The reason why the Australian Government encourages investment - and actively encourages investing in income producing assets - is simply because the more self funded retirees there are, the fewer pensions the rate payers of the future will have to fund
Never mind about a bit of negative gearing here or there
Current Centrelink payments for a sole Pensioner are $17,118 and for a Couple, $12,903 per annum each
http://www.centrelink.gov.au/internet/internet.nsf/payments/age_rates.htm
Kind of makes negative gearing pale by comparison, doesn't it?
Pensions are means tested, so if during the working life of an investor - of which there are proportionately very few, - salary sacrificing superannuation, buying an investment property, buying shares - can encourage even some of them to be not reliant on the pension the pain now is worth the gain later
Governments tend to know a thing or two.
During the next twenty years the population is going to age suddenly and dramatically. Women will soon not be eligible for the pension until they are also 65.
The number of people fit enough to continue to work full time starts to fall away quite sharply from that point.
All of a sudden, that person is drawing $12 - $17,000 out of the People's Bank of Australia.
If, during their working life, by tax concessions of whatever name, that person had saved eg $100,000 in superannuation (statistically very unlikely) then the claim on the Govt is deferred for a while.
Negative Gearing is not as relevant as it used to be. Tax bracket creep has seen to that. However, if people's perception is that 'negative gearing' will help them buy property with a view to later financial independence why on earth would you not encourage that?
Investing is a means to an end.
The end is a dignified retirement.
Whether it is the low income earner superannuation contribution scheme, or the ability to salary sacrifice, or the opportunity to claim depreciation or to reduce your PAYG taxable income by a few dollars for a few years, it really doesn't matter, provided that the Government can popularise the process and have as many tax payers as possible saving for their inevitable old age.
If anything, Governments are cranking up their tax incentives
If there are 100,000 women in Australia capable of being fully self funded retirees I would be very surprised. There probably are more than 100,000 self funded men, as men tend to have longer working lives with few breaks inemployment and earn about $12,000 per year more than women. $12,000 x 9% since 1989 = $23,760 without taking compounding interest into account t.
If you can increase the number of self funded retirees to eg 500,000 across the Nation you can save the tax payer $85,000,000 per annum in pensions.
Roll on Negative Gearing, I say. Increase the superannuation contribution, make salary sacrificing of voluntary superannuation payments more widespread than just in the Public Service, bump up the $1 for $1 bonus, do anything possible to minimise the burden of our healthy, and long lived Senior Citizens by encouraging all persons to plan, save and invest for their retirement.
I certainly intend to be able to pay for my own dentures and to be able to afford the Roast of the Day on Tuesdays at the RSL.
Negative Gearing has not been of such a great benefit to me but it has been a real help through Mike's PAYG
It has helped our teenage children buy property as it has recycled even the small amount of tax paid through their part time jobs
We must all keep our eye on the horizon. It is the future that matters and the long term financial health of our citizens
Anything else is simply short sighted and pretending that everyone is 'selfish' or earning heaps of money and rorting the system is very far from the truth
Cheers
Kristine