Perhaps she could recomend low or zero interest rates for first home buyers as well.
So these new homebuyers, would they be ok with buying a property which will not go up in value? Why would you buy then , just rent.
Is it the end of negative gearing
- Thread starter Dan_p
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Perhaps she could recomend low or zero interest rates for first home buyers as well.
So these new homebuyers, would they be ok with buying a property which will not go up in value? Why would you buy then , just rent.
Given the repeated commentary from Swan and others that they will keep it, what odds are you offering?
Hi Buzz.l.y,
I can't speak for others, but agree with Dazz that any change to NG is 100% off the agenda at this upcoming election (which I'd happily give odds will take place this year rather than next, given the current government is not so much a lame as a multiple-amputee duck).
It still seems though to me that no-one has presented a sound economic rationale (as opposed to a disguised moralism) for why NG should be limited or dismantled. I'd even go so far as to posit that this is the real reason why it hasn't won favour in the Labor cabinet (despite reportedly intense union and welfare lobby pressure this year).
Until crimping or abolishing NG can be logically shown to aid economic growth, there simply is no sound reason (other than redistributing private assets from savers to spenders) to warrant it. Or, at least, I'd be happy to be proved wrong if there is.
So disguised moralism was the reason the Henry tax review recommended changes to negative gearing?
Good question! I haven't read the Henry Review. Will look into it though.
The budget deficit in Australia was $47.7 billion last year, and will exceed $40 billion this year. The cost of negative gearing is growing, and reached $5.5 billion last year rising from $600 million a decade earlier.
If the capping of payments into Super are part of a general austerity package to bring down the budget deficit by reducing tax avoidance (or minimisation
) strategies, then I wouldn't be surprised to see similar rules coming in to limit, not abolish, what investors can claim for negative gearing.
The reason that the Henry Review came out against it, was that methods of saving were treated very differently by the tax office. Investing in negatively geared IP is being subsidised, whereas a regular savings account is being hit by high rates of tax.
If the capping of payments into Super are part of a general austerity package to bring down the budget deficit by reducing tax avoidance (or minimisation
) strategies, then I wouldn't be surprised to see similar rules coming in to limit, not abolish, what investors can claim for negative gearing.The reason that the Henry Review came out against it, was that methods of saving were treated very differently by the tax office. Investing in negatively geared IP is being subsidised, whereas a regular savings account is being hit by high rates of tax.
If the capping of payments into Super are part of a general austerity package to bring down the budget deficit by reducing tax avoidance (or minimisation
Investers will have more focus on making their properties closer to positively geared so I guess rents would go up! right?
In Canada we are only permitted to put in 18% (which is based on the previous year's earnings), which has a cap,which I think is currently around the 23k pa, into our RRSP (Registered Retired Savings Plan)
Of course we are not permitted to have NG on our properties, for any length of time. They will allow a few shortfalls, but not others.They need to be carried forward.
Maybe the Australian government is watching how other countries are doing things.
USA has the ability to use their PPOR as a tax deduction which I always thought would be nice...but I don't think we will ever get that in Canada.
Of course we are not permitted to have NG on our properties, for any length of time. They will allow a few shortfalls, but not others.They need to be carried forward.
Maybe the Australian government is watching how other countries are doing things.
USA has the ability to use their PPOR as a tax deduction which I always thought would be nice...but I don't think we will ever get that in Canada.
Agree. That's what would really create a bubble. In the US they have this (not sure if it has a ceiling or cap/limit) and IMO would encourage here (as it has there) maxxing out the "equity mate" LOC.....seeking bigger/better and larger trophy homes.........prices would most likely increase.
On the basis that circa 65-70 % of residential sales in Aus are to owner occupiers, this would have a more deleterious effect than maintining negative gearing for the 30-35 % of sales to investors.
If they did I would be living in 6 residences at once!
The Australian Taxation Office (ATO) has released its Taxation Statistics for the 2009-10 financial year, which once again revealed that Australia is a nation of loss-making landlords. According to the ATO, there were 1,751,679 property investors declared to the ATO in 2009-10 - representing one in seven taxpayers - an increase of 59,235 from the 2008-09 financial year.
Total losses on investment properties were $4.810 billion in 2009-10, or $2746 per property investor, down from $6.528 billion ($3857 per investor) in 2008-09. Of the 1,751,679 property investors recorded by the ATO in 2009-10, 63% or 1,110,922 were "negatively geared", meaning that holding costs (eg, interest payments, maintenance, and other costs) outweighed income from rents.
Of these negatively geared investors, nearly three-quarters earned less than $80,000 in 2009-10, and the average loss was $9132 per negatively geared investor, or $176 per week. ...
http://www.theage.com.au/business/property/nation-of-lossmaking-landlords-20120430-1xuh4.html
Total losses on investment properties were $4.810 billion in 2009-10, or $2746 per property investor, down from $6.528 billion ($3857 per investor) in 2008-09. Of the 1,751,679 property investors recorded by the ATO in 2009-10, 63% or 1,110,922 were "negatively geared", meaning that holding costs (eg, interest payments, maintenance, and other costs) outweighed income from rents.
Of these negatively geared investors, nearly three-quarters earned less than $80,000 in 2009-10, and the average loss was $9132 per negatively geared investor, or $176 per week. ...
http://www.theage.com.au/business/property/nation-of-lossmaking-landlords-20120430-1xuh4.html
Glad I'm not one of those 1,110,922 other property "investors".
To put it another way.
92% of the population either rent or just have a mortgage for the house they live in.
5% of the population are quite happy to spend money on property speculation to maybe get 40% of that back. All the time sacrificing things to keep paying for their "investment".
3% of the population are probably sitting pretty.
Scary.
I'd like to see how the losses are distributed. My guess is that they're concentrated at the top end, then a lot of noise about how the abolition of negative gearing is simply the richest segment of society campaigning for the preservation of its favourite tax break.
But if there are a lot of people on lower incomes struggling with IPs (which the raw figures suggest), then negative gearing has been used to draw a lot of suckers in on a highly speculative basis.
The ages skew as expected. Property ownership tends to be more concentrated in the older generations than the young.
I'd agree with the author's (Leith van Onselen) comments about expecting a sell off of property. Quite a common strategy here seems to be to accumulate a large portfolio, rely on capital gains to reduce the debt ratio, and then sell down to repay mortgages on retirement, resulting in an income stream.
I also think that the likelihood of causing significant damage to the housing market highlighted in this piece makes the abolition of negative gearing unlikely.
But if there are a lot of people on lower incomes struggling with IPs (which the raw figures suggest), then negative gearing has been used to draw a lot of suckers in on a highly speculative basis.
The ages skew as expected. Property ownership tends to be more concentrated in the older generations than the young.
I'd agree with the author's (Leith van Onselen) comments about expecting a sell off of property. Quite a common strategy here seems to be to accumulate a large portfolio, rely on capital gains to reduce the debt ratio, and then sell down to repay mortgages on retirement, resulting in an income stream.
I also think that the likelihood of causing significant damage to the housing market highlighted in this piece makes the abolition of negative gearing unlikely.
is a bit dismissive of a lot of peoples best endeavours... why call them suckers, their investment could work out very well for them?
Most property investors are looking long term, not checking weekly or monthly charts.
At 10 years worst case scenario that will cost you $91,520
Option A. Even if the value is going up at an average of 5% for a property worth $350k the property will be worth $570,113. difference of $220,113
$220,113 - $91,520 = $128,593
Option B. What about at 3% this will give you $470,370. difference of $120,370
$120,370 - $91,520 = $28,850
Meanwhile $176 a week would be shrinking as rents go up and mortgage comes down.
You assume that the majority of property investors have a sophisticated plan and outlook. My personal observations and the data would suggest otherwise:
Although the states will probably vary somewhat in the timing and scale of correction I think in many cases we will see nominal prices stagnant/lower in 5-7 years... so IMO using a base case scenario of 5% or even 3% growth is flawed... Perth has already seen 6 years with no price growth. Melbourne and many other cities are now probably heading into a similar if not worse correction.
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Using your best endeavours doesn't preclude you becoming a sucker.
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