the country as a whole.

 

[Value Collector]

Not really, it just allows good investments to subsidise bad ones from a tax point of view.

Its common in business for new ventures to lose money in the early years, and its extremely common for some one just starting out in property that needs a high LVR loan to take a cashflow loss in the early years until they can pay down they loan enough to reduce the interest rate.

As I mentioned above its not tax payers funding the loss, the loss is paid for out of that persons other income, it just reduces that persons taxable in come, just like all business expenses do.

 

[SirRumpole]

As I mentioned above its not tax payers funding the loss, the loss is paid for out of that persons other income, it just reduces that persons taxable in come, just like all business expenses do.

Sorry, but if a persons taxable income is reduced, they pay less tax which is a loss of revenue for the government which other taxpayers have to pay for.

 

[Value Collector]

1. You were literally quoted just a few seconds ago talking about capital gains.





2. Because, as I said already, it should be obvious that it has negative externalities for large portions of the economy.




3. Please take a moment to consider that your views may be influenced by your position in life and that it's possible what makes sense to you the individual may not make sense for the country as a whole.

1. I was talking about mainly cashflow, but used an extended example of capital gains.

2. I don't think there is obvious negative effects, because the private sector investing in property does help bring new supply to market, and negative gearing does encourage more investment.

3. I don't use negative gearing and never plan to, although I can see how it is a fair way to treat Investors who are needing to use higher LVRs, as I used it back way I had a smaller capital base. I have been investing for 26 years, and understand why these sorts of rules exist.
there are some things that tend to produce an emotional reaction in some people because they see them are a root, but they are just common sense things, one of them is negative gearing two others are franking credits and capital gains tax discounts.

 

[SirRumpole]

2. I don't think there is obvious negative effects, because the private sector investing in property does help bring new supply to market, and negative gearing does encourage more investment.

The majority of negative geared property is already existing dwellings.

 

[Value Collector]

Sorry, but if a persons taxable income is reduced, they pay less tax which is a loss of revenue for the government which other taxpayers have to pay for.

If a workman needs to buy a new pair of boots to work in, it reduces her taxable income by the cost of the boots, but it would be stupid to say the tax payers are funding the Workmans boots, the government were never ever entitled to tax on the portion of revenue used to buy the boots in the first place, they government is only entitled to tax on the profits remaining after all business expenses are paid.

Businesses generate revenue, from this they deduct their expenses and pay tax on their profit, if one project generates a loss it is deducted from the profit generated from another project, that is not the same as the government paying for it.

 

[Value Collector]

The majority of negative geared property is already existing dwellings.

that doesn't alter the outcome, thats like saying the majority of share purchases are exisiting shares, but we know that a healthy share market encourages more companies and new share issues to be listed.

Developers will not be encourage to bring new developments to market unless they know their is a healthy secondary market to sell into.

Also exisiting houses still require capital, I have just spend $200,000 renovating some units I own, and am working on a house now, I wouldn't do that unless I was confident I could sell the properties to some one.

 

[SirRumpole]

If a workman needs to buy a new pair of boots to work in, it reduces her taxable income by the cost of the boots, but it would be stupid to say the tax payers are funding the Workmans boots, the government were never ever entitled to tax on the portion of revenue used to buy the boots in the first place, they government is only entitled to tax on the profits remaining after all business expenses are paid.

Businesses generate revenue, from this they deduct their expenses and pay tax on their profit, if one project generates a loss it is deducted from the profit generated from another project, that is not the same as the government paying for it.

So if the workman wears his boots to the pub after work, should the deduction be reduced ?

 

[SirRumpole]

Businesses generate revenue, from this they deduct their expenses and pay tax on their profit, if one project generates a loss it is deducted from the profit generated from another project, that is not the same as the government paying for it.

It comes down to my earlier point that housing is for people to live in and own, not for investors to reduce their tax.

The market has obviously failed if we have the shortage of affordable housing that we currently have. The system is broken.

 

[InsvestoBoy]

2. I don't think there is obvious negative effects, because the private sector investing in property does help bring new supply to market, and negative gearing does encourage more investment.

Like I said already, my proposal is specifically to allow negative gearing for primary investment.

Secondary investment, by definition, does not bring new supply or encourage investment. In aggregate it is wealth transfer from some economic actors to others. Those actors should not be incentivised to invest on the basis which they currently are.

there are some things that tend to produce an emotional reaction in some people because they see them are a root, but they are just common sense things, one of them is negative gearing two others are franking credits and capital gains tax discounts.

Do I sound emotional about it?

CGT discount is a great example of Government incentivising a particular behaviour that we desire as a society over another behaviour that we don't. Let's take a leaf from the CGT discount book.