Australian Politics General...

[Value Collector]

So back to what SirR was saying, why are capitalists such a protected specie?

And you can't deny that their wealth and interests are highly protected.

Or a depositor's putting their after-taxed earning into a bank, it earn interests but that interest is taxable at the full amount, not at a discount like capital gains.

The Average depositor is actually the protected species.

If you have deposit with a bank, before you lose a single 1 cent, the Shareholders will lose 100% of their equity, the Bondholders will lose 100% of their bonds, The other debt holders will lose 100%, then the government/taxpayers steps in and guarantees the deposit.

So the depositor is taking no investment risk, so earns no investment return, but they get interest it offset inflation.

An average Joe earning an extra 2% on last year's aren't really earning anything extra. So why are wages not giving some sort of discount to ease the pain of inflation?

If they are doing the same work, why should they earn anything extra, if its just an inflation adjustment, thats just recognising that if they could buy a coke for 5 mins labour last year, we want them to be able to still be able to afford the same coke for the same labour.

There is actually no difference between recognising that a workers wage is not going to buy the same amount of stuff next year, so the system needs to raise wages and increase the tax free threshold etc, and recognising that an investors capital is not going to buy the same amount of stuff, so part of the gain is not a real "gain"

Especially when you factor in retained earnings.

 

[SirRumpole]

so the system needs to raise wages and increase the tax free threshold etc,

But the tax free threshold is not adjusted for inflation whereas investors get a notional adjustment which may be way higher that actual inflation.

 

[luutzu]

The Average depositor is actually the protected species.

If you have deposit with a bank, before you lose a single 1 cent, the Shareholders will lose 100% of their equity, the Bondholders will lose 100% of their bonds, The other debt holders will lose 100%, then the government/taxpayers steps in and guarantees the deposit.

So the depositor is taking no investment risk, so earns no investment return, but they get interest it offset inflation.

You have that backwards there.

A gov't deposit guarantee is an insurance for the banks - at zero cost to the banks.

The bank uses that insurance and can "take risk" with people's deposits. If the "risks" paid off, they keep the profit, if it goes to heck, the gov't will step in.

If you remove that gov't deposit guarantee, how many people do you reckon would just deposit their savings at just any bank? They'll make sure that the bank don't get creative with their deposits. Just the old and usual banking business of lending deposits to local home owners and small businesses. Nothing fancy or risky.

A gov't backed guarantee get depositors cash in, lots of it. It also permit the bank to tell other lenders of theirs that the gov't will bail them out in case anything ever happen, so don't worry about it. In doing so, they can borrow for less as the risk is practically taken on by the gov't.

Who is this nice and generous gov't? Friends and future consultants having the people's mandate to handle the people's money.

If they are doing the same work, why should they earn anything extra, if its just an inflation adjustment, thats just recognising that if they could buy a coke for 5 mins labour last year, we want them to be able to still be able to afford the same coke for the same labour.

There is actually no difference between recognising that a workers wage is not going to buy the same amount of stuff next year, so the system needs to raise wages and increase the tax free threshold etc, and recognising that an investors capital is not going to buy the same amount of stuff, so part of the gain is not a real "gain"

Especially when you factor in retained earnings.

Most workers, even uni graduates, do not see a 2 or 3% pay rise as merely keeping up with inflation dude.

I know a few guys who were so happy they went out to celebrate when they got an annual raise like that.

And it's never sold that way by HR anyway. New pay "rise", new responsibilities.

 

[SirRumpole]

The Average depositor is actually the protected species.

For good reason. The whole financial system depends on the "Average Depositor". If people don't trust banks then they won't deposit their money, businesses won't get loans and everything stops.

If investors don't invest in residential housing, the worse thing that will happen is that they become affordable for the mums and Dads again.

 

[McLovin]

Get rid of negative gearing and cut income taxes. Don't let the government expand it's revenue base.

 

[luutzu]

For good reason. The whole financial system depends on the "Average Depositor". If people don't trust banks then they won't deposit their money, businesses won't get loans and everything stops.

If investors don't invest in residential housing, the worse thing that will happen is that they become affordable for the mums and Dads again.

I heard of an investor who bought a pretty pricey house but decided not to rent it out at all. Just leave it empty. He can claim a loss on it anyway. That and no tenant mean less repair and maintenance.

 

[SirRumpole]

I heard of an investor who bought a pretty pricey house but decided not to rent it out at all. Just leave it empty. He can claim a loss on it anyway. That and no tenant mean less repair and maintenance.

Sure , no income from it gives a bigger tax loss. Not sure how long the ATO will let him get away with it though.

 

[luutzu]

Sure , no income from it gives a bigger tax loss. Not sure how long the ATO will let him get away with it though.

Maybe he flipped it after 12 months. But yea, heard that from an uncle saying how his wife's sister sold their house it's never rented out or lived in after.

We then go on about a house unoccupied would deteriorate more quickly since the air won't flow and pests and rubbish would collect etc. But I guess that's just poor men talking

 

[SirRumpole]

Maybe he flipped it after 12 months. But yea, heard that from an uncle saying how his wife's sister sold their house it's never rented out or lived in after.

We then go on about a house unoccupied would deteriorate more quickly since the air won't flow and pests and rubbish would collect etc. But I guess that's just poor men talking

I'm sure they would have cleaners around regularly. Another tax deduction you know.

 

[luutzu]

I'm sure they would have cleaners around regularly. Another tax deduction you know.

Oh yea. Dam!

Been reading a bit about Murdoch and the guy practically built his empire on taxpayers' dole.

He would borrow and leverage the heck out of his balance sheet, overpay for companies of strategic importance... knowing that it'll lose money in the first few years... But that's alright because he can claim those losses against other profitable operations.

That's why the likes of GE, Newscorp somehow managed to not pay any income tax. And these are the old low-hanging fruits... there's all those other means plebs like us couldn't even imagine is possible.

 

[SirRumpole]

But that's alright because he can claim those losses against other profitable operations.

Yes, that's a dodge allright.

Maybe if people could only claim deductions against a particular asset. eg if you owned a rental property you could only claim interest expense against the income from that asset. If you made a loss on that asset, tough you have to write it off and not claim it against other income.

It's not up to the taxpayer to subside loss making assets, it's up to the shareholders.

 

[Value Collector]

But the tax free threshold is not adjusted for inflation whereas investors get a notional adjustment which may be way higher that actual inflation.

It has generally risen over time, its much higher than it was when I entered the work force.

You have that backwards there.


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No I don't, your money at the bank is guaranteed by the government.

How much return to you think a depositor deserves when their position is not only the safest and most senior of all the people in the banks capital structure, but their position is also guaranteed by the government?

thats an actual question, obviously expected returns need to be highest for those who's funds are least secured i.e. equity holders, and reduced through the positions such as bond holders, unsecured deposits etc.

So how much does a person first inline to claim assets with a government guarantee deserve to earn?

I think no real "wealth creation", if they earned just enough interest to cover inflation, that would be fair?

For good reason. The whole financial system depends on the "Average Depositor". If people don't trust banks then they won't deposit their money, businesses won't get loans and everything stops.

If investors don't invest in residential housing, the worse thing that will happen is that they become affordable for the mums and Dads again.

Yes, but their level of risk is practically zero, so they don't deserve big profits, they deserve to have their money kept safe, and have enough interest to protect it from inflation, if they want to generate wealth, there is way to move up the chain into higher risk/reward areas.

I heard of an investor who bought a pretty pricey house but decided not to rent it out at all. Just leave it empty. He can claim a loss on it anyway. That and no tenant mean less repair and maintenance.

No he can't, vacant property is not a tax deduction.

 

[SirRumpole]

Yes, but their level of risk is practically zero, so they don't deserve big profits,

And they don't get big profits , bank interest rates are barely at the level of inflation.

No he can't, vacant property is not a tax deduction.

Yes and no. If the property is listed for rent but there are no takers then expenses are still deductible.

All an owner has to do is set the rent so high that no one can afford it, and bingo they get deductions against no income.

Mr Barbara said if the property stood empty while you had it listed with a real estate agent in the process of looking for a tenant, all the expenses would be allowed for a tax deduction.

He cited some of his clients in north Queensland who had been unable to find renters for their older property given a massive new development next door that was able to offer cheaper rent and newer premises.

While the rental property remains vacant, the owners are still able to negatively gear that property.

"The concept is that you are in the business to make a profit out of rental," Mr Barbara said.

http://www.abc.net.au/news/2016-11-24/can-you-negatively-gear-an-empty-house/8054166

 

[Value Collector]

And they don't get big profits , bank interest rates are barely at the level of inflation.
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Yes, which Is about where they should be.

And they don't get big profits , bank interest rates are barely at the level of inflation.



Yes and no. If the property is listed for rent but there are no takers then expenses are still deductible.

All an owner has to do is set the rent so high that no one can afford it, and bingo they get deductions against no income.

If someone wants to do something dumb and lose money, let them.

losing $1, so that you can claim back a 30 cent refund is hardly a way to riches.

 

[SirRumpole]

Negative gearing is creating empty residences and artificial scarcity.

http://www.smh.com.au/comment/negat...-and-artificial-scarcity-20160324-gnqoeb.html



"
This reflects the dominant driver of negative gearing in which capital gain is the main objective, not the rental yield that you would expect from a positively geared property. Unsurprisingly, on the fringe where there can be less expectation of capital gains, there are much lower rates of empty dwellings.

Together these points highlight some of the perverse outcomes that current tax and housing policy settings are driving in Australian cities.

The structure of the housing market is driving a mismatch between the supply of housing and housing need. This only further exacerbates the emerging spatial inequalities experienced in our major cities, driving unaffordability in central, well connected and serviced parts of the city. This is a supply crisis driven not by the planning system, but by a concentration of empty and under-utilised housing.

This trend is likely to have worsened since 2011, as more housing is being delivered precisely in the locations where there appears to be a concentration of homes standing empty. Housing supply is being increasingly driven by a property investment market that is failing community expectations of affordable homes in places people might want to, let alone need to, live. Losses against a rental investment can be offset by negative gearing and resulting capital gains taxed at a reduced rate when the property is eventually sold.

Leaving housing empty is both profitable and subsidised by government. This is taxation lunacy and a national scandal.

Moreover, the failure of governments to acknowledge the pervasive prevalence of empty homes only adds to the ongoing affordability crisis. Other countries take a less sanguine approach to owners deliberately leaving properties vacant when there is a clear housing shortage, often by imposing higher rates or property taxes on housing known to be empty for long periods.

Until such time as we act decisively on this issue, arguments about the need for less planning to support increased housing supply will continue to ring hollow. Let's start to address both the housing supply and the housing affordability problems by solving the empty homes problem first."

 

[SirRumpole]

If someone wants to do something dumb and lose money, let them.

Not on the taxpayers purse thank you.

 

[luutzu]

It has generally risen over time, its much higher than it was when I entered the work force.


No I don't, your money at the bank is guaranteed by the government.

How much return to you think a depositor deserves when their position is not only the safest and most senior of all the people in the banks capital structure, but their position is also guaranteed by the government?

thats an actual question, obviously expected returns need to be highest for those who's funds are least secured i.e. equity holders, and reduced through the positions such as bond holders, unsecured deposits etc.

So how much does a person first inline to claim assets with a government guarantee deserve to earn?

I think no real "wealth creation", if they earned just enough interest to cover inflation, that would be fair?



Yes, but their level of risk is practically zero, so they don't deserve big profits, they deserve to have their money kept safe, and have enough interest to protect it from inflation, if they want to generate wealth, there is way to move up the chain into higher risk/reward areas.



No he can't, vacant property is not a tax deduction.

If Berkshire were to insure the banks the way our gov't guarantee banks depositors their deposits, how much you reckon Buffett would charge for that? Not free that's for sure.

I haven't look, but does the banks pay any premium to the gov't for that insurance?

Anyway, how is it risk-free to deposits? It's no-risk because the gov't will guarantee it in case the bank goes. That's not risk-free, there's a risk but big brother will do the bank's right, taking all risks that are there away from the bank. Encouraging people to do business with them.

Does the gov't also guarantee your average mom and pop business? Would the gov't write a guarantee covering all liabilities mom and pop incurred but can't pay later? No.


Dude, in the normal world, it is a given that when depositors entrust money to the bank, it is to be safe and secured.

You can't make it out to be some sort of benevolence that the bank take deposits and the gov't guaranteeing its safety... can't take that as doing depositors a favour. Not when the banks turn around and lend those deposits at twice the "cost" on a risk-free case.

 

[Value Collector]

Not on the taxpayers purse thank you.

tax payers don't actually hand money over.

I haven't look, but does the banks pay any premium to the gov't for that insurance?

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The reserve Bank pays its profits to government, so the government is extracting profits from the banking system, not to mention all the stamp duties on loans, and the countless other benefits to society by having a properly functioning banking system.

Anyway, how is it risk-free to deposits?

where is the risk?

What is the risk compared to say just storing the $100K at your house? the bank has far less risk, and the interest you get even gets rid of inflation risk.

Banks offer a free or low cost place to store your money (so you don't have to buy a safe), gives you free options to transfer it around the country, protect it from inflation via a nominal interest payment, and guarantee it with their entire balance sheet and the government guarantee it to.

Does the gov't also guarantee your average mom and pop business? Would the gov't write a guarantee covering all liabilities mom and pop incurred but can't pay later? No.


.

No the government doesn't really guarantee the equity holders of any business, hence why I think its fair that investors in equity deserve a much higher return than depositors.

 

[Value Collector]

.


Dude, in the normal world, it is a given that when depositors entrust money to the bank, it is to be safe and secured.

Ofcourse, they are not subject to any of the normal risks of business, hence why its silly to compare their income etc with that of investors, which is what you were trying to do, when you were saying "why don't depositors get this" "why don't savers get that"

 

[luutzu]

Ofcourse, they are not subject to any of the normal risks of business, hence why its silly to compare their income etc with that of investors, which is what you were trying to do, when you were saying "why don't depositors get this" "why don't savers get that"

So you think it's fair that a depositor would put their savings into a bank and be happy and thankful that their deposit is safe? Everything else is a bonus?

Then out of the bank's generosity, they'll pay an interest somewhere slightly below inflation. What more should be asked for.

Would you deposit money into my account on the same term? That if I invest, the profits I get to keep. But if I were to lose it, the gov't [using taxpayers cash] pay you for me.

Sounds fair yea?

Fair enough to say that that's how to world works. But honestly, the banks and the gov't are screwing the poor over in more ways than one. Legal, sure. Fair it is not.