Another Negative Gearing Reform Proposal

Have we dissected this yet?

Wealthy should be excluded from negative gearing, research finds

It proposes eliminating NG for higher income earners bur keeping it for lower income earners, and reducing it for those in the middle-ish. From March 2018

I'm not sure I liked their definition of Affluent.

 

In this low inflation world, CGT changes make more sense than income testing NG (in a stagnant or falling maket NG are not much of an incentive anyway, but could be restricted against income form their asset class )

 

Nowadays I laugh every time I come across any article which likes to bash the 'wealthy'. They are just pathetic. The true story is never told of how many of the 'wealthy' got to where they are. I got no more patience for the whingers anymore. Anyway, what will be will be.

 

This is one of those things that I would do across the board if it was left to me. No grandfathering. No income testing. If they are sure NG is a good idea to go, then just be done with it.

 

Sigh - why can't they just leave NG alone? One of the few small carrots to incentivise mum and dad investors to hold a loss making asset providing affordable rental housing for that segment of the population who need it.

Plus whatever small tax refunds they each year get are probably clawed back with interest when they finally pay CG tax when they eventually sell.

 

I agree with not trying to income test, just adds complexity, but strongly disagree with no grandfathering. Long term investment decisions need to be able to be made based on assumptions that stay consistent. Government constantly changing the rules or even threatening to do so just makes for an uncertain environment and deters future investment.

Same goes for changing the rules that affect people's super/retirement strategies (eg ALPs latest franking credits cash grab) completely unreasonable to start changing the rules for people who have there cash locked inside super and spent decades planning for retirement based on the laws at the time.

 

Because it costs a lot for very little benefit as most investors buy existing dwellings, do not add any supply whatsoever ( and charge as rent what the market can bear).

 

Does it really cost a lot? How much of that tax refund is recovered by Capital gains tax on sale? How cost effeciently can the government provide affordable rental accommodation in place of these investors? How much will rents increase when that incentive is removed?

 

CGT is recovered anyway independently of NG (unless you assume NG pushes the prices up)

The most affordable are social housing, which add to supply, 90% of investors (like myself) do not add supply therefore do not provide affordable rental (they just outbid wouldbe first home owner and force them to rent, not much added value there, rent cannot increase as supply would be unchanged nowadays if NG goes) .

 

My point is that currently there is the carrot of NG and the stick of CG tax.

Shorten and co. want to take away the NG carrot and double the size of the CG stick.

 

yes but the point of CGT is to not tax inflation but as inflation is now pretty low it also makes sense to reduce the discount accordingly.

 

I don't think we should encourage people to hold a loss making asset. In fact, if it's loss making then the only way it's an asset is if it sells for profit but if you add up loss over years...where's the profit?

 

@Deck Sorry, I am confused, you are a property investor who is in favour of abolishing NG as well as getting rid of the CG discount?

Serious question- how do you reconcile investing in property while simultaneously supporting these sort of wealth redistribution proposals?

 

What social housing? The govt doesn't build it any more.They introduced NG to entice the private sector to provide housing for them.

Are you seriously sure that, as an investor, you want to out bid other people, all of whom are FHB not upsizers or downsizers, to pay as high a price as possible in order to take out a huge mortgage?
Really?
Or is that quoted verbatim the mantra used by a certain group within the community who want to....blah blah same old

 

I know, right, isn't all this investing for our future just a huge con.

I am about to call everyone I know who is currently retired and living off rent. I think they should stop all this frugality nonsense, spend up big until they reach aged-pension age, and collect welfare instead.

 

I think you missed my point. It makes sense to have assets that are positively geared. That was my point.

 

Good thing no one's gone after the golden egg of property: offset accounts. Abolish those and there will be more interest, in numerous senses of the word lol

 

I definitely agree with you there.

 

Ssh, dont give them any ideas

 

Negative gearing is gone next year, time to just accept it. Capital gains tax discount is also going to be greatly reduced. Labor could guarantee the deal by replacing Shorten with Albanese/Plibersek/Bowen prior to the federal election but either way the Libs are done.

Time to adapt and find a new tax minimisation strategy.