The future of energy generation and storage

[Value Collector]

Qantas paid dividends during the time it wasn't paying tax, so if it and other companies can do that then investors can afford to take a haircut as well.

You can make genuine non cash losses while still having cashflow to pay dividends.

eg. Imagine You had $1,000,000 of money in the bank that has already been taxed, So its yours free and clear.

Say you decide to put it into a $1 Million dollar house boat, that you rent out for $100,000 per year, But it turns out the house boats life is only 10 years.

Each year you get $100K in income that you can pay as a dividend to yourself, But the House boat also goes down in value by $100K a year as it eats into its 10 year life span.

Your investment is generating a return to you, but its not making a profit that is taxable, The $100K you are getting paid is offset by the $100K capital loss in the value of the asset.

In reality you are just getting your original $1 Million capital paid back to you over 10 years, you never earned any additional profit.

If the boat ends up lasting 15 years, so you do end up getting an additional $500K over that extra 5 years, then you will start paying tax, because then you have made a profit, but until then you don't get taxed.

If you boat ends up only lasting 5 years, you make a $500K loss, which you can write off against future profits from other ventures, The fact is you shouldn't have to pay tax until you have actually made a profit on that original $1M.

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In qantas example, if they had been depreciating assets with a life of 20 years, but it turns out they only ended up lasting 10, they may get a big write off in one year that flows over to the following years meaning they pay no tax, but in reality this is because they paid to much tax in the prior 10, by not writing their equipment off based on the actual 10 year life that happened, because they had assumed a 20 year life.

 

[luutzu]

They are already doing those things.

Affordable housing? Where?

 

[luutzu]

We must have got in about the same time, made a nice 40% and was quite happy at the time. Wish I held onto it, such a solid bluechip. Meanwhile I still have that speculative mining stock worth stuff all and lucky to do 10k $ volume a year that just won't die off yet but is still there in the portfolio to remind me of my stuff up those years back.

Mean while the Vic Greens have all the answers, turn us into the next California and beat SA to do it https://reneweconomy.com.au/greens-call-to-phase-out-coal-in-victoria-100-renewables-by-2030-2030/

If I recall at the last VIC election the Greens said if they hold the balance of power they would shutdown all Vic coal plants by 2025. Guess we'll have some nice big redundant Holden and Ford sheds to put the homeless in.

I put most of my stocks back then into RIO and BHP. For safe keeping and such as I was getting "a real job". Those and ABC Learning.

So I still got two stocks reminding me of blindly following the "long term" investment strategy.

 

[sptrawler]

Rationally we’d make steel and fill the ship to effectively 100%

I thought that, but talking to someone fairly high up in the business, he says it isn't economical to make the steel here.
Firstly to fill the ship to capacity it would have to be in ignot form not rolled, therefore would require re processing, at destination.
If the steel was in rolled form, the amount you could fit in the vessel would be restricted.
I think if you fill a ship to 100% capacity, it sinks, something to do with displacement I think.
Way above my pay grade, but he said the most efficient way, is to pour in iron dust until the ship reaches its plimsoll line then off it goes.

 

[SirRumpole]

In qantas example, if they had been depreciating assets with a life of 20 years, but it turns out they only ended up lasting 10, they may get a big write off in one year that flows over to the following years meaning they pay no tax, but in reality this is because they paid to much tax in the prior 10, by not writing their equipment off based on the actual 10 year life that happened, because they had assumed a 20 year life.

Sounds like creative accounting to me.



Assets are written off over their lifetime, in your scenario few companies would pay any tax at all. It's the operating profit not capital profit that is taxable.

 

[Value Collector]

Affordable housing? Where?

$650,000,000 was spent in this Minto estate alone.

 

[Value Collector]

Sounds like creative accounting to me.

Nah, assets wear out, especially planes.

Of course you can get creative and write them of quicker than they actually wear out, But this just delaying the taxation, it doesn't reduce the over all amount.

Also, sometimes you will be writing things off over longer periods, and then suddenly the item is obsolete and it turns out you should have been writing it off over a shorter period the whole time.

 

[Value Collector]

I thought that, but talking to someone fairly high up in the business, he says it isn't economical to make the steel here.
Firstly to fill the ship to capacity it would have to be in ignot form not rolled, therefore would require re processing, at destination.
If the steel was in rolled form, the amount you could fit in the vessel would be restricted.
I think if you fill a ship to 100% capacity, it sinks, something to do with displacement I think.
Way above my pay grade, but he said the most efficient way, is to pour in iron dust until the ship reaches its plimsoll line then off it goes.

China probably deals will unions and greenies more effectively that we do to.

 

[luutzu]

$650,000,000 was spent in this Minto estate alone.

Not sure I can trust a video with music and voice over like a propaganda piece man.

Yea, there are a few new social housing estates that I'm aware. They're very impressive. Good to see.

See how socialism is good for everyone?

 

[luutzu]

Nah, assets wear out, especially planes.

Of course you can get creative and write them of quicker than they actually wear out, But this just delaying the taxation, it doesn't reduce the over all amount.

Also, sometimes you will be writing things off over longer periods, and then suddenly the item is obsolete and it turns out you should have been writing it off over a shorter period the whole time.

The human body wears out too right? Most parts are irreplaceable. Sooo... where's the tax deduction on that?

 

[SirRumpole]

The human body wears out too right? Most parts are irreplaceable. Sooo... where's the tax deduction on that?

Yeah, we should all be able to claim depreciation on our bodies.

 

[Smurf1976]

If I recall at the last VIC election the Greens said if they hold the balance of power they would shutdown all Vic coal plants by 2025.

Ultimately yes but nobody with an understanding of the technical and resource issues would think that sensible even if unlimited funds were available.

What we need is to get the politics out of it.

 

[Value Collector]

Yeah, we should all be able to claim depreciation on our bodies.

Maybe, but it would be net zero effect, Because then the government would then apply a capital value to you at birth from which the depreciation charge is deducted each year and if labour get in, they might want to limit your rights to claim the depreciation, but also tax you an additional tax on the capital value of your body

 

[Value Collector]

Assets are written off over their lifetime, in your scenario few companies would pay any tax at all. It's the operating profit not capital profit that is taxable.

This is how its done, and plenty of companies pay tax.

But obviously tax is only due on Profits, and you can only say you made a profit if over an assets life you extract more $$$ out of it than it cost to Buy it, Run it and eventually dispose of it.

Using the wind turbines as an example.

They have a 20 year life, if the cost $100 Million and generate $10 Million a year in cashflow from electricity sales, then they aren't making $10 Million a year in profit, they are only making $5 Million a year.


Over the 20 Year life they will bring in a total of $200 Million in cashflow, But the $100 Million original capital value has been depleted to $0 because the assets are now worthless, so the total profit is only the $100 Million additional cashflow that was brought in over and above the capital cost. They would have paid tax on the additional earnings over the life of the project at the rate of $5 Million taxable income each year, while $5 Million cashflow returned to their bank without being taxed, because that was their original capital returning.

 

[SirRumpole]

Over the 20 Year life they will bring in a total of $200 Million in cashflow, But the $100 Million original capital value has been depleted to $0 because the assets are now worthless, so the total profit is only the $100 Million additional cashflow that was brought in over and above the capital cost. They would have paid tax on the additional earnings over the life of the project at the rate of $5 Million taxable income each year, while $5 Million cashflow returned to their bank without being taxed, because that was their original capital returning.

Well that's why they can deduct depreciation.

 

[luutzu]

Maybe, but it would be net zero effect, Because then the government would then apply a capital value to you at birth from which the depreciation charge is deducted each year and if labour get in, they might want to limit your rights to claim the depreciation, but also tax you an additional tax on the capital value of your body

Can't argue with a capitalist now can you?

 

[Value Collector]

Well that's why they can deduct depreciation.

Thats the point, sometimes you might have to write of a bunch of things early, and it wipes out all profit for a couple of years, so no tax is due, But you could still pay dividends, because its not a cash flow loss, you have just lost some of your capital that was employed.

 

[SirRumpole]

Thats the point, sometimes you might have to write of a bunch of things early, and it wipes out all profit for a couple of years, so no tax is due, But you could still pay dividends, because its not a cash flow loss, you have just lost some of your capital that was employed.

The simple point is, if the company can afford to pay dividends they can afford to pay tax, either way it's dead money to the company.

 

[Value Collector]

The simple point is, if the company can afford to pay dividends they can afford to pay tax, either way it's dead money to the company.

Do you understand you can have the cash flow to pay a dividend, while also losing a chunk of your capital? so you aren't actually making a profit.

Imagine if something happened that made you wind farm totally obsolete and worthless in year 5 of its 20 year life span,

It would have been worth $75 Million to you, You may still have got $10 Million revenue that year, but you have lost $75 Million of your capital, It would be wrong for the government to try and tax that $10 Million, because you have made a Loss, not a profit, you are poorer, not richer regardless of the dividend, that $10 Million dividend is just your capital being returned.

Cashflow and profit are two different things.

If you happen to have some other investment generating profits, those profits won't be taxable till you make back the $75 Million you lost on the obsolete wind farm.

 

[SirRumpole]

Do you understand you can have the cash flow to pay a dividend, while also losing a chunk of your capital? so you aren't actually making a profit.

Tax is also paid from cash flow.