Media - Neg Gearing limit to New IPs

[joeExpat]

This sends a sgnal to me - Perhaps the end of the 50% CGT discount on property ?

Yes this discount was cut for non residents recently (2012) so I think cutting it for everyone is probably the next step. It's the main reason I just sold my Sydney property.

I expect negative gearing will go soon too, not really a very productive policy, certainly doesn't do what it was originally intended for and just encourages speculation.

 

[Aaron_C]

And to think we never had a CGT once upon a time...

 

[perthguy]

I expect negative gearing will go soon too, not really a very productive policy, certainly doesn't do what it was originally intended for and just encourages speculation.

I don't agree with that at all. I don't care whether they keep negative gearing at all. But I do want to stress that NG was not a consideration in any property purchase I have made.

OTOH, zero capital gains tax on a PPoR was a consideration when I bought my main residence. I will be building a main residence soon and zero capital gains tax will be a factor in my planning. The capital gains tax discount (50%) and capital gains tax exemption is worth $30 billion per annum. Far more than NG on resi properties.

 

[roe]

I don't agree with that at all. I don't care whether they keep negative gearing at all. But I do want to stress that NG was not a consideration in any property purchase I have made.

OTOH, zero capital gains tax on a PPoR was a consideration when I bought my main residence. I will be building a main residence soon and zero capital gains tax will be a factor in my planning. The capital gains tax discount (50%) and capital gains tax exemption is worth $30 billion per annum. Far more than NG on resi properties.

They all need to go seriously why do we need to give people with money 50% tax break on CGT?

NG on properties and Share margin loan, Capital Gain Tax Concession
all need to go

It wont stop people who want to invest from investing, it just another middle class welfare we cant afford.

maybe keep the PPOR Tax free so people can move around or older people can cash out and support themselves.

everything will yield better when you remove all these subside components

 

[macca446]

They all need to go seriously why do we need to give people with money 50% tax break on CGT?

NG on properties and Share margin loan, Capital Gain Tax Concession
all need to go

It wont stop people who want to invest from investing, it just another middle class welfare we cant afford.

maybe keep the PPOR Tax free so people can move around or older people can cash out and support themselves.

everything will yield better when you remove all these subside components

When you say people with money do not deserve 50% tax break,most people work and save hard towards investing and a lot on 50k salaries so where do you get off on that dumb statement .

 

[joeExpat]

It's not a dumb statement at all, things will function much better without all the current subsidies and tax breaks distorting the market.

Like roe.says, yields would improve without these distortions (via lower asset prices)

 

[Angel]

It's not a dumb statement at all, things will function much better without all the current subsidies and tax breaks distorting the market.

Like roe.says, yields would improve without these distortions (via lower asset prices)

This statement would make sense for those who will purchase in the future if and when asset prices reduce. It doesn't mean that those of us who already own properties will suddenly get higher yields at all. The yields we get are based on the current (or future) rent received against the purchase price paid. Which, for those who desire the removal of NG and any imminent asset price fall, would have been higher than what they will fall to.

Geez, did Wategos, Roe and co all purchase your properties more than one cycle ago and thus you have already made such a large capital gain that you can shrug it off when the value of your assets decreases?

 

[roe]

No I think you will be benefit from future lower price because no one crazy enough to pay for low yield properties without NG or 50% CGT.

I wouldn't say no one because there are always people who buy anything and any price... just look at the stock market, more than 60% of the companies aren't investment grade and people still BUY BUY, but an astute investor will never buy

I know everyone said I don't buy properties based on NG or 50% CGT but it get factor in and it get calculated differently...this is where it kill you if you pay high price once NG and 50% CGT goes ...

say you buy 500K properties and borrow 400K, without NG and 50 CGT.
and say each year you lose between 2-3% ...

for every year your properties don't move you lose 2-3% and each year it get harder and harder as properties need to move higher the year after just to catch up.

Properties is not as transparent as the stock market but you can take lesson from stock market and applied similar logic.

Not so long ago Yahoo worth more than Coca Cola company without making a dollar profit..and Yahoo is one of the lucky one so we cut them some slack.

Everyone is buying into the stock because of the greater future promise who care coke making hundred of millions of dollar profit a year...Yahoo is going to be making more money in the future is the theme.

so a smart men came out with an example lay out 5-10 year down the road
Year 1 Yahoo burning cash but let assume zero, coke racked in a couple hundred mil..

Year 2 yahoo still zero profit coke make another couple hundred mill..

Year 3 yahoo still zero and coke making a couple hundred mill again

and coke is now out profit yahoo in tune of billions and let assume Yahoo start making profit, how long do you think Yahoo can catch up to Coke?

well they have to grow double digit earning for a long long time every year in order to catch up and yahoo never did until this day, Coke is now worth 177bn and yahoo 36bn a 1/4 of Coke.

same goes without NG and 50 CGT tax on properties, you can gamble on making a loss each year and hope eventually house price rise enough to out stripped your loss each year or properties has to drop and provide yield that are +ve cash flow to attract investors who doesn't want to gamble.

 

[roe]

When you say people with money do not deserve 50% tax break,most people work and save hard towards investing and a lot on 50k salaries so where do you get off on that dumb statement .

Unless other people get their money from drugs or trees doesn't everyone work hard and save and invest?

they don't affect you they affect all investor my self included but this is something the government need to do..

It was bad policies and when you have bad policies you need to correct it for the good of the country not leave it to benefit a small portion of the population and everyone else get the raw deal.

All these rules goes I am still investing because my investment doesn't relies on tax break to make money...they are good bonus but not required

 

[rabidz]

Removing negative gearing for property but leaving it available to every other asset class and keeping it for new housing only would likely destabilize the property market. It would be a disaster.

Removing it for all asset classes, only being able to write off losses when that asset makes a profit would be interesting. The investment landscape would change but we'd adjust reasonably eventually. Within a decade people would still be complaining that housing is unaffordable (in fact I think that prices would only drop a negligible amount). It would discourage risk taking and innovation and we'd be worse of for this.

If the government really wants to reduce the cost of housing and encourage new housing, reduce the taxes on building a new house. Tax is currently about 40%-60% of the cost of a new property. Unfortunately this would also have massive disruption in certain housing markets and create a new area of slums, whilst mostly allowing developers to charge more and get rich.

Couldn't agree more, Peter.
I read it somewhere yesterday...

"If the system is not changed this year, then property investors can probably relax in the knowledge that it will become a permanent feature of the investment landscape. It is suggested that this year is the most likely in which it will happen."

Hope this it's not changed this year..