Negative Gearing on chopping block

Discussion in 'Accounting and Tax' started by kamchatsky, 4th Apr, 2014.

  1. kamchatsky

    kamchatsky Member

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  2. wylie

    wylie Member

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    None of those links works for me.
     
  3. Player

    Player Live Every Day

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  4. wategos

    wategos Member

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    Last edited: 4th Apr, 2014
  5. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Not exactly a source to cite. No news here. Move on.

    The Libs have been very quiet about the content of the forthcoming budget. Far quieter than Gillard and Swan who virtually released everything before every budget. The news we have been told is :
    - No changes to GST rate. (SA election outcome would support this)
    - All taxes are on the table otherwise
    - Its going to be painful to all.
    - Govt is going to cut spending
    - Govt cant just cut spending it must raise tax revenue.

    If I were a betting man I wouldnt think a negative gearing policy change and CGT 50% discount change would both be contemplated. One of them sure.

    Watch for changes to super. Any changes could be as radical as Costello's 2007 announcements. But not in benefits ! The words "tax exempt" might be at risk.
     
  6. datto

    datto Member

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    Any move by the govt to make property investing less attractive will mean less investors. Less property investors will affect the building industry and cause rents to rise. It will also put a greater strain on public housing. More people will be living on the street, in cars, in factory units, on lounges in friends or relo's place etc. I just cant see the govt doing it.
     
  7. kamchatsky

    kamchatsky Member

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    Links fixed ....
     
  8. impala67

    impala67 Member

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    That's the way I understood it, from what I have read and heard when the so called independent "experts" comment on what would happen when NG is abolished, i.e., the Govt. is basically subsidising investors to provide housing to the masses that otherwise would not be there. They also always state that it is a way cheaper alternative than the Govt. providing it.
     
  9. rabidz

    rabidz Member

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    This is the part I don't understand.
    If Neg. Gearing abolished, then the rents will rise?

    My understanding, if NG abolishes it means less property investor, then it means a drop in property price. If the property price drop, it means more people (especially first home buyer) can afford to buy a house. If more FHB can afford to a house, it means rents to drop. So, am I correct to assume this?
     
  10. datto

    datto Member

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    I think its all about supply and demand.

    Fewer property investors means fewer rental properties (ie supply down). Renters (demand) will be bidding for fewer rental properties, therefore, us greedy landlords will be rubbing our hands together and jacking up the rent as potential tenants jump all over us, wanting to live in our properties lol

    Another way to look at it, when banana's were in short supply due to the storms in Qld, prices of banana's in the supermarket shot up.
     
  11. datto

    datto Member

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    It seems that there are alot of people out there that rent. These people will compete for fewer rental properties and cause rents to rise IMO.
     
  12. The Fence

    The Fence Banned

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    Spot on datto...

    see my sig
     
  13. datto

    datto Member

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    I see it but I dont believe it!...Guido hatzis
     
  14. Player

    Player Live Every Day

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    Indeed.

    The (residential) property investor runs a far more efficient modus operandi to house renters (of varying means) than any government (federal or state) could ever do.

    In the short to medium term it becomes a loss making investment that the tax payer offsets against their income. They provide housing that otherwise would not be available. The supply and demand posts above reflect this view. It is the investor that holds the risk.

    We need to remember that not all negatively geared properties are held by individuals. Some are held in trusts where losses are quarantined. For those dead set against it, don't buy those types of properties. Not all of the circa 30 % of investment type properties held in Australia are negatively geared. The vast majority of residential real estate purchases are by owner occupiers.

    If we were to follow the USA where negative gearing doesn't exist, then we should also have a tax deduction on our own PPOR's as they allow there. This feeds an even bigger affordability bubble where people chase trophy homes. Should we also have non-recourse loans where the borrower can post the keys back to the lender via jingle mail?

    We have a fairly prudent lending/banking system here. If they eliminate negative gearing, it doesn't affect me however in the event they do, perhaps the states could abolish or reduce the biggest impost to the pro-active investor, namely land tax. Or, at the very least make it on a single holding basis rather than exponentialise (is that a word......it is now) the punishment delivered to the greedy investors who provide housing (quite high on Maslow's hierarchy of needs I believe) to those who choose to rent or need to rent due to various reasons.
     
  15. chindonly

    chindonly Member

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    I don't think it will happen. They have tried it before and it just didn't work.
     
  16. wategos

    wategos Member

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    Not correct since there are fewer renters also, they bought the properties sold. So the supply demand is not affected and rents are unaffected as well.
     
  17. mattysavager

    mattysavager Member

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    I think a factor to consider is that 'in my personal experience', most people renting properties are serial renters. I have never rented, but most of the tenants I've interacted with in the last 5 years were not thinking about buying a home in the near future.

    For millions of Australians, renting is a way of life, and a choice. It's not the only option, and that won't change overnight.

    Most people my age are nowhere near prepared to purchase a property. Even if negative gearing is wound up, properties flood the market and prices drop 20%, most tenants won't be running to the bank and applying for a mortgage.

    This is also based on my utter rejection of the argument that housing is out of reach for many people. I bought a unit to live in at 22, I paid 8 times my annual salary, and my mortgage was 8 times my annual salary. I made sacrifices, lived with a crappy kitchen, no air conditioning, and put up with an annoying housemate for a year.

    I don't rely on Neg gearing to survive, but many people do, and in my opinion it will do more harm than good.
     
  18. Angel

    Angel Member

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    How many renters can go out tomorrow and start buying up housing? If they didn't have a big deposit last week, they wont have one next week either. Doesn't matter if the price of a house drops, if they cant get finance, they cant get finance.
     
  19. Darlogus

    Darlogus Member

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    I'm sure I read somewhere that NG was abolished in the 80s and investors left the market in droves. This created a shortage in housing and rent increases and put pressure on the government to supply housing, so they re-introduced it again.
    Think it was the time that depreciation on buildings went from 4% to 2.5% around the 1985 period.
     
  20. datto

    datto Member

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    That's what I believe also, Angel.

    There are heaps of renters out there. 2006 Bureau of Stats shows just over 2 mil renters in Oz ( that number has been growing steadily over the years - could be 3 mil now).

    How many of those (say) 3 mil renters will go out and buy a property to live in - miniscule - I bet most people rent because they can't afford a house, even if a house was 100K! These renters usually live week by week.

    If NG was given the boot, then alot of investors will park their money elsewhere eg shares, bank interest etc for a better return. Also consider that without NG some investors won't have the cashflow to service a loan.

    IF NG is abolished on investment properties only, then of course other forms of investment will become more popular. SS would probally become a stock market forum!

    When you have around 3 mil renters scrounging around our major big cities and towns, looking for a limited commodity ie a roof over your head, rents will go up not down.