Abolish Negative Gearing

[robots]

hello,

extremely disappointed its ended in another property bashing exercise, amazing

that 11bil the gov doesnt get is miniscule to the $ they get from the private rental market tax collected

thankyou
professor robots

 

[wayneL]

hello,

extremely disappointed its ended in another property bashing exercise, amazing

that 11bil the gov doesnt get is miniscule to the $ they get from the private rental market tax collected

thankyou
professor robots

How is this property bashing?

 

[drsmith]

extremely disappointed its ended in another property bashing exercise, amazing

This isn't about property bashing, it's about tax bashing. The monster that is Australia's tax system needs a good long bashing to remove all the dead feathers. The problem though is it's way too heavy for any of our wimpy politicians to lift and so they just keep adding more plucked feathers from the goose.

The ultimate ideal would not be to tax income or capital gains at all and for government to provide services purely from consumption tax, corporate tax and economic rent from natural resources.

https://www.aussiestockforums.com/forums/showpost.php?p=552564&postcount=176

 

[MR.]

Oooh..... someone mention property bashin' ?
No...oh my mistake, better read more of the thread.

Whitaker puts it........

Cast your mind back to 1985 when Treasurer, Paul Keating, watered down negative gearing by introducing a system that quarantined any net losses from property investment, and required them to be offset only against future profits. It was a disaster - investment in property fell dramatically, rents went sky high,and in October 1987 Keating backed off and reversed his original decision.

When keating abolished negative gearing, public housing waiting list blew out by about 5 years. They won't abolish it again.

Guys we are forgetting something here!

Two months after the watering down of negative gearing (July 1985) "Capital Gains Tax" was introduced at 50% (September 1985). Before then there was no Capital Gains Tax.

No doubt this new 50% CGT would have contributed to the problem with Negative Gearing. However, it took two years before one of them was reversed and it happened to be Negative Gearing.

 

[Garpal Gumnut]

If the property portfolio is likely to return a trading profit within a reasonable time frame (say 2 or 3 years), then I agree the losses should be deductible in the current year. If there is no chance within the forseeable future, the deductions should be deferred.

This is as how it applies to normal business.

I'm not an economist and when I started the thread, I may have slightly overstated the case for banning NG , as such, as business needs to borrow to capitalise, stock etc. to make goods/services to turn a profit.

wayneL's statement above basically fits with my original intent of the thread....I think...., but because I'm not an economist I don't want to get in a **** fight with every smart **** on ASF who brags about making a quid from borrowing.

My basic premise is.
Houses are overpriced.
Young couples cannot afford them without disrupting their responsibilities to their children or the community.
Many capitalists use negative gearing in a lazy way that provides no useful outcome for the economy.
Higher house prices inevitably leads to higher rents and makes it less likely that citizens will be able to save to afford their own houses without being imprisoned in a long debt to the banks.

That was my reason for starting the thread.

gg

 

[drsmith]

Guys we are forgetting something here!

Two months after the watering down of negative gearing (July 1985) "Capital Gains Tax" was introduced at 50% (September 1985). Before then there was no Capital Gains Tax.

No doubt this new 50% CGT would have contributed to the problem with Negative Gearing. However, it took two years before one of them was reversed and it happened to be Negative Gearing.

That makes sense especially when one considers the property price response to John Howard's 50% CGT discount. This change rewarded shorter term investment (speculation) at the expense of longer term investment.

 

[It's Snake Pliskin]

My basic premise is.
Houses are overpriced.
Young couples cannot afford them without disrupting their responsibilities to their children or the community.
Many capitalists use negative gearing in a lazy way that provides no useful outcome for the economy.
Higher house prices inevitably leads to higher rents and makes it less likely that citizens will be able to save to afford their own houses without being imprisoned in a long debt to the banks.

That was my reason for starting the thread.
gg

It has been my opinion that wealth should not be made through housing in the form of capital gains. Because of the bubble mentality of buying to make wealth a lot of people are not in a position to buy. Sadly, renting is overly expensive in cities now too.

Robert Kiyosaki focusses on cash flow according to his writings.

 

[hmmm]

My basic premise is.
Houses are overpriced.

gg

You are unfortunately correct and this sucks balls.

 

[drfuzzy]

The time has come to abolish negative gearing on investments both stock and property.

Too much dead money is being gambled by people with no real understanding of markets or gearing, resulting in catastrophic losses during the gfc.

These losses will only be magnified as a new cohort of mugs are enticed by the banks to go long on shares and derivatives in the second leg of this bear market.

Many investors are withholding housing stock from young couples by artificially inflating the price of housing through the use of negative gearing.

There is no way that houses are worth 7 to 9 times times average yearly earnings. The longtime average is closer to 3 or 4 times.

Let us hope that Julia Gillard or Tony Abbott have the balls or ovaries to abolish this festering inequality in our financial system, whichever one of them gets in to government after the election.

gg

You can't be serious.

The government attempted to abolish it in the 1980's and the housing market fell apart. Two years later? Negative gearing was back and better than ever.

You probably agree with the Resources Super Profits Tax as well I am guessing.

They are both bad policies and sound like something straight out of the Ken Henry report with no basis in the real world.

 

[wayneL]

You can't be serious.

The government attempted to abolish it in the 1980's and the housing market fell apart. Two years later? Negative gearing was back and better than ever.

You probably agree with the Resources Super Profits Tax as well I am guessing.

They are both bad policies and sound like something straight out of the Ken Henry report with no basis in the real world.

Sounds like vested interests talking.

 

[tech/a]

My basic premise is.
Houses are overpriced

As it was in 1960/70/80/90/00
When I was a pimply faced kid earning $23/week a $15000 home was rediculously expensive.
When my Son bought his home last year at $400,000 it to was expensive.

Housing will ALWAYS be SEEN as expensive.

If the property portfolio is likely to return a trading profit within a reasonable time frame (say 2 or 3 years), then I agree the losses should be deductible in the current year. If there is no chance within the forseeable future, the deductions should be deferred.

This is as how it applies to normal business.

How on earth do you know what timeframe it will/could take?
If an investor is capable of supporting an investment (which someone is living in at a subsidised cost---the owner is Negatively geared) why shouldnt they be able to claim a deduction---they are paying tax on other earnings which allow them to own the property.

In the business situation they have NO earnings and as such nothing to claim against.
Rightly when they do the deductions are allowed.

Big difference.

 

[wayneL]

As it was in 1960/70/80/90/00
When I was a pimply faced kid earning $23/week a $15000 home was rediculously expensive.
When my Son bought his home last year at $400,000 it to was expensive.

Housing will ALWAYS be SEEN as expensive.

Yeah but no but yeah but no. There are measures of value where a mean or median may be considered as relative value for that point in time.

When house prices are above that, they can be considered expensive.

How on earth do you know what timeframe it will/could take?
If an investor is capable of supporting an investment (which someone is living in at a subsidised cost---the owner is Negatively geared) why shouldnt they be able to claim a deduction---they are paying tax on other earnings which allow them to own the property.

In the business situation they have NO earnings and as such nothing to claim against.
Rightly when they do the deductions are allowed.

Big difference.

There is reasonable expectation. If expenses are double maximum achievable earnings, one could bet their @ss there is no reasonable prospect of a trading profit in the forseeable future, unless there is some redevelopment prospects which may boost earnings beyond normal organic growth.

 

[tech/a]

Yeah but no but yeah but no. There are measures of value where a mean or median may be considered as relative value for that point in time.

When house prices are above that, they can be considered expensive.



There is reasonable expectation. If expenses are double maximum achievable earnings, one could bet their @ss there is no reasonable prospect of a trading profit in the forseeable future, unless there is some redevelopment prospects which may boost earnings beyond normal organic growth.

Maybe its me but it seems that the general opinion of house pricing stays well above median value far longer than below.
Infact Ive never seen comment about housing being affordable.

Wayne there is Capital gain and while its not always there if and when IPs are sold there will be capital gains tax to pay.
It may also be that LONGTERM the investor wants to create a passive income.
That may take him many many years to pay down or off his investment to do that.
Longterm holders also (If they hold for many many years) will/have seen periods of un precidented growth where they can sell some IPs and become 100% positve.

But if they cannot claim tax relief in the process over a long long period they may never achieve thier goal.They simply cant afford it.
The point Im making is that there is another side to the st home buyer arguement and thats retirees.

Far more of them and if Kids dont want higher taxes to support those who cannot support themselves they should take a leaf out of the book of those who did it just as hard as they did many years ago.

 

[irish joe]

I am a believer in "gearing" as a tool for wealth creation, but please take away the tax incentive unless it applies to one's own business.

On another thread I posted about stockmarkets being established as a means of companies attracting investors and not about trading and short termism.

the same applies with property; As an investor I am happy to borrow money to buy a property that i believe has good prospects for stable tenancy and longer term capital appreciation. Whether your tenant is BHP or a family not ready to buy, you still get your rent that grows over time, you still own the asset and guess what, because there is no tax deduction the govt has more money to spend on public housing

same in the stock market, companies get capital, investors get a growing dividend stream

Positive gearing brings positive outcomes for the investor AND the tenant,regardless of their current means.

 

[Julia]

Same in the stock market, companies get capital, investors get a growing dividend stream

Companies also fall over. Companies also cut their dividends in a downturn.
Your capital investment can fall significantly.
It ain't always all roses which is what you seem to be suggesting.

 

[irish joe]

Companies also fall over. Companies also cut their dividends in a downturn.
Your capital investment can fall significantly.
It ain't always all roses which is what you seem to be suggesting.

Julia my dear,

I would not for a minute suggest that companies can't fall over or indeed cut dividends in a downturn. In fact that further exemplifies my point about property. You can lose a tenant and indeed you can have a profit downgrade resulting in a reduced dividend.

I ask you the question though, despite capital movements, how do NAB or WOW or TLS dividends stack up against the current interest rates available. Yes there is capital risk bu that is why we invest in shares and property.

BTW I own NAB shares and a property leased to woolies for the next 15 yrs by way of disclosure. Oh yeah, i also have a telephone and internet connection.

I am off now to replenish my glass of pepperjack 01 and to see if GG is online somewhere. I have a meeting in the morning that requires my best.

 

[irish joe]

Maybe its me but it seems that the general opinion of house pricing stays well above median value far longer than below.
Infact Ive never seen comment about housing being affordable.

Wayne there is Capital gain and while its not always there if and when IPs are sold there will be capital gains tax to pay.
It may also be that LONGTERM the investor wants to create a passive income.
That may take him many many years to pay down or off his investment to do that.
Longterm holders also (If they hold for many many years) will/have seen periods of un precidented growth where they can sell some IPs and become 100% positve.

But if they cannot claim tax relief in the process over a long long period they may never achieve thier goal.They simply cant afford it.
The point Im making is that there is another side to the st home buyer arguement and thats retirees.

Far more of them and if Kids dont want higher taxes to support those who cannot support themselves they should take a leaf out of the book of those who did it just as hard as they did many years ago.

maybe I'm old fashioned but I have done ok. I have a significant share portfolio, some commercial rental properties as well as a significant super fund to which i contribute my maximum every yr. The fund owns more propertyand my international and small companies exposure.

With my properties and my shares I have borrowed to invest. I have bought blue chip shares and really good propertiess with tenancies to die for, None of these purchases have been made based on tax effectivenessrather on a forecast of net yield.

Oh and i am still a good 8 runs off saluting for my 50 at the gabba

 

[DB008]

Won't happen. There is a 200,000 dwelling shortfall p.a. in Australia and if you take out the investors, (ie, negative gearing), if anything, prices will go even higher.

 

[c-unit]

Why can't N/G only apply if the investment is a brand new dwelling? Wouldn't this provide incentives for investment in new housing construction and attack the housing bubble from both the demand and supply sides?

 

[saiter]

Won't happen. There is a 200,000 dwelling shortfall p.a. in Australia and if you take out the investors, (ie, negative gearing), if anything, prices will go even higher.

How does that work? If negative gearing is allowing investors to hold empty homes, then by abolishing negative gearing, the investors are forced to sell these homes which can then be occupied...