I saw this section in LATEST PROPERTY NEWS and thought there's some truth in this.
The Real Estate Institute of Australia has voiced strong opposition to a call to the Government by the Australian Council of Social Services to curb negative gearing on property and revisit Capital Gains Tax to stop the housing bubble burst.
The ACCC claim we should be taking note of the lessons learnt in the US that speculative investment bubbles leave “a nasty hangover” and we should be calling on the Government to curb negative gearing to stop the ongoing (and they claim excessive) investment in Australian residential property markets.
While the ACCC say the recent burst of investment in residential property and the increase in the number of promoters of negative gearing “schemes” will lead to people being saddled with high debts, lost jobs and a slow economy, the Real Estate Institute does not agree.
Negative gearing is the shortfall when expenses from a property exceed the income after all allowable deductions, including interest.
Even though the after tax result is minimised it is still a loss and is only recaptured if the value of the investment grows over time.
But no matter how much ‘negative gearing’ you have, a property must also have capital growth to be considered a good, long term investment. If capital growth does not occur, the outcome is not as rewarding.
This point needs to be stressed because there are some who say negative gearing is the only important factor and saving tax is the purpose of investing in property.
No amount of negative gearing will overcome the fact that you are subsidising the investment if the property does not grow in value.
Steve
The Real Estate Institute of Australia has voiced strong opposition to a call to the Government by the Australian Council of Social Services to curb negative gearing on property and revisit Capital Gains Tax to stop the housing bubble burst.
The ACCC claim we should be taking note of the lessons learnt in the US that speculative investment bubbles leave “a nasty hangover” and we should be calling on the Government to curb negative gearing to stop the ongoing (and they claim excessive) investment in Australian residential property markets.
While the ACCC say the recent burst of investment in residential property and the increase in the number of promoters of negative gearing “schemes” will lead to people being saddled with high debts, lost jobs and a slow economy, the Real Estate Institute does not agree.
Negative gearing is the shortfall when expenses from a property exceed the income after all allowable deductions, including interest.
Even though the after tax result is minimised it is still a loss and is only recaptured if the value of the investment grows over time.
But no matter how much ‘negative gearing’ you have, a property must also have capital growth to be considered a good, long term investment. If capital growth does not occur, the outcome is not as rewarding.
This point needs to be stressed because there are some who say negative gearing is the only important factor and saving tax is the purpose of investing in property.
No amount of negative gearing will overcome the fact that you are subsidising the investment if the property does not grow in value.
Steve
