Removal of negative gearing

[Andrew_A]

I just smile to myself about how the complaining we get on here about high cost of housing would change if -ve gearing was removed.

Just turn the page back to your history books circa 87 and insert your spoilt gen Y renter who is used to government subsidized (read -ve gearing) rents in lifestyle areas, of course I could be wrong and they might choose to move out to the commuter suburbs and take on a mortgage.

Not all gen y's do this of course, but we seem to pick up a few who prefer b*tching on internet forums instead of actually getting out and doing something about their own wealth creation.

Just imagine how the tune would change if rents were to rise to comparable levels with other countries.

 

[peastman]

I believe rental property should be just like any other business.
We provide a service which our customers are willing to pay for.
Sales less expenses gives a net return.
Pay tax on the net.
If we are sole traders or partnerships, our other income is taken into consideration for the total taxable income.
I dont see any difference between property and any other business.

It has always been a goal of mine to have a tax problem. It means I am making money.

 

[yieldmatters]

I dont see any difference between property and any other business.

Broadly I agree with you but I think the following restriction would be helpful to the economy (maybe not to individual property investors though).

I think losses should be offset against profits within the same asset or income category. I think when you can offset a loss in a realestate business against your income in something unrelated (e.g. public servant in the health department) it encourages speculative behaviour and distorts prices. I would like to see all realestate losses offset against realestate incomes (with carried forward losses) and all share portfolio losses offset against share portfolio incomes (with carried forward losses) etc.

 

[roe]

I dont think they get rid of negative gearing, bad move for pollies but they do it by stealth by increase tax brackets and change various law that make NG becomes less and less attractive over time.

In time people work out NG is no longer attractive, they invest into some thing else.

 

[Andrew_A]

I dont think they get rid of negative gearing, bad move for pollies but they do it by stealth by increase tax brackets and change various law that make NG becomes less and less attractive over time.

In time people work out NG is no longer attractive, they invest into some thing else.

Agreed, the stealth approach is much smarter for them and it would be a real loser at the ballot box I think.

 

[TheAnalyst]

I believe Paul Pollard is extremely anti-NG on property investment. In his submission, he used a lot of words such as:extrodinary incentive to investors, significant contribution to the price rise .... NG has been existing for a long time, why the prices was not going up significantly? As he claimed he is an economist, he ignored HOUSEs are also type of proudcts. A lot of countries do not have NG, but their house prices have gone throgh the roof -Mr Pollard did not answer. He said his proposal could satisfy everyone. I do not think so. It would only disturb the industry and cause small amount of people suffer (rentors and highly NG). He did not suggest to abonish the CGT which it should if NG is removed.

 

[Rob G.]

Yeah ... but whatever Federal Tax incentive is given to property investors the States quickly pilfer from the back-pocket with stamp duty & land tax.

Rob

 

[oldjonesy]

Folks,
I am not sure how wide spread this is...but there is a rising sentiment amongst pollies to remove negative gearing.

I am doubtfull that there is a rising sentiment amongst politicians to remove NG for housing. Every time leading pollies have been asked they would drop negative gearing they have clearly and forcefully put down any thoughts about its removal, and frankly I would be stunned if it was even considered by parliament.

What are your sources for the 'rising sentiment'?

 

[buzzlightyear]

Yeah ... but whatever Federal Tax incentive is given to property investors the States quickly pilfer from the back-pocket with stamp duty & land tax.

Rob

Here here Rob.

When the issue of NG is raised, the discussion about the broader issue of taxation on property is never mentioned. Various media crusaders and self-annointed experts gravitate towards NG like a bee to a honey pot. As it is the cure to end all property woes! If it was that simple, it would have been done. Oh, I forgot it was and then it was rescinded.

I say, if you want to discuss taxation on property, lets look at all taxes, local, state & federal and put them into context and talk about an equitable treatment of property, that generates better outcomes for society and the economy. Not the skewed and self-aggrandising comments we constantly hear from the peanut gallery.

 

[Mofra]

I just smile to myself about how the complaining we get on here about high cost of housing would change if -ve gearing was removed.

Just turn the page back to your history books circa 87 and insert your spoilt gen Y renter who is used to government subsidized (read -ve gearing) rents in lifestyle areas, of course I could be wrong and they might choose to move out to the commuter suburbs and take on a mortgage.

Not all gen y's do this of course, but we seem to pick up a few who prefer b*tching on internet forums instead of actually getting out and doing something about their own wealth creation.

Just imagine how the tune would change if rents were to rise to comparable levels with other countries.

Yep - everything (rental yields, gloabal warning, Wayne Carey etc.) is all Gen Y's fault.


FWIW no politician will ever be bold enough to commit political suicide by bringing in policies that have a direct & large effect the capital return from residential property, so for the most part subsidy schemes that flag the "look at us spend to fix a problem" criteria will continue to be the norm for whoever is in power.

 

[dave99]

IF you assume the number of people looking for rentals doesn't increase. It does, as people form families, move out of their parents' homes, etc. There will be a decrease in the projects being BUILT, certainly being proposed. Supply will start decreasing a few months down the line. What happens when supply doesn't change, and demand keeps increasing?

If NG is retained for building existing homes, with the benefit passed on to subsequent purchasers (limited to deductions based on the original cost of building), there should be NO drop in supply. The only drop in activity will be in the exchange of existing properties between investors at ever increasing prices, which has no effect on the rental pool

We don't lack newly released land, we lack new land with decent transport links. That won't change just because you axe NG. What we need is more investment in transport and infrastructure, either building better transport into the CBD or secondary CBDs.

I agree with you. But this is the case with or without NG on existing homes. Having NG on existing homes only worsens the affordability problems caused by lack of transport. Removing it would generate some improvement. And new supply is not always on the outer fringes, NG would be retained on new dwellings resulting from increased densities.

Yeah, doesn't that suck? Too bad. No polly has the backbone to axe NG, because they can't handle the short term backlash. Even if they did, plenty of investors would go to the wall before me, and I'll be picking their properties from them at bargain prices. Life isn't fair. Have fun petitioning your local MP.
Alex

What exactly would the short term backlash be, if all existing investors KEPT their ability to NG, and future investors could continue to NG on new dwellings? No-one currently on this forum will go to the wall because everyone gets to continue their NG! The result will be:
- A steady increase in prices at about the rate of nominal wage growth.
- No more property price bubbles and 50% annual increases in prices, inflated by people buying at an uneconomic yield.
- No more 1% vacancy rates at 25% rental increases due to disincentives to invest in new supply.