RBA want Negative Gearing Scrapped

[OSienna]

1. It benefits them directly (most would have multiple property investements)

I would presume most politicians would be piling their income into their super rather than investment property considering how overly generous their superannuation packages are.

2. Messing with it will have bad side affects and they will upset a large number of voters.

It depends. If voters can be convinced that the government can prevent a repeat of what happened in the 80s it could possibly happen. Heck, the majority of us believed Howard about interest rates being lower under his government! If we believe that we'll believe anything.

 

[Lissy]

The Liberals never said rates would be lower ie go down under the Liberal government. They said that rates would be lower under Liberal than they would be under a Labor government, ie rates would rise more with Labor.

 

[quiggles]

I would presume most politicians would be piling their income into their super rather than investment property considering how overly generous their superannuation packages are.

You assume that the super packages (a) have ANY member contributions and (b) could be increased by extra contributions. Theirs is an old style defined benefit fund and I don't believe they contribute at all. (No jokes, please).

At the same time, I'll bet that any properties they hold are either trophy mansions or investments in proeprty trusts, rather than direct property.

 

[kissfan]

The Liberals never said rates would be lower ie go down under the Liberal government. They said that rates would be lower under Liberal than they would be under a Labor government, ie rates would rise more with Labor.

Just another escape clause. They (Libs) may be right, but we'll never know and they can say whatever they like now.

Regards
Marty

 

[Lissy]

Marty
I quite agree - no matter which way the election or interest rates went, it never could be proved.
However I just wanted to clear up the misconception that the liberals ever said rates would go down if they were elected.

 

[Lplate]

Quote from an article in The Age 12/6/03:
KPMG tax partner Michael Andrew agrees. "Why discriminate against the direct residential investment property sector, when the same principles apply to gearing equities, business investment and all commercial endeavour? It's a fundamental principle that your interest outgoings are an ordinary business cost."

Lplate

 

[TheBacon]

So no-one likes the idea of scrapping negative gearing because it would be 'bad for the country'. Nothing to do with us all having a vested interest in the status quo continuing?

I would love to see negative gearing scrapped, so long as capital gains are scrapped also and tax rates DRAMATICALLY lowered. I'm going to get a pay rise soon, of which only 50% will actuall come my way, why would I not use neg gearing to offset this ridiculous situation?

TheBacon

 

[quiggles]

You're a bad boy, TheBacon. Your point is well taken that you are hearing vested interests speak BUT economically, to scrap negative gearing is stupid. Why? Because neg gearing on housing is the ONLY activity for which this is proposed. Negative gearing for all other sources of income (business, shares, bonds etc) remain untouched, thus causing a market distortion if it should go ahead.

And I have yet to see a share portfolio put a shelter over the head of anyone other than the portfolio owner.

 

[natmarie73]

I recall a story in "Ordinary Millionaires" which stated that rents went up by around 30% when negative gearing was scrapped. Can anyone who was investing during this time verify this? I would assume that the same thing would happen again ie either there would be lots of property on the market due to many people who baught for negative gearing benefits not being able to, or wanting to, hold on to their properties and selling them therefore reducing the supply of houses for rent and further pushing up rents. Those who did hold their properties would surely raise rents to at least make them neutral.

In my opinion, if the government scrapped negative gearing there would no doubt be many more homeless people sleeping in the bus shelters as investors either raised rents or moved into equities/business investments.

Please correct me if this assumption is way off.

Nat

 

[shazza]

Agreed, OSienna re CGT.

The capital gains tax rules should be overhauled before too many more years pass, IMO.

regards,

In the statement that I read in the AFR Ian MacFarlane was not only gunning for negative gearing but also the tax-free CGT for home owners! How do you think that would go down with the general populace?

cheers Sharyn

 

[Pete]

Geez Shazza, CGT on PPOR? It'd be about as popular as a tax on sex!

 

[quiggles]

I recall a story in "Ordinary Millionaires" which stated that rents went up by around 30% when negative gearing was scrapped. Can anyone who was investing during this time verify this?

There's a logical fallacy known as 'post hoc ergo properter hoc' which basically means that just because one thing happened followed by another, it doesn't imply that the first CAUSED the second. In the market there's a lot of factors at once and I don't necessarily think the market would dry up immediately as a result. After all, the housing stock isn't going to go down, but new housing won't be coming on stream as quickly. there's a lag affect which should take years to work through, but didn't.

And don't forget, it wasn't retroactive. That meant all current investments had a market advantage over new investments, and investors would have been silly to sell at that point.

In the ACT at that time it was still easy to rent. I'll bet it was in Tassie too and Adelaide. Sydney rents went up, sure, but was that a State thing or even a city thing, or was it due to the negative gearing problem? Hard to say really.

There was a very interesting thread a long time ago entitled "Kill negative gearing!" I cant find it or I'd put a link up. It argued that killing off neg gearing would return sanity to the overheated market (in about 200, from memory).