Australian Politics General...

[SirRumpole]

[QUOTE="Value Collector, post: 939230, member: 57577]


how so?[/QUOTE]

Bracket creep
Limited deductions from income
GST

Anyway, I would be more happy if all the things you defend are applied to everything except residential housing.

Every person that investors deprive of owning their own homes are going to be more dependent on the public purse later on, so it's in the national interest that as many people as possible are able to own their own homes if they wish.

Gradually getting investors out of the residential market by eliminating negative gearing and reducing the CGT discount on residential property will help not only the budget bottom line but will spread the national wealth and reduce the reliance on pensions in the future.

Investors in residential housing pretending that they are somehow unfairly treated by the tax system is a joke. They have been sponging on the public purse and wannabe owner occupiers for too long.

 

[luutzu]

Reduction in the book value of assets over time.
Deduction to the PL account, therefore reduction in tax payable over the life of the asset.

What else ?

There's also this thing call "impairment charges".

It's where the assets they had, according to their accountants and "independent third party consultant"... those assets can no longer earn as much money now as they're used to.

So the assets is "impaired" and all the "losses" from such impairment are tax deductible "expenses". They're non-cash losses, but they're real losses and the ATO will deduct them from any taxable income.

It's quite incredible.

 

[Ves]

There's also this thing call "impairment charges".

It's where the assets they had, according to their accountants and "independent third party consultant"... those assets can no longer earn as much money now as they're used to.

So the assets is "impaired" and all the "losses" from such impairment are tax deductible "expenses". They're non-cash losses, but they're real losses and the ATO will deduct them from any taxable income.

I don't actually think that this is correct. I believe they're only deductible immediately if the asset is a) severely damaged beyond repair or b) it is part of a corporate restructure.

A standard write down of goodwill or impairment of assets due to re-assessment of earnings power isn't tax deductible.

 

[luutzu]

I don't actually think that this is correct. I believe they're only deductible immediately if the asset is a) severely damaged beyond repair or b) it is part of a corporate restructure.

A standard write down of goodwill or impairment of assets due to re-assessment of earnings power isn't tax deductible.

I'm pretty sure it is. Having read Mermaid Marine's annual reports.

They claims some $250M in non-cash impairment losses; claim that as a business loss; and get a tax return.

Pretty sure Santos did the same.

 

[Ves]

I'm pretty sure it is. Having read Mermaid Marine's annual reports.

They claims some $250M in non-cash impairment losses; claim that as a business loss; and get a tax return.

Have a look at Income Tax Expense reconciliation at Note 6 of the 2016 Financial Report. Most of the write-off in that year actually ends up in the Deferred Tax Asset account.

From that perspective, they cannot use the tax benefit until the assets are either sold or destroyed.

 

[Value Collector]

Bracket creep
Limited deductions from income
GST

.

That is the same for everyone, we all use the same brackets, except its worse for investors because they might have to put 10 years earnings into one years brackets, putting them in the highest tax bracket, imagine if a worker had to claim 10 years wages in one years brackets.

Investors in residential housing pretending that they are somehow unfairly treated by the tax system is a joke. They have been sponging on the public purse and wannabe owner occupiers for too long.

No, I am not saying the current system is unfair, I am saying it is fair.

So the assets is "impaired" and all the "losses" from such impairment are tax deductible "expenses". They're non-cash losses, but they're real losses and the ATO will deduct them from any taxable income.
.

A company has to be able to claim its losses, loss of assets is just as real as loss of cash. I can't see a problem there.

 

[luutzu]

Have a look at Income Tax Expense reconciliation at Note 6 of the 2016 Financial Report. Most of the write-off in that year actually ends up in the Deferred Tax Asset account.

From that perspective, they cannot use the tax benefit until the assets are either sold or destroyed.

2015: without expensing $120.710M in impairment charge, would be a profit of $72.491M

Expensed that charge and it's a loss of $48.219M.

Same method results in a massive loss in 2016.

Got a tax benefit.


Then below in the cash flow statement, got a tax return.

 

[bellenuit]

Reduction in the book value of assets over time.
Deduction to the PL account, therefore reduction in tax payable over the life of the asset.

What else ?

Yes, but it doesn't make up for any discount on capital gain. It is an actual expense incurred that is eliminated over the life of the asset rather than all in the first year. If you didn't allow depreciation expense, then you could be taxing non-existent gains.

Company buys a machine for $22M that increases sales by $30M over the 20 year life of the machine. Looking at the marginal effect that has on the company books (i.e. all the rest being equal), if depreciation wasn't allowed as a deduction, that $30M in extra sales would be taxed $9M over 20 years (@30%) leaving a net profit after tax of $21M. So that investment of $22M by the company meant that they are $1M worse off than if they hadn't bought it at all.

It is a genuine expense that isn't making up for anything else. Not allowing it is akin to taxing revenue, not profit.

 

[SirRumpole]

Not allowing it is akin to taxing revenue, not profit.

I don't think I ever suggested that depreciation should not be allowed did I ?

 

[bellenuit]

I don't think I ever suggested that depreciation should not be allowed did I ?

No. You said: "businesses have depreciation deduction on assets which makes up for any discount on capital gain" which by implication is suggesting that it is a benefit of sorts that would compensate for the removal of the capital gain discount. It doesn't make up for anything. It is a fundamental business cost deductible from gross profit, just like raw materials, heating, lighting etc.

 

[SirRumpole]

Well, the RBA governor thinks negative gearing and CGT discount should be reviewed.

RBA's Philip Lowe takes aim at negative gearing, questions global race to cut corporate taxes

Australia could "take the heat out of the housing market" and make home prices more affordable by cutting negative gearing and capital gains tax concessions, the head of Australia's Reserve Bank admitted today.

Reserve Bank Governor Philip Lowe also questioned the wisdom of a global race to the bottom on corporate tax cuts, in a blow to the Government's claims that the central bank backed its view that cutting corporate tax would create "jobs and growth".

In a remarkably frank exchange before a Standing Committee on Economics, Dr Lowe said altering negative gearing and the capital gains tax would take some heat out of the housing market, at least in the short term.

While he said negative gearing alone wasn't the issue, it was the combination with capital gains tax discounts that fuelled investment demand.

While he couldn't quantify the effects, he said, if removed, it would likely help housing affordability.

http://www.abc.net.au/news/2017-02-24/philip-lowe-house-committee-economics/8299714

 

[Value Collector]

Note the reserve banks goal there would be to "take the heat out of the property market" not create a fair tax system.

Offcourse if your goal is to lower the price of an asset class, attaching an unfair and punitive tax to it is a way of achieving it.

 

[Value Collector]

View attachment 70066

2015: without expensing $120.710M in impairment charge, would be a profit of $72.491M

Expensed that charge and it's a loss of $48.219M.

Same method results in a massive loss in 2016.

View attachment 70068

Got a tax benefit.


Then below in the cash flow statement, got a tax return.

View attachment 70067

Whats wrong with that?

 

[SirRumpole]

Offcourse if your goal is to lower the price of an asset class, attaching an unfair and punitive tax to it is a way of achieving it.

Or removing a benefit from one class of owner and transferring it to another.

 

[luutzu]

Whats wrong with that?

As a shareholder, I'd say there's nothing wrong with that.

As a taxpayer, it's a bit rich to get to write what "losses" you'd like to claim.

Could a labourer/worker ever be able to do that kind of claim?

Say they earned $100K, then got injured and could only now earn $50k. Could they then claim an impairment to their asset and write that they had lost $50K? Or claim that they would have otherwise be paid $75K above their current $50K, so it's a $75K loss.

That's the equivalent of what these non-cash impairment charges are if applied to labour.

I'm not trying to be on that high horse or whatever, obviously I'm in the game. Just want to point out that the game's rigged in favour of one class against the rest.

As a capitalist, as a business owner, it serves us much better if we don't ourselves root for these things. Because in the end, an impoverished working class can't do good work, can't afford our goods and services, and there's that possibility of revolution where the top gets chopped first.

 

[Value Collector]

As a shareholder, I'd say there's nothing wrong with that.

As a taxpayer, it's a bit rich to get to write what "losses" you'd like to claim.

Could a labourer/worker ever be able to do that kind of claim?

Say they earned $100K, then got injured and could only now earn $50k. Could they then claim an impairment to their asset and write that they had lost $50K? Or claim that they would have otherwise be paid $75K above their current $50K, so it's a $75K loss.

That's the equivalent of what these non-cash impairment charges are if applied to labour.

I'm not trying to be on that high horse or whatever, obviously I'm in the game. Just want to point out that the game's rigged in favour of one class against the rest.

As a capitalist, as a business owner, it serves us much better if we don't ourselves root for these things. Because in the end, an impoverished working class can't do good work, can't afford our goods and services, and there's that possibility of revolution where the top gets chopped first.

Investors can't write off or impair their body either, I mean I can't claim a tax deduction if i lost my eyes or hands and I couldn't invest effectively anymore.

a better example would be talking about the tradies or labourers tools, which he probably gets to write off as a tax deduction in the year he buys them, that's a much better deal than the company gets.

But you are acting like the impairment is not a real loss.

That asset you are saying got impaired was purchased using real cash, that had already had tax paid on it, if it turns out that asset is not worth as much as what it is on the books for, or lost completely it gets written off as a loss against other income, nothing wrong with that.

Surely you would write off the trading losses you make against the trading profits to get a net figure to pay your tax on, or do you just forget about your losses and pay tax on your profit making trades?

You are looking at genuine accounting practices with a real purpose and trying to Create a story of how it is a rort or something.

 

[Ves]

2015: without expensing $120.710M in impairment charge, would be a profit of $72.491M

Expensed that charge and it's a loss of $48.219M.

Same method results in a massive loss in 2016.

Got a tax benefit.


Then below in the cash flow statement, got a tax return.

Took out your images, but people can see them above.

At note 7 you can see "Effect of expenses that are not deductible in determining taxable profit" which is $29.272m. I think this is the part of the impairment that they don't get an immediate tax benefit. It's been added back.

Wrong thread to get into a detailed argument about it, but that's what it looks like.

 

[SirRumpole]

It [depreciation] is a fundamental business cost deductible from gross profit, just like raw materials, heating, lighting etc.

No, depreciation is not "just like" raw materials, lighting etc.

Depreciation is a notional adjustment to the value of assets which may or may not be accurate; ie you can make either capital losses or capital gains if you sell the asset below or above its book value..

If you sell an asset for below its depreciated value you can offset that loss against other capital gains, whereas raw materials and lighting are direct expenses with a known value which are totally written off against income. (Maybe you didn't really understand this ).

But we are digressing. The real question that started this discussion is what should be the amount of CGT discount if any, and what is the justification for that amount ?

Labor has plans to cut the CGT discount from 50% to 25%, so what is the argument that this would be unfair ?

 

[Value Collector]

Labor has plans to cut the CGT discount from 50% to 25%, so what is the argument that this would be unfair ?

The argument is that retained earnings and inflation generally make up more than 25% of the capital gain, 50% is a better number.

 

[SirRumpole]

The argument is that retained earnings and inflation generally make up more than 25% of the capital gain, 50% is a better number.

When times are tough, we all have to make sacrifices.