Australian Federal Election - 2022

[Value Collector]

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

No, but the boots he wears only to the pub obviously are not a tax deduction.

A small percentage of personal use is fine, its not going to alter anything big, we all know the 8 hours pouring concrete would have created more wear than the walk across the carpark into the pub.

 

[sptrawler]

My thoughts on negative gearing are, the tax break on a loss making investment is given, on the expectation that at some stage that investment will become positively geared and make a profit.
If there is no expectation that the investment will ever become positive geared, it is a speculative investment for the sole purpose of reducing tax, therefore the losses shouldn't be allowed to be offset against normal income, they should have to be carried forward and only be able to be used to offset any capital gain when the investment is sold.

It is somewhat like someone buying 50 acres of land and claiming the losses as a primary producer because they have half a dozen chooks on it, that isn't allowed the property has to be a viable business venture.

If someone buys a house for $5m in Sydney and rents it out for $20k a year making a loss, there is no likelyhood that property will ever make a taxable profit, therefore it is speculative and the losses should only be able to be offset against a capital gain.

It would be quite easy for the ATO to just say negative gearing can only be applied for x years.
Anyway better brains than ours will be looking at it, that's for sure.

 

[Value Collector]

Secondary investment, by definition, does not bring new supply or encourage investment.

I don't agree with that at all, every one that buys a "Primary" development only does so because they hope to sell it into the secondary market at some stage, and as I said large renovations are just as important as new developments, unless you want to encourage slum lords.

 

[Value Collector]

My thoughts on negative gearing are, the tax break on a loss making investment is given, on the expectation that at some stage that investment will become positively geared and make a profit.
If there is no expectation that the investment will ever become positive geared, it is a speculative investment for the sole purpose of reducing tax, therefore the losses shouldn't be allowed to be offset against normal income, they should have to be carried forward and only be able to be used to offset any capital gain when the investment is sold.

It is somewhat like someone buying 50 acres of land and claiming the losses as a primary producer because they have half a dozen chooks on it, that isn't allowed the property has to be a viable business venture.

If someone buys a house for $5m in Sydney and rents it out for $20k a year making a loss, there is no likelyhood that property will ever make a taxable profit, therefore it is speculative and the losses should only be able to be offset against a capital gain.

It would be quite easy for the ATO to just say negative gearing can only be applied for x years.
Anyway better brains than ours will be looking at it, that's for sure.

I agree with you, maybe one thing to change is to limit interest only loans (they may have already done that, I know cba does), paying principle and interest means that eventually the loan interest will be reduced and it will become positive geared automatically, especially combined with inflation raising rents over time

 

[sptrawler]

I agree with you, maybe one thing to change is to limit interest only loans, paying principle and interest natural means that eventually the loan interest will be reduced and it will become positive geared automatically, especially combined with inflation raising rents over time

It isn't a difficult problem to solve, the real issue is do politicians want to solve negative gearing, or use negative gearing IMO.

It would be easy to say only $x can be negatively geared, only house loans up to $x can be geared.

 

[InsvestoBoy]

I don't agree with that at all, every one that buys a "Primary" development only does so because they hope to sell it into the secondary market at some stage,

One would hope that people are either buying the property as a domicile or if they are an investor, because it is a good investment in it's own right.

Investors should be free to sell their property in the secondary market to participants who are bidding on the basis of the investment value of the property in it's own right.

and as I said large renovations are just as important as new developments, unless you want to encourage slum lords.

Renovations are obviously a primary investment and nonetheless completely unrelated to the proposal I am making.

 

[Value Collector]

It isn't a difficult problem to solve, the real issue is do politicians want to solve negative gearing, or use negative gearing IMO.

It would be easy to say only $x can be negatively geared, only house loans up to $x can be geared.

I wouldn’t be comfortable putting a price on it, I mean if some one wants to borrow $10,000,000 to buy a block of flats knowing it’s going to deliver a negative return for the first few years, I don’t have a problem with that, because they can borrow $10,000,000 for shares or any other business venture and negative gear it in the same way.

 

[SirRumpole]

It isn't a difficult problem to solve, the real issue is do politicians want to solve negative gearing, or use negative gearing IMO.

It would be easy to say only $x can be negatively geared, only house loans up to $x can be geared.

Well, as I said before, limit NG to one property per taxpayer . If people want a nest egg for their retirement, fine, if they want to turn it into a business then they should pay for it themselves.

And the CGT discount should be eliminated too.

 

[Value Collector]

1, One would hope that people are either buying the property as a domicile or if they are an investor, because it is a good investment in it's own right.

2, Investors should be free to sell their property in the secondary market to participants who are bidding on the basis of the investment value of the property in it's own right.

1, Just because something produces a negative leveraged cashflow for a period of time doesn't mean its a bad investment, I mean look at Tesla or many other things. Also it can be just a personal decision for an investor to take a negative cashflow for a period of time until they can pay their loan down to the point it becomes positive cashflow.

2, they are free to do that, but some of them will need to use debt for a period of time, and this may produce a negative cashflow.

If you want to lock out a bunch of small investors from the property market and leave the market to cashed up investors like Harry Triguboff by all means, but there will be less stock on the market for sure.

 

[Value Collector]

If people want a nest egg for their retirement, fine, if they want to turn it into a business then they should pay for it themselves.

As I explained, workman pay for their own boots, a tax deduction is not the same as getting something for free.

anyone this is getting circular, I have a list of jobs the wife needs me to do today and I am letting my self get distracted, so I will have to leave this topic for now.

 

[InsvestoBoy]

because they can borrow $10,000,000 for shares or any other business venture and negative gear it in the same way.

You have been investing for 26 years, you know as well as the next person that LVR, lending standards, margin requirements etc are all completely different for margin loans or business loans than investment property loans.

The Government also happens to tax business profit at a flat 30% rate.

I would accept this as an alternative, investment property can only be done by corporate entities with similar lending standards, gearing ratios, etc.

If you want to lock out a bunch of small investors from the property market and leave the market to cashed up investors like Harry Triguboff by all means, but there will be less stock on the market for sure.

Bizarre statement considering many countries in the world don't have a tax code that allows income transfer like ours and yet still somehow small investors invest in the property market. Maybe it's magic.

 

[SirRumpole]

As I explained, workman pay for their own boots, a tax deduction is not the same as getting something for free.

anyone this is getting circular, I have a list of jobs the wife needs me to do today and I am letting my self get distracted, so I will have to leave this topic for now.

I appreciate the fact that you don't use NG and your investments stand on their own, but the cumulative nationwide effects of NG are derogatory to the national interest imo.

 

[Value Collector]

1. You have been investing for 26 years, you know as well as the next person that LVR, lending standards, margin requirements etc are all completely different for margin loans or business loans than investment property loans.

2. The Government also happens to tax business profit at a flat 30% rate.

3. I would accept this as an alternative, investment property can only be done by corporate entities with similar lending standards, gearing ratios, etc.



4. Bizarre statement considering many countries in the world don't have a tax code that allows income transfer like ours and yet still somehow small investors invest in the property market. Maybe it's magic.

1. I know that I can borrow against my home and buy negatively geared shares, just like I can borrow against my home and buy a rental property. I can even borrow up to 80% of the value of my home, and use it to buy shares using a margin loan 70% gearing so the end result is a 100% LVR share purchase, this would be available for negative gearing deductions if the income was less than the expense.

2. Yep, and it will tax my positive cashflow from real estate at 47%, what's your point?... by the way when those business profits are passed along to investors as dividends the tax is what ever that investors tax bracket is... so again what's your point.

3. yep, lets get all the mums and dads out the way to make the rich richer, I am leaning more to the rich side these days so you are helping me there, I don't think thats a good thing though.

4. they probably have many other different tax laws to that some how balance things out, a bit like some people say "But the USA don't have franking credits why do we need them" obviously they answer to that is that they limit taxation on dividends to 15% which serves basically the same effect.

As I said though Mrs VC is going to kill me is I don't get my chores done soon hahaha I have to stop letting this distract me

 

[Value Collector]

I appreciate the fact that you don't use NG and your investments stand on their own, but the cumulative nationwide effects of NG are derogatory to the national interest imo.

We will have to agree to disagree on that.

 

[SirRumpole]

In australia we rely on the private sector to provide housing to the rental market, with that supply provided by the private sector there would be less supply to meet the demand and rents would be higher.

The demand for housing is so high that dwellings will be built even if there were no investors in the market.

 

[Belli]

It'll never happen but one method is to only allow any tax deductions against the property and not permit it to be offset against other income.

I place the blame (unfairly or not) on Sir Garfield Barwick.

 

[sptrawler]

I appreciate the fact that you don't use NG and your investments stand on their own, but the cumulative nationwide effects of NG are derogatory to the national interest imo.

Again just in my opinion, but I think negative gearing property is a government initiative to save the Government having to supply social housing and I have already explained that I feel the Government should get back into building social housing.

The other problem negative gearing of residential property does is, it takes investment money from the productive side of the economy e.g startup businesses, capital raising, business expansion etc and deploys it into what is really a static asset which once it is built contributes very little to the economy.
If Sydney/Melbourne property wasn't so attractive as an investment, that money would be deployed into commercial ventures and buildings IMO.

 

[Value Collector]

The demand for housing is so high that dwellings will be built even if there were no investors in the market.

Have you seen the demand for rentals in some markets? I had 27 applications on one of my units I just renovated, I am not sure who you think is going to step up and provide the capital for building / renovating more rentals if new investment from investors was stopped, I know you will say you are happen for investors to be limited to new buildings, but buildings last for decades, we have to be able to sell them to other investors otherwise we won't want to invest the capital to begin with.

I can guarantee you I would not have invested all the money I did to renovate the units if I didn't think other investors would be there to buy it from me if I decide to sell, I would be forced to become a slum lord, holding the property and just taking out all the cash I could rather than putting more money in to improve it and stay in the business of offering quality living quarters.

 

[SirRumpole]

Have you seen the demand for rentals in some markets? I had 27 applications on one of my units I just renovated, I am not sure who you think is going to step up and provide the capital for building / renovating more rentals if new investment from investors was stopped.

Glad you finished your chores haha.

The demand is for people to own their own homes. A great proportion of renters only rent because they are priced out of buying their own dwellings by investors.

The industry works on demand, not who is demanding. If the demand is there, builders will build, it matters not to them whether the buyers are owner occupiers or investors.

 

[Value Collector]

1. Glad you finished your chores haha.

2. The demand is for people to own their own homes. A great proportion of renters only rent because they are priced out of buying their own dwellings by investors.

3. The industry works on demand, not who is demanding. If the demand is there, builders will build, it matters not to them whether the buyers are owner occupiers or investors.

1. not yet, half way I am a bit naughty today.

2. there will always be a decent chunk of the population that needs rental accomodation, eg people just moving out of home, people that don't want to own, people that move a lot for work, divorcees, people that would rather but money into their business or super than own, retired down sizers etc etc.

3. most of the groups I mentioned above are not capable of deploying capital to meet their own demand, so their demand will not increase supply unless enough investors can step in and provide the capital in return for regular rental payments, Its a bit like a plane load of travellers landing at an airport and wanting to travel some where buy car, there is demand for cars there but unless car rental companies pony up some capital to buy the cars and make them available to rent, the travellers vehicles demand will remain unmet.