Tax cuts negative gearing and housing

[crackaton]

I know this is just a dumb question but what happens if tax cuts gets to the point where we no longer need negative gearing?

Does this mean a mass exodus?

 

[excalibur]

I know this is just a dumb question but what happens if tax cuts gets to the point where we no longer need negative gearing?

Does this mean a mass exodus?

Hi Crack,

Could you please be a bit more explicit with your question?

What do mean by " no longer need negative gearing"...WHO?

Cheers,
excalibur

 

[crackaton]

Hypothetical,
as in high wage earners? what happens if there is an across the board tax of say 30% or so. Would negative gearing , in property, still be as huge an advanatage to so many as it is now?

 

[Duckman#72]

I know this is just a dumb question but what happens if tax cuts gets to the point where we no longer need negative gearing?

Does this mean a mass exodus?

Hi Crackaton

We don't need neagtive gearing now. Do you mean "once the top tax rates are so high that the majority of people negatively geared are only on 30c per dollar?"

Duckman

 

[crackaton]

Hi Crackaton

We don't need neagtive gearing now. Do you mean "once the top tax rates are so high that the majority of people negatively geared are only on 30c per dollar?"

Duckman

Why don't we need negative gearing now? Because most wages earners are in or near the top bracket?

 

[crackaton]

what I really want to know, is what effect any changes in our present tax system will have.

There's been a lot of talk about it lately, and it all seems very vague. Any tax consultants accountants out there?

 

[excalibur]

Hi Crack,

I think that you just answered your own question.
You don`t have to be a tax consultant to analyze how the mass will behave after a certain tax-cut.
Of course that a mass exodus would occur after such a radical decision.
Often is such propaganda issued, just to cool down the market IMO.
But in reality gradual tax cuts are consequentially decided to keep things under control.

 

[Duckman#72]

Why don't we need negative gearing now? Because most wages earners are in or near the top bracket?

Hi Guys

It depends upon who you mean when you say "we" - do you mean Australia, taxpayers, or "the tax system"? Most wage earners are not in the top tax bracket.

I agree with Excalibur. Your question has been answered. It certainly becomes less attractive at 30c compared to 47c. However, depending on what changes there are to the current tax system there could still be benefits of investing into rental properties - the capital allowance(building write-off) claims would still be beneficial. Plus a number of people invest in property as a form of forced savings - this won't change.

I think it will be a brave government that tinkers with negative gearing as so many people are doing it - rightly or wrongly. IMO an increase in interest rates will be the biggest risk to the property market. There are a lot of rental investors that are not returning much money on very high value properties that are banking on another big spurt of capital growth. A rates rise would hurt.

Duckman

 

[Duckman#72]

what I really want to know, is what effect any changes in our present tax system will have.

The tax act started at 100 pages and is currently over 1600 pages. This includes a simplification and re-write! As good as Peter Costello and the Libs have been in running the economy over the past 10 years they have dropped the ball in relation to Tax Reform. Costello believes tax reform is a change to the tax threshold levels and reduction in tax rates.

The Tax Act is like a house that was built in 1930 to which an extra room has been added in each decade since. Sure it's a big house that does a job - but God its a mess that could be so much better.

Successive governments have built on their predecessors mistakes. Take Capital Gains Tax for example - by Paul Keatings own admission it was never designed to be as wide reaching as it has become. The Government love it. The current Government introduced the 50% capital gains tax exemption to those people holding onto an investment for more than 12 months. What sort of bull **** rule is this? Sure it is good for the taxpayer but in reality it encourages short term investing. What if you hold onto an investment for 20years? Yep still only 50% exemption. The 50% exemption helped fuel the property price rises.

Also the government, despite being labelled the "employers friend" have introduced so many pieces of red tape. It has done nothing to encourage employers to employ more staff or encourage people to go in business for themselves.

While we are on the subject of stupid taxes (I know I'm moving off income tax) Payroll Tax is a cashflow burdon that is just a revenue raising exercise. What is the reasoning behind it except for - "you can afford to pay it?"
These are just a few thoughts.
Duckman

 

[Dettis]

Hi Guys

It depends upon who you mean when you say "we" - do you mean Australia, taxpayers, or "the tax system"? Most wage earners are not in the top tax bracket.

I agree with Excalibur. Your question has been answered. It certainly becomes less attractive at 30c compared to 47c. However, depending on what changes there are to the current tax system there could still be benefits of investing into rental properties - the capital allowance(building write-off) claims would still be beneficial. Plus a number of people invest in property as a form of forced savings - this won't change.
Bookkeeping services near me http://yourbooksontime.com/bookkeeping-services
I think it will be a brave government that tinkers with negative gearing as so many people are doing it - rightly or wrongly. IMO an increase in interest rates will be the biggest risk to the property market. There are a lot of rental investors that are not returning much money on very high value properties that are banking on another big spurt of capital growth. A rates rise would hurt.

Duckman

Yes, you are right

 

[MovingAverage]

I know this is just a dumb question but what happens if tax cuts gets to the point where we no longer need negative gearing?

Does this mean a mass exodus?

So long as people pay tax there will always be a demand for negative gearing. I think the real issue is interest rates...if interest keep dropping negative gearing becomes far less effective.

 

[MovingAverage]

While we are on the subject of stupid taxes (I know I'm moving off income tax) Payroll Tax is a cashflow burdon that is just a revenue raising exercise. What is the reasoning behind it except for - "you can afford to pay it?"
These are just a few thoughts.
Duckman

There are plenty of examples of stupid taxes with not much reasoning behind them...stamp duty on housing comes to mind.

 

[Movendi]

Hi Guys
I think it will be a brave government that tinkers with negative gearing as so many people are doing it - rightly or wrongly. IMO an increase in interest rates will be the biggest risk to the property market. There are a lot of rental investors that are not returning much money on very high value properties that are banking on another big spurt of capital growth. A rates rise would hurt.

Duckman

What makes you think rates will rise anytime soon ?? Low interest rates aren't going anywhere.

 

[moXJO]

wasn't that post from 2006?