The Abolishment of the Negative Gearing Debate

[Deltaberry]

No point second guessing government policy and then being bitter about it when it doesn't work the way you'd like it to.

Many industries have government intervention/subsidies. Many people get rich off the back of this. If the government subsidies weren't there, I'm sure none of these people would've gotten rich.

So rather than saying things like "we should abolish negative gearing so all these landlords can sufferrrrr", one should be saying "ok given negative gearing isn't going to go away, how do I use it to my advantage and make some $$$?"

Not saying I'm a major success or anything, but I'm sure that's the difference between success and failure - do you have a "ok how do I make this work" attitude or a "what an unfair system I hope all you people die when Chairman Smith of the Australian Socialist Party instigates the Australian Cultural Revolution"

 

[grafix]

5.2 million boomers and none of them will want a NG'ed property when they retire and do not have the taxable income to use the tax benefit of NG.

NG will be gone by 2015 as the boomers get what the boomers want.

 

[Aaron_C]

5.2 million boomers and none of them will want a NG'ed property when they retire and do not have the taxable income to use the tax benefit of NG.

NG will be gone by 2015 as the boomers get what the boomers want.

Boomers when they retire won't be negatively geared anywhere near the extent of the younger generations.

 

[Francesco]

5.2 million boomers and none of them will want a NG'ed property when they retire and do not have the taxable income to use the tax benefit of NG.

NG will be gone by 2015 as the boomers get what the boomers want.

I am a boomer.
I have NGed properties.
I am retired.
I have taxable income to use the NG tax benefits.
So, I want NG for my properties but you can phase in abolishment of NG so I can raise rent to pay for expected increased land tax and rates (apart from higher demand).

I am sure there are more boomers with similar situations like mine.

You are a newcomer and already you are sprouting generalisations and predictions. What source of information are you basing on to predict that NG will be gone by 2015?

What do you hope to get out of SS forum apart from making such statements?

 

[BayView]

What do you hope to get out of SS forum

An argument.

I don't think these guys get it; if there is no neg gearing, then the element of investors who are using neg gearing as one of the factors that encourage them to invest (this would be almost every investor at the start) would decrease.

Now; of the volume of properties available decreases due to these neg gearing investors selling, there is no guarantee that other investors will buy them.

So, the likelihood is that there will be less total rental properties available for renters to choose from.

We've all seen what happens when that occurs; happy days for Landlords because the increased demand for less properties forces rents.....UP.

http://www.youtube.com/watch?v=1aXpty_1xo4

The question these "anti-neg gearing-I-can't-afford-to-buy-a-house" posters should ask themselves - or the Gubbmint (or even us here) is:

"Why does the Gubbmint allow investors to have a tax deductions from cashflow losses associated with property investing?"

The Gubbmint made the rules - not us.

 

[VYBerlinaV8]

5.2 million boomers and none of them will want a NG'ed property when they retire and do not have the taxable income to use the tax benefit of NG.

NG will be gone by 2015 as the boomers get what the boomers want.

Rubbish.

Are you also known as 'demografix' in other places?

 

[Graemsay]

Believe it or not; there are not really that many investors out there, and not that many who are cashed up to buy anything all the time. There are, however; loads of people who are "gunna" invest and never do...just lots of talk.

There's been a fall in the number of homeowners in the younger age groups. They've got to be living somewhere, and my guess would be that they're in rented accommodation.

In the UK it's become common for people to rent their first home instead of buying it, in part because of being outbid by investors for reasons I gave in my last post. I wouldn't be surprised if the same tune is playing in Australia.

So rather than saying things like "we should abolish negative gearing so all these landlords can sufferrrrr", one should be saying "ok given negative gearing isn't going to go away, how do I use it to my advantage and make some $$$?"

I'm in agreement with Deltaberry here.

If someone offers me a tax break then I'll take advantage of it.

I don't think these guys get it; if there is no neg gearing, then the element of investors who are using neg gearing as one of the factors that encourage them to invest (this would be almost every investor at the start) would decrease.

Now; of the volume of properties available decreases due to these neg gearing investors selling, there is no guarantee that other investors will buy them.

So, the likelihood is that there will be less total rental properties available for renters to choose from.

We've all seen what happens when that occurs; happy days for Landlords because the increased demand for less properties forces rents.....UP.

And if investors aren't buying then properties will have to be sold onto owner occupiers.

If a significant number of tenants are frustrated buyers who are priced out, then prices are going to have to move downwards to meet what this market will bear. That might even cause a reduction in demand for rentals too.

In theory if you leave a market alone then it should balance itself out. The article that Dinkumnet linked to was arguing that the government is pumping money into housing in an unhealthy way (subsidising both landlords and tenants), which in turn inflates property costs.

What strikes me is that the government has made a series of atrocious policy decisions, and I'm not just talking about taxation, which have restricted supply and boosted demand. Unfortunately the scale and costs of reform would be a massive vote loser (removal of grants and subsidies, planning changes), and I can't see any politician supporting them.

 

[BayView]

There's been a fall in the number of homeowners in the younger age groups. They've got to be living somewhere, and my guess would be that they're in rented accommodation.

No doubt.

Most younger people rent for a time when they move out of home, but I think there are also a lot of the current 18-30 year olds still electing to live at home for longer as well.

"Back in the old days" the younger folk would move out of home at 18, many would be married by the time they were 20, and would buy an older fixer-upper out in the boondocks and put blankets up on the windows, buy second hand furniture or sit on tea chests etc. Trade up to the you-beaut house at around 30, or in some cases live in the same house their whole adult life.

The availability of credit for purchasing new gadgetry wasn't there back then, so it was more common to actually save cash money. Today that is less common, and when it comes time to getting a loan for a house, many young folk are lacking in savings history and are already loaded up with credit card debt and/or personal loans for holidays and cars.

The silent killer (of borrowing) is the credit card limit - it is factored in to the serviceability for Bank loans, and if you are "lucky" enough to get offered an increase in the limit before you get to the point of looking for a home loan - and take it - then your serviceability just took another hit, and many people don't know this.

In the last few months, we have been offered limit increases of a total of $20k over both our cards (one for private use and one for the business). Won't be taking up the offers.

In the UK it's become common for people to rent their first home instead of buying it, in part because of being outbid by investors for reasons I gave in my last post. I wouldn't be surprised if the same tune is playing in Australia.

Being outbid by investors can be a demographic thing too; it gets back to the argument that comes up here every other week about affordability; many of the younger generation are not wanting to live further out from the city, then whine because houses are too expensive, and/or they are very choosy, and lots of investors are cap-gain brainwashed, and tend to look more at the "flavour of the decade" spots.

So, you have FHb's and PI's fighting over the more in demand areas. The investors could look for other diamond-in-the-rough areas, but that takes more work.

If someone offers me a tax break then I'll take advantage of it.

Absolutely.
I have a silent snigger when I hear people say they are expecting a big tax return of a $1k, when ours are always a decent amount higher than that; but we took the plunge and bought IP's - a lot don't.

 

[Rixter]

5.2 million boomers and none of them will want a NG'ed property when they retire and do not have the taxable income to use the tax benefit of NG.

NG will be gone by 2015 as the boomers get what the boomers want.

Rubbish. That statement proves you havent a clue about what you are talking about...rental income alone is income and needs to be declared..

My rental income is far far more than my payg income, same as retirees with IP's who exit the workforce.

Why would the govt abolish NG where they are making huge revenue from it.

 

[Dazz]

The stats that I've seen suggest that historically FHBs make up around 40% of the market.

Hmmm, your stats say 'historically around 40%", and mine say 'currently 18%'.

We ceratinly are worlds apart, and not just geographically with you over in the UK. No wonder we draw vastly different conclusions.

 

[Dazz]

There's been a fall in the number of homeowners in the younger age groups. They've got to be living somewhere, and my guess would be that they're in rented accommodation.

It's not as simple as that....there have been massive demographic changes in the last few decades.

Back when, there weren't too many late 20 somethings still living at the M&D free hotel, having completed 3 Uni degrees and going back to commence a 4th. Now it's common.

In the UK it's become common for people to rent their first home instead of buying it, in part because of being outbid by investors for reasons I gave in my last post. I wouldn't be surprised if the same tune is playing in Australia.

The UK is not Australia. Housing does not react the same. The D&G brigade have been waiting nearly 5 years for Australian residential property to behave and fall in line with attributes seen in the US, UK, Spain.....you're gonna just have to sit tight and wait a bit longer....cos it just doesn't follow the same pattern.

 

[SENIOR]

Francesco;r.
I have NGed properties.
I am retired.
I have taxable income to use the NG tax benefits.
So, I want NG for my properties but you can phase in abolishment of NG so I can raise rent to pay for expected increased land tax and rates (apart from higher demand).

I am sure there are more boomers with similar situations like mine.

You are a newcomer and already you are sprouting generalisations and predictions. What source of information are you basing on to predict that NG will be gone by 2015?

What do you hope to get out of SS forum apart from making such statements?
Having negative geared property when retired can hurt as you will have losses and shrinking your nest egg.Unless there is Capital Growth that gives increased asset value that can be cashed in later.
At the moment Capital Growth is flat or shrinking which is a even worse
When I retired I made sure all the IPS are positevely geared and its part of you could say pension

 

[Ausprop]

At the moment Capital Growth is flat or shrinking which is a even worse

where's this happening?

 

[Rixter]

where's this happening?

US of A

 

[Francesco]

...Having negative geared property when retired can hurt as you will have losses and shrinking your nest egg.Unless there is Capital Growth that gives increased asset value that can be cashed in later.
At the moment Capital Growth is flat or shrinking which is a even worse
When I retired I made sure all the IPS are positevely geared and its part of you could say pension

Hi Senior

I am mindful of what you said. The latest analysis I did showed that I received $50k CG per year for the last 2 years from half my IP portfolio. Maybe CG may retract going forward but I am looking forward to reduced interest payments and better investment opportunities in Australia and elsewhere (others have cited US for example). So, refinancing helps with investment opportunities. I already have pension. Refinancing and IP are pluses. Must do something with the mind as well as being an argy bargy grump on SS.

I don't know how senior you are but I am considered senior but not senile I hope.

 

[Dan_p]

At the moment Capital Growth is flat or shrinking which is a even worse
When I retired I made sure all the IPS are positevely geared and its part of you could say pension

You can still claim against any expenses for the property right

 

[VYBerlinaV8]

You can still claim against any expenses for the property right

Yep.

The problem is people think 'negative gearing' is a tax rule - it's not, it's just a name that financial planners have given to a specific strategy.

 

[Shadow]

They don't need to remove NG, they simply need to completely do away with the FHOG and other FHB concessions.

In other words, you think property should be taxed even more heavily than it already is. The government currently takes far more in tax from the housing sector than it gives back in grants and concessions. The government basically treats the Australian property market as a 'cash cow', using their massive net tax intake from homeowners to fund other essential services.

Some rough figures...

Government outgoings to property
Negative gearing ~$2.5b (tax forgone on $6.5b losses claimed)
FHB grants ~$0.7b ($7k times 100,000 FHBs)
TOTAL GOV SPEND ~ $3.2b

Government take from property
Rates ~ $9b (~$1000 on 9m dwellings)
Stamp duty ~ $6b (~$15k on 400k transactions)
GST ~ $6b (~$40k on 150k new dwellings)
Development and approval fees ~ $15b (~$100k on 150K new dwellings)
Plus more fees for extensions etc
Plus land tax ~ $6b
Plus CGT on sales
TOTAL GOV TAKE ~$42b+

And your 'solution' is for the government to take more, and give less! Why? So that house prices will fall enough to justify your decision to sell your home?

 

[Peter 14.7]

Shadow puts a very good argument and I agree but.....

I would like to note our rates and contributions pays for services like roads, pools, parks etc.. so the Government (local) spends the income and the user benefits so to me that is zero out.

An example: Back of say Hay NSW, in the bush, rural land, there is very very low rates, because there is almost no services.

Overall Shadow is right!

Property is an industry to tax and in the end, even at 40c in the dollar tax back , each investor is risking 60 cents in the dollar that that Investment will rise.

In a way, NG means investors are actually subsiding the Government costs of providing affordable rental public housing by 60% plus.

Regards

Peter 14.7

 

[hobo-jo]

In other words, you think property should be taxed even more heavily than it already is.

How is scrapping the FHOG an invitation for heavier taxes?

Not seeing the link.