http://www.abc.net.au/news/2012-10-23/suggestion-for-a-surplus/4330352
Estimated cost a year to the taxpayer $ 5 billion.
Is this amount justifiable
Estimated cost a year to the taxpayer $ 5 billion.
Is this amount justifiable
ABC The Business on Negative gearing
- Thread starter Weasil007
- Start date
Ahh this old chestnut again...
What this story omits to tell you is the amount of revenue negative gearing raises indirectly from other taxes collected along the way... That's why the Govt will never abolish NG - its a revenue spinner that far outstrips tax deductions given back to investors.
What this story omits to tell you is the amount of revenue negative gearing raises indirectly from other taxes collected along the way... That's why the Govt will never abolish NG - its a revenue spinner that far outstrips tax deductions given back to investors.
You seem pretty negative about property in general weasil.
Negative gearing has to go, it is good to see momentum building against it.
It's an unfair handout to speculators, at the expense of other tax payers.
With interest rates so low, now would be an excellent time to start phasing it out on existing properties with minimum impact. It should be allowed to a degree on new construction only.
It's an unfair handout to speculators, at the expense of other tax payers.
With interest rates so low, now would be an excellent time to start phasing it out on existing properties with minimum impact. It should be allowed to a degree on new construction only.
Well lets just say as a taxpayer I want to be assured my money is being well spent, or if spent if comes back with interest in another form (such as returned tax revenue or income as a few have suggested).
I can't say I'm a big fan of negative gearing. All good in the good times while property values increase but in flat or a declining market you start to see a few holes... It like every man and his dog jumped into it and now there in deep dodo with declining property values and rising unemployment it reckon it's going to be a bloodbath..
Got no issue with property in general and am about to get into a commercial property myself
Agreed, but forget the new construction...that's what the building boost grants are for, I mean how much is enough already!
http://www.abc.net.au/news/2012-10-23/suggestion-for-a-surplus/4330352
Estimated cost a year to the taxpayer $ 5 billion.
Is this amount justifiable
Could you imagine if the government (any government) had to mismanage what investors do:
http://somersoft.com/forums/showpost.php?p=841265&postcount=14
From this thread:
http://somersoft.com/forums/showthread.php?p=841265#post841265
Fine. They'll save handing out $5B in deductions, but lose billions more in revenue from the taxes they rake in. Refer to Rixter's response.
But hey, this government seem all gung ho in creating a tax that raises no money, why not stop a $5B handout and really lose some money.
http://www.abc.net.au/news/2012-10-23/suggestion-for-a-surplus/4330352
Estimated cost a year to the taxpayer $ 5 billion.
Is this amount justifiable
Balanced against this cost is the tax income received from investors, without this the picture is incomplete.
No doubt you have the sense to look at all the variables to arrive at a conclusion whether it is justifiable or not.
What is your conclusion?
If you've ever run a business and have an understanding of what it takes to be profitable, you'd be very disappointed with how the government runs the country and spends your tax money before you even start thinking about negative gearing. It annoys me no end when I pay a $20k tax bill then see Julia & Tony calling each other sexist in parliment...
It could be argued that not having negative gearing would make property more affordable. No body would want to see their property values drop, but it might be a good way to get people into their own homes much easier so it would be a good thing.
The problem is it doesn't make investing more affordable. It's worth remembering that for an investor to be negative gearing, it means that on some level they're subsidsing the tenants costs to reside in that property. If the investor gets 30 cents in the dollar back from the government, it still costs them 70 cents in the dollar, which is 70 cents the tenant isn't paying. Fewer investors means fewer rental properties, which means the government will have to cover a lot more social housing. DHA has barely got their act together, does anyone really believe the goverment can cater to a wider rental market as well?
From the point of view of someone in finance with a reasonable understanding about property affordability, I'd also argue that most of the people who say they can't afford to save a deposit, would still be in the same position if house prices were lower - they still wouldn't be able to save a deposit. I also know for a fact that there is still plenty of housing in Australia that is still easily affordable to the majority of employed people.
Negative gearing isn't unique to property either. It's done across almost all asset classes and in business as well. I don't see many people jumping up about removing negative gearing through depreciation of plant and equipment for businesses, or making interest on leveraged shares non-deductable.
In truth, property is probably the highest taxed asset class in Australia. You get taxed on the way in (stamp duty), you get taxed on the way out (capital gains) and you get taxed in the meantime (land tax). Most other assets only get taxed when you sell for a profit.
I thought tax payers are getting an excellent deal. All these property investors will eventually retire from their property investments. Pay bucket loads in taxes from rents, land tax once their properties become positively geared.
But the best deal tax payers get out of property investors is they will not burden the government for pension, health care benefits in their old age. Have you done the sums?
Cheers,
Oracle.
you may or may not remember, but this was tried in 1983 to co-incide with the AUD float.
investors dumped their stock, which smashed housing prices in the short term.
eventually, this stock was taken up by the private market, and the ratio of investors 1:20 still hasn't changed - so 95% of that stock was bought by OO's
that's a loss of 95% of private rentals.
rents subsequently shot through the roof, making it unaffordable for those on lower incomes.
so the lines for social housing grew and grew, to the point where the govt couldn't ignore it and had to provide social housing at a cost of approx 40x what it cost them to neg gear an investor's loss per house.
so the small amount of taxpayer's money that was used to subsidise neg gearing and now "saved" was now blown out of the water by FORTY times.
negative gearing was re-instated in 1985 to "alleviate" the social housing trend.
however, the effect of this neg gearing removal is one of the reasons the country headed into recession in the early 90s - yes, it took that long to be realised.
so if you say that "we, the taxpayer" could save $5b by abolishing neg gearing, well, you may be right....
....as long as you have an adjusted $80b stashed away to provide social housing when investors don't invest in private rentals, or families are left on the street as rents skyrocket to reflect the actual cost of holding a property.
this is an actual example, from this country, since the dollar has been floated of an attempt to remove negative gearing.
does that sound like a good outcome to you?
investors dumped their stock, which smashed housing prices in the short term.
eventually, this stock was taken up by the private market, and the ratio of investors 1:20 still hasn't changed - so 95% of that stock was bought by OO's
that's a loss of 95% of private rentals.
rents subsequently shot through the roof, making it unaffordable for those on lower incomes.
so the lines for social housing grew and grew, to the point where the govt couldn't ignore it and had to provide social housing at a cost of approx 40x what it cost them to neg gear an investor's loss per house.
so the small amount of taxpayer's money that was used to subsidise neg gearing and now "saved" was now blown out of the water by FORTY times.
negative gearing was re-instated in 1985 to "alleviate" the social housing trend.
however, the effect of this neg gearing removal is one of the reasons the country headed into recession in the early 90s - yes, it took that long to be realised.
so if you say that "we, the taxpayer" could save $5b by abolishing neg gearing, well, you may be right....
....as long as you have an adjusted $80b stashed away to provide social housing when investors don't invest in private rentals, or families are left on the street as rents skyrocket to reflect the actual cost of holding a property.
this is an actual example, from this country, since the dollar has been floated of an attempt to remove negative gearing.
does that sound like a good outcome to you?
Contrast this with what happened during the 1950s and early 1960s, when the Commonwealth government provided low-interest loans to state governments to build houses for sale to eligible first home buyers. The home ownership rate rose from just under 53 per cent at the time of the 1947 census (a level unchanged from that reported in the first Commonwealth census in 1911) to 72 per cent at the time of the 1961 census. In other words, policies that added directly to the supply of housing worked and worked well.
Read more: http://www.smh.com.au/business/bill...hing-gained-20110315-1bvvs.html#ixzz2AIOaEgoA
Read more: http://www.smh.com.au/business/bill...hing-gained-20110315-1bvvs.html#ixzz2AIOaEgoA
now now, not that there's anything WRONG with that....
Or did they...
NEAL WOOLRICH: Some in the property industry have also argued there would be a spike in rents if negative gearing was removed. The Hawke government abolished negative gearing in 1985, but reinstated it before the 1987 election fearing a voter backlash. During that period rents rose in Sydney and Perth, were steady in Melbourne and Adelaide and fell in Brisbane.
SAUL ESLAKE: In truth the reason why rents rose so much in Sydney and Perth at that time was because of rental vacancy rates in those two cities was below 2 per cent on those occasions.
What about the common argument that the abolishion of negative gearing between July 1985 and September 1987 caused a rental crisis, causing rents to skyrocket across the country? This claim is easily debunked by the data, which shows that rents rose in four capital cities and fell in four capital cities:
If it was true that the abolition of negative gearing caused rents to rise, shouldn’t rents have risen Australia-wide since negative gearing affects all rental markets?
http://www.macrobusiness.com.au/2012/10/negative-gearing-exposed/
No, this is typical Macrobusiness misinformation. Saul Eslake, and Leith van Onselen from MacroBusiness, and many others make this error regularly.
You shouldn't necessarily expect rents to rise Australia-wide. You should expect upward pressure on rents, but whether or not that upward pressure translates to actual rises depends on the other fundamental forces at play in the market. The upward pressure might just mean that rents only fall by 2% instead of falling by 4%.
If the removal of NG had an equal effect on rents everywhere, say upward pressure of 2%, then you would expect a city where rents would have risen by 1% (with NG) to instead rise by 3% (without NG), and a city where rents would have fallen by 3% to instead fall by only 1%. You wouldn't necessarily expect rents to rise everywhere.
Logic would dictate that removal of NG should place upward pressure on rents and downward pressure on house prices, but it's impossible to quantify the impact of NG in isolation from all of the other factors influencing the housing market at the same time.
NG is fully funded (and then some!) by the tens of billions of dollars tax intake the government rakes in from homeowners every year (CGT, Stamp Duty, Rates, Land Tax etc). Net tax intake (after NG and FHOG are deducted) is $40 billion every year to the government, just from homeowners. The housing sector is actually the second highest taxed sector of the economy. By advocating removal of NG, you are effectively arguing for even higher taxes on what is already the second highest taxed sector of the economy.
