Negative gearing on the way out

For those who may be interested, I read recently (in AFR, if my memory serves me correctly) that Dr Ken Henry (who is currently conducting the government's review of the taxation system) was employed in Treasury when Paul Keating quarantined NG - he was quoted as saying that he had 'headaches trying to sort out all the problems that arose' from Keating's decision.

Lets hope that he remembers those 'headaches' when it comes down to writing his recommendations to the government! :rolleyes:

Cheers
Lynn
 
Oh well, bring it on Mr Henry, Mr Swan...bring it on...watch rents spiral higher again....

Same as the next stupid idea they have for Banks....banning exit fees etc....will justify the banks raising rates and or not matching the RBA moves....fair dinkum...:rolleyes:
 
AUSPROP... said:
yes it sounds strange but everyday all over the country investors continue to buy loss making properties.
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Well I think you need to tell the whole story in the interest of a balanced argument.

Yes, investors buy loss making properties everyday. Even Sub-way has some offers that, if that offer was all ppl purchased, they would lose money. I think in retail it is called a loss-leader.

Yes, you lose money on a monthly basis BUT with the expectation of longer term CG. Now before I get jumped on with the "Yes but you cannot rely on capital growth" brigade, IF you cannot rely on CG then why would anyone invest in property?

If all you are after is yield, there would be plenty of better ways to get that without the list of:
Dodgy tenants, useless PMs, laws skewed in favour of the tenant, banks that screw you six ways from Sunday, tradies that rip you off for repairs etc.

Immediate CG is never assured but long term I think its a pretty safe bet and putting up with that "list" is just the loss-leader - eventually even that (rents) becomes profitable (as the loner you hold the property, the more the rents increase).
 
In all the time we have been investing, we have only ever bought one house that was cash flow positive from day one. The other "loss makers" have put us in a very comfy financial position.
 
Of course, if the ever got rid of negative gearing, NOW is the perfect time to do it. Most IPs are neutral or positive (granted, not all of them but more than for a long time). So if they did it now, the impact on investors would be small, and then as rates go up, the market will simply dictate faster rent increases.

Plus, it will scare people away from IPs, meaning cheap IPs on the market and less rentals available.

Actually might not be a bad idea from an investor's point of view. Pretty bad if you're a renter though. (And bad if you're a government who's talking about cheap housing...)
 
wylie said:
In all the time we have been investing, we have only ever bought one house that was cash flow positive from day one. The other "loss makers" have put us in a very comfy financial position.
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going forward it all depends on your belief in fiat currency and whether the massive expansion in credit over the past few decades is sustainable and if there can be a new stimulus to affordability e.g. greater workforce participation from having the wife working.
 
Don't know about any of that..... (heck!! cannot even understand most of it) just know that we have done very well from negatively gearing what properties we have chosen :).
 
Hi

Anyone got comments on this? Another Peter Martin article.

http://www.theage.com.au/national/australia-institute-pushes-radical-tax-scheme-20090419-abi7.html

Australia Institute pushes radical tax scheme
April 20, 2009
CAPITAL gains tax exemptions would be scrapped, the sales of family homes taxed, and a form of death duties reintroduced as part of a scheme to be put to the Government designed to save $40 billion and fund tax cuts worth $4000 per taxpayer a year.

The scheme, outlined by the Australia Institute in a paper to be released today, would be costless and would plug tax loopholes largely directed at Australia's rich.

The institute says the top 1 per cent of Australian taxpayers receive 39 per cent of the nation's capital gains and so benefit disproportionately from concessions such as the low tax rate and exemption of the family home.

Capital gains are taxed at only half the income tax rate, benefiting wealthy Australians even further. An Australian earning $180,000 who can take half of that income as a capital gain saves $18,700 in tax, whereas an Australian earning less than $14,000 on the zero tax rate gains nothing by taking income as a capital gain.

The institute found the 50 per cent discount costs the budget $10 billion a year and the family home exemption $30 billion. It recommends abolishing the discount and removing the exemption for family homes above a threshold that it says should be twice the median house price, currently $450,000.

The institute is proposing its changes for the budget and for the Henry tax review, which reports in December.

PETER MARTIN

Regards
Daniel Lee
 
yes I would say CGT reductions are on very shaky ground. exemptions for PPOR woul dbe sensitive. Death duties an interesting one, no one cares about what happens when you are dead and the family are getting somehting for nothing so they dont mind too much
 
Mmmmmm ..... I don't think there is a political party in this country who would have the intestinal fortitude to introduce those recommendations. A one-way ticket to electoral annihilation - the PPOR CGT exemption would hurt a lot of people.

No, they'll just do what all governments have done in the past - slug the higher income earners with higher taxes.

Cheers
LynnH
 
daniellee said:
Anyone got comments on this? Another Peter Martin article.
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Let me nit-pick it :)

daniellee said:
Australia Institute pushes radical tax scheme
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This is just a paper from an Institute. It is a recommendation but govts are not known to act on recommendations they don't like.

daniellee said:
CAPITAL gains tax exemptions would be scrapped,
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Does not bother me - I NEVER pay CGT 'cause I never sell.

daniellee said:
the sales of family homes taxed,
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Not going to happen - political suicide for the party that introduces it.

daniellee said:
The scheme, would be costless
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Bulls@#t. It has to cost somebody or it would not raise revenue. What an incredibly stupid statement to make. :confused:

daniellee said:
Capital gains are taxed at only half the income tax rate,
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Only if you have held the asset for more than 12 months

daniellee said:
whereas an Australian earning less than $14,000 on the zero tax rate gains nothing by taking income as a capital gain.
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The poor ole' Australian did not pay one red cent of tax either - you Institute morons.

daniellee said:
removing the exemption for family homes above a threshold that it says should be twice the median house price, currently $450,000.
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As mentioned before - it is not going to happen because if you start touching Australian's favourite investment (their own home) - you're gone. As well, the pollies that would have to pass this legislation would have homes above the median (in general) - so again - it ain't gonna happen.
 
The tax office also released their figures for the 2007 year recently. They reckon that 1.65 million individuals claimed net rental income of -$6.4 billion.

For the 2006 year, net rental income was –$5.1 billion from 1.56 million investors.

2008 stats won't be out until this time next year. Will be interesting to see what affect the interest rate cuts and rising rents will have had.
 
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Battler, that's exactly how they do it.

JamesGG, presumably these figures would be for financial years, not calendar years, if it came from the tax office. (I could be wrong) If this is the case, the '08 figures will still be interesting, but only because they represent a time when interest rates were high, not low...
 
Propertunity said:
Let me nit-pick it :)

This is just a paper from an Institute. It is a recommendation but govts are not known to act on recommendations they don't like.

Does not bother me - I NEVER pay CGT 'cause I never sell.

Not going to happen - political suicide for the party that introduces it.

Bulls@#t. It has to cost somebody or it would not raise revenue. What an incredibly stupid statement to make. :confused:

Only if you have held the asset for more than 12 months

The poor ole' Australian did not pay one red cent of tax either - you Institute morons.

As mentioned before - it is not going to happen because if you start touching Australian's favourite investment (their own home) - you're gone. As well, the pollies that would have to pass this legislation would have homes above the median (in general) - so again - it ain't gonna happen.
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Thank you for the sensible de-bugging....
 
neg gearing is still a very viable option of securing a well positioned property.

at the end of the day, you can buy a large parcel of developable land, renovate the little sh it ter on it for a small increase in yield and to secure a tenant, and then neg gear for 2 years while you wait for approvals.

i dont think people are neg gearing $500pw and watching their investment increase by $1000pw + tax benefits anymore - if you think they are then you must know some very cool information and i encourage a PM to me!

but to neg gear a carton a week - to me - is acceptable if the DD lines up for solid potential rental increase and CG potential.

but, that's just me. $50pw is about what some hedge funds demand as a contribution, so i don;t really see it in any different light.

horses for courses.
 
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