Another Negative Gearing Reform Proposal

So what do you think that will do too the equities and property markets within Australia..

 

I dont favor anything, it just I find logical of getting rid of NG (or at least limiting its use or only on new dwellings) and reducing CGT according to inflation condition.I am not blindsided by my interests (anyway I have barely used NG (I am not into loss making "investment") and my plan is for my kids to sell my properties, not me ;-) )

 

Not much compared to this coming limit to easy credit

 

for sure it s a shame

You always have outbid someone to get a property

 

That's the troubling mismatch between the clarity of the consequences with Labor ..

 

Do they intend to do the same with shares? Remove the CGT discount?

If the CGT discount is reduced - will that be grandfathered?

 

Start a new business. That might change your point of view!!

 

I did. I made a profit.

If you are comparing profit and loss with NG then I think that's disingenuous personally.

 

Not really.

All my assets at some point were NG which enabled me to realize a lot more wealth in the medium term. It just depends on your goals and strategy.

 

If most small business ran it the same way as many run their investments properties , the country would have gone broke years ago.
Most business oriented people are smart enough to be able to look at another business and just walk away, if the numbers dont add up , or have a plan to turn the business around within a reasonable timeframe.
They just dont buy a business , keep on running it at a loss and then get a tax refund each year .
Unless its a hobby or set up to commit fraud, launder drugs etc etc.

 

When did they introduce negative gearing?

Answer = never. Negative gearing was never "introduced" and never had a purpose. It's been around as long as income tax.

 

A permanent solution to a temporary problem.

 

Can you define what “making a loss” and “negative gearing” means?

 

Most decent investors do not want to have their assesst negatively geared forever. They have a plan to turn it into CF+ by several strategies such as reno, extension, GF,... Of course CG is important in the game similar to the way business owners hope/aim to have higher profit. All want to have a product in high demand, buy low and sell high, sell more etc...

Good investors also walk away from a deal if the number do not stack up.

 

Rubbish.

According to the Australian Bureau of Statistics, more than 60 percent of small businesses cease operating within the first three years of starting.

These didn’t cease to operate because they were making profits; I bet you they were making losses.

I don’t believe two thirds of property investors give up within the first three years of buying a loss making IP .

And it is not just small businesses. Analysis by the ABC reveals that one in five of Australia's largest companies have paid no tax for at least the past three years. Qantas has not paid corporate tax for 9 years.

 

bait comment

 

Sometimes we buy the ugly ones that your FHBs dont want.

Other times we buy bigger and better homes that FHBs cant afford. Were my IP is, there is a smorgasboard of smaller and cheaper houses for FHBs worth about $50 to $80k less than ours.I wouldn't have one of those horrid new little things, all crammed up close together and that fall down within ten years. Which will have the better capital growth?

 

I do know someone that did just this and lost their house. It's a definite possibility if you want to go broke fast.

 

Wasn’t meant to be one .

The point I was trying to make was that not all businesses make profits. Some large ones don’t; some small ones don’t. But if you can offset losses against income in the same year or in future years.

Same in property investment. Not all property investors make a profit. Some large ones don’t; some small ones don’t. But one should be able to offset losses against income in the same year or in future years.

Our property portfolio has been cashflow positive. Currently we are negatively geared. This time next year we should be cashflow positive again. We won’t pay income tax for a little while until we consume our accumulated tax losses. After that, we will be paying tax for the rest of our days.

 

Australian equities face more than enough challenges at the moment. Weakening iron ore and coal price, banking royal commission (the big 4 are about 40% of the ASX), geo political crisis (trade war, South China Sea). I suspect the removal of negative gearing and the reduction of CGT discount are just two more nails in that particular coffin.

As for house prices they are heading down, the question really is how much? The impending credit crunch, interest only reset, the potential for out of cycle rate rises by the banks and the likelihood that immigration will be reduced. NG and the CGT discount reduction will add to the pain but by then the pain train will well and truly be rolling.

It is hard not to be bearish, whether I am overly pessimistic or realistic remains to be seen.