Todays AFR article about trusts

From: Tibor Bode


Hi everyone,

There is a very interesting article on the front page (continues on page 8) of todays AFR. trust is again Public enemy No 1. Total lack of understanding by the politicians or just simply vote grubbing of the reasons for the trust. It is worth to pay attention to the opinion of the Labor party and the Democrats on this matter, which is supportive of a "crackdown".

The same mobs are also supportive of removing negative gearing. If someone is interested, it is worth to have a loot at the Democrats opinion about it on
http://www.democrats.org.au/policies/#

Tibor
 
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Reply: 1
From: Dale Gatherum-Goss


Hi

I don't have a copy of that article and thank you for drawing attention to it. As I have said many times before, the Government loves to look like they're doing something abt trusts so that the man in the street will support the government.

In the end, they tinker around the edges and do very little indeed. This has happened for a very long time and I doubt that we'll see anything different in the near future.

In fact, the major accounting bodies have recently suggested that the government drop their proposed plans and get on with the job of looking for real tax cheats and not the people who genuinely use trusts for all sorts of reasons.

As always, do your own research and be aware of the issues, but, don't get too frightened by newspaper talk. This stuff sells papers.

Have fun

Dale
 
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Sim

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Reply: 1.1
From: Sim' Hampel


I read the article and also the policy statements on the democrats website, and I got the feeling that it is all the Robin Hood "take from the rich and give to the poor" type of mentality - which is the politically correct thing to do these days... something the democrats are right in to. This "all high net worth individuals are crooks" attitude annoys me, as I'm sure it would most people who have worked hard to get where they are financially.

sim.gif
 
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Reply: 1.1.1
From: Gordon Austin


One only has to look back to what happened when the Labor Govt removed negative gearing back around 1987. What a mess, it didn't take them long to realise their mistake and reintroduce it.

I remember seeing something in Renton's book recently which I thought made sense in relation to all the extra revenue the Govt expected to raise by harsely taxing trusts. As Renton points out, this arguement is flawed because once you apply unreasonably harsh rules taxpayers will just stop using these vehicles and move to other alternatives.

Gordon
 
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Reply: 1.1.1.1
From: Tibor Bode


Hi Gordon,

I know it is a very good selling point that it will not happen. The same happened in the US (if I am correct back in 86) and RK mentioned in one of his books that this is how he made a killing in real estate. Should the government be forced into a hole an d have to deal with the democrats this might just be an option again. The Democrats tried it just about 2 years ago during some negotiation on some GST related issue. Once is taken there is NO guarantee that it will be reintroduced again or just some watered down version (like allow 50% only as this is the CGT) which could hurt people big time who are heavily in the negative geared game.

I personally totally agree with Sim on the subject that the democrats and labor (as well as several people) think that if someone has a couple of properties they are automatically crooks and "rich bastards". I have several, but I am neither rich (hopefully a couple of years time I will be financially independent) nor I am doing it in any crook way. But this still does not change the fact that this is how you can get votes and politicians like anything that helps them to be re-elected.

Tibor
 
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Sim

Administrator
Reply: 1.1.1.1.1
From: Sim' Hampel


Indeed the gist of the arguments against the current negative gearing allowances is the gap between the financial benefit of negative gearing at your full marginal tax rate versus the cost of capital gains tax where you only pay tax on half the gains. Basically a form of arbitrage, converting cashflow into capital gains and getting a healthy tax advantage along the way.

The suggestion is to move to close that gap by having consistent taxation across the board, which actually sounds like a reasonable argument to me.

Of course the argument used by the Democrats (and many others) is that negative gearing (in it's Australian definition) is not allowed in most other countries, in particular the US and the UK (ie. they don't get the tax benefits that we do)... however, they fail to make note of the other differences between us and them, with capital gains tax, much higher personal tax rates and so on. So removing negative gearing "because no-one else allows it", without also adjusting some of the other taxes to bring us more into line with other countries would be rather unfortunate.

sim.gif
 
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RE: Today's AFR article about trusts

Reply: 1.1.1.1.1.1
From: Duncan M


Sim,

In addition to this:

I also fail to see the difference in:

A) Allowing a Tax Benefit NOW from a loss on a Rental Property
B) Deferring the loss until a profit is made

At the end of a given time period after the property is making a profit and
any losses have been applied, the net outcome to the government in Tax
Revenue is surely identical (aside from the time value of money argument)..


?


Duncan.





-----Original Message-----
From: propertyforum Listmanager
[mailto:listmanager@bne003w.webcentral.com.au]
Sent: None
Subject: Todays AFR article about trusts


From: "Sim' Hampel" <sim@hampel.com.au>

Indeed the gist of the arguments against the current negative gearing
allowances is the gap between the financial benefit of negative gearing at
your full marginal tax rate versus the cost of capital gains tax where you
only pay tax on half the gains. Basically a form of arbitrage, converting
cashflow into capital gains and getting a healthy tax advantage along the
way.

The suggestion is to move to close that gap by having consistent taxation
across the board, which actually sounds like a reasonable argument to me.

Of course the argument used by the Democrats (and many others) is that
negative gearing (in it's Australian definition) is not allowed in most
other countries, in particular the US and the UK (ie. they don't get the tax
benefits that we do)... however, they fail to make note of the other
differences between us and them, with capital gains tax, much higher
personal tax rates and so on. So removing negative gearing "because no-one
else allows it", without also adjusting some of the other taxes to bring us
more into line with other countries would be rather unfortunate.

sim.gif



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To start a new topic: mailto:propertyforum@bne003w.webcentral.com.au
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Reply: 1.1.1.1.1.2
From: Projects .


The RBA has a research discussion paper City Sizes, Housing Costs & Wealth that touches on tax treatments.

http://www.rba.gov.au/rdp/RDP2001-08.pdf

In it, it mentions that many OECD countries allow negative gearing. I wonder if the Democrats would allow deductible interest on the ppor like the USA & others.

Projects

There is more than one way to climb a mountain.
 
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RE: Today's AFR article about trusts

Reply: 1.1.1.1.1.1.1
From: Duncan M




Hmm, in hindsight if a property is never allowed to make a profit (ie is
sold), it does change the picture somewhat.



-----Original Message-----
From: propertyforum Listmanager
[mailto:listmanager@bne003w.webcentral.com.au]
Sent: None
Subject: RE: Today's AFR article about trusts


From: Duncan Margetts <duncan.margetts@cispl.com.au>

Sim,

In addition to this:

I also fail to see the difference in:

A) Allowing a Tax Benefit NOW from a loss on a Rental Property
B) Deferring the loss until a profit is made

At the end of a given time period after the property is making a profit and
any losses have been applied, the net outcome to the government in Tax
Revenue is surely identical (aside from the time value of money argument)..


?


Duncan.





-----Original Message-----
From: propertyforum Listmanager
[mailto:listmanager@bne003w.webcentral.com.au]
Sent: None
Subject: Todays AFR article about trusts


From: "Sim' Hampel" <sim@hampel.com.au>

Indeed the gist of the arguments against the current negative gearing
allowances is the gap between the financial benefit of negative gearing at
your full marginal tax rate versus the cost of capital gains tax where you
only pay tax on half the gains. Basically a form of arbitrage, converting
cashflow into capital gains and getting a healthy tax advantage along the
way.

The suggestion is to move to close that gap by having consistent taxation
across the board, which actually sounds like a reasonable argument to me.

Of course the argument used by the Democrats (and many others) is that
negative gearing (in it's Australian definition) is not allowed in most
other countries, in particular the US and the UK (ie. they don't get the tax
benefits that we do)... however, they fail to make note of the other
differences between us and them, with capital gains tax, much higher
personal tax rates and so on. So removing negative gearing "because no-one
else allows it", without also adjusting some of the other taxes to bring us
more into line with other countries would be rather unfortunate.

sim.gif



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To start a new topic: mailto:propertyforum@bne003w.webcentral.com.au
To login: http://bne003w.webcentral.com.au:80/~wb013


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Sim

Administrator
Reply: 1.1.1.1.1.2.1
From: Sim' Hampel


Considering that for many people their PPOR is their biggest investment, a US style treatment of tax on PPOR loan interest would be a great for many people.

sim.gif
 
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Reply: 1.1.1.1.1.2.1.1
From: Lee Mathers


This comes from the Dems website


"The Australian Democrats are unique in policy formulation and this makes us different to all other political parties. All our members can draft and vote on all Party Policies."

Perhaps we could get enough people together to stack the Democrats full of IP investors and introduce our own policies. Maybe then the Govt will listen - afterall, that will place us in a "minority" - a perfect place to be if you ever want to get anything done in politics!

Lee "Mr Cynical" Mathers
 
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Reply: 1.1.1.1.1.2.1.1.1
From: Ctrader .


"The Australian Democrats are unique in policy formulation and this makes us different to all other political parties. All our members can draft and vote on all Party Policies."

Sounds a bit like the joke about a camel - a horse designed by committee.
 
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