Henry Report

Hi

Have heard a rumour about the Henry Report and negative Gearing

The recommendation in the report is to only allow the negative gearing on a given property only be allowed to offset income on that property alone and not be carried over to other properties in your portfolio.

What will the consequences be?

:eek:
 
bedlam.

this dam report is causing so much gossip and hearsay. let's just wait and see what it says and then see what little the govt actually does with it
 
The report is (finally!) due for release on Sunday, and the Federal Budget is only a few weeks away as well.

The latter will be more telling than the former, I'd suggest.
 
I'm not quite following what you mean! :confused:

Are you saying negatively geared property can't therefore be offset against ordinary income?

Without putting much thought into it I would think small time investors will sell up without the immediate tax advantages - when capital growth slows if you're smart. Possibly less demand on housing but possibly an equally less amount of supply.
 
My rumour is this:

All existing properties negative gearing remain in place.

In future someone buying first property gets 100% ng,

2nd property 75%

3rd property 50%

4th property 25%


5th no NG

Just a rumour but who knows?
 
I recall reading in Jan's book ( i think it was) that the federal gov't abolished -ve gearing in the 80's and that caused a shortage of investors and developers because there weren't any advantages for them - something along those lines.

I don't have the book with me at the moment.

Bigtone - your theory does seem very likely, I doubt it would be abolished altogether.
 
The SMH ran a story recently about the last time Ken Henry recommended abolishing NG.


The Hawke government tried to quarantine negative gearing for new properties in 1985, but faced a massive backlash.
"I still wear the scars of that," the Treasurer secretary, Ken Henry, said in late 2008 of the ill-fated changes.
 
I recall reading in Jan's book ( i think it was) that the federal gov't abolished -ve gearing in the 80's and that caused a shortage of investors and developers because there weren't any advantages for them - something along those lines..

Yes, negative gearing was abolished in around 1985. You could offset expenses against the rental income, but if there were excess expenses they were carried forward to the next year (and so on) until all loses were absorbed and the investment started creating an actual income.

The main problem occurred in Sydney, as this action occurred around the time there was a lot of urban renewal going on, and many rental properties and boarding houses etc were redeveloped. There were also preliminary purchases for the planned 2000 Olympics.

All of which led to severe rental problems in Sydney which led to the discontinuation of the negtive gearing ban. It was lifted and the CGT provisions were altered to catch investments that were previously exempt.
Marg
 
What about 50% discount on CG?

I wonder whether this could be abolished. I don't really see the sense in maintaining it, but then I don't know much about it. What do others think?
 
When they abolished NG on rentals in 85 does any one know what the status of NG was in relation to shares?

Most margin loans are neg geared as dividends rarely cover interest costs.

MJK
 

After reading that article it seems pretty simple what the solution is.

Sack 80% of the politicians and remove any access they have to their lifetime pension. That should free up a large chuck of money.

Personally I wouldnt mind if they removed negative gearing and all other tax deductions if it meant the existing tax rates were cut in half. Tax system would be so much simpler too.
 
I am willing to bet that negative gearing won't be touched, but rather that taxes will be increased.
Hi mja,

But Krud is suggesting the majority are going to get tax cuts now...

Rudd hints at tax cuts for Australians

But the 'Vast Majority' are probably the same vast majority that got their $1,000 cheques to blow on smokes and booze. But at least his tax take from that mob will increase now too...

Cheers,
Michael
 
Last edited:
After reading that article it seems pretty simple what the solution is.

Sack 80% of the politicians and remove any access they have to their lifetime pension. That should free up a large chuck of money.

They could begin with the states for a start. We are over-governed ad nauseum. :(

Personally I wouldnt mind if they removed negative gearing and all other tax deductions if it meant the existing tax rates were cut in half. Tax system would be so much simpler too.

If they did remove negative gearing rents would rise substantially, providing the positive cashflow investment property that resi investors are accustomed to in the US.

If they go one step further and then allow interest on the PPOR to be tax deductible (as in the US) then this may lead to a further bubble in trophy home market as everyone tries to outdo their neighbors/relatives by proving that "mine's bigger/brighter/shinier/newer than yours" :p

Bring on Sunday and the scary details that the Haunting Henry Report shall evidence. What the govt does about it is another matter. I doubt Messrs Rudd and Swan would compromise their vote scores by being too draconian in the first instance. Taxes will rise in one manner or another.

T'is a global phenomenon. Who's gonna pay the US interest bill with the printing/dissemination of currency ad infinitum.

The central (families) banks are happy to print however they also want their interest bill paid. A nice cashflow stream for them
;)
 
When they abolished NG on rentals in 85 does any one know what the status of NG was in relation to shares?

Most margin loans are neg geared as dividends rarely cover interest costs.

MJK
A horse of a different colour. Only a small percentage of shares are held in margin accounts and even then there is no way you can gear up to 90%. Most guys keep gearing to 50% or less. Any change would be of little interest to most and would not affect markets.

You can't get margin on spec shares, nor can you claim interest on them in the current year if bought through a LOC. (I'm no tax expert and this is not definitive) There is a test for neg gearing where they must be "income producing" or have reasonable expectations of them becoming so. Can you neg gear vacant land? A tougher interpretation of the "income producing" test could reduce the prevalence of NG.
 
Top