Another Negative Gearing Reform Proposal

Discussion in 'Property Market Economics' started by Angel, 11th Apr, 2018.

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  1. willair

    willair Well-Known Member Premium Member

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    Good to see other peoples opinions ,with all the explosive consequences with the unseen and unknown about to happen ..
     
  2. Hamish Blair

    Hamish Blair Well-Known Member

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    A capital gain is earned over more than one fiscal year - the asset has to be held for > 12 months in order to be eligible for the 50% CGT discount.

    Now since the gain is included as income and taxed accordingly (not simply at your pre-gain marginal rate as some incorrectly think), the 50% discount provides a degree of smoothing.

    Gain occurs at a single point in time; in effect the 50% discount smooths the tax impact as though you were taxed over multiple years.

    I acknowledge this may have not been the intention of the government when they replaced the CPI indexation of the cost base with the 50% discount from 20 September 1999.

    In the US they tax “long term" capital gains at a flat rate depending on your marginal rate. The flat rate is much lower than the marginal rate.

    [I am trying to decipher the impact of the Tax Cuts and JObs Act on capital gains].

    Similary dividend income in the USA is taxed at a different rate to your marginal rate (doing away with the need for franking credits).
     
  3. marmot

    marmot Well-Known Member

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    Yeah thats the difference between a real business and residential property investor.

    For most business people it takes then about 3 times to get it right , a few failures along the way is part of the learning curve .
    They generally dont get to offset their losses against income that is totally unrelated, unlike housing.
    They also have to be competitive in pricing and provide good customer service .
    And then you have the big multinationals that can use profit shifting to move their profits to low tax countries and then load up the local business arm with debt to reduce their tax liability.
     
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  4. Eric Wu

    Eric Wu Well-Known Member Business Member

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    "Capital gains tax discounts are also "heavily weighted" toward the more affluent according to the report, where the average sophisticated investor has a portfolio of $730,000 and an assessable tax income of $82,000 compared to $31,000 for renters who do not own properties." --- from the article.

    this line makes most of us on PC as " affluent" & " sophisticated" ;)
     
    Last edited: 12th Apr, 2018
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  5. strongy1986

    strongy1986 Well-Known Member

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    what is a loss making asset?

    Return is made up of rental yield + capital growth

    If everyone was investing using only their own funds (no bank interest), would there be such a stigma about investing in loss making/ 'speculative' assets?
     
  6. hobartchic

    hobartchic Well-Known Member

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    What stigma?

    I think some people question whether it's an investment if a loss is made.

    Why would anyone support speculative assets where the value is in other people piling in, not in adding value? And then the music stops and it all rewinds. Quickly.
     
  7. Francesco

    Francesco Well-Known Member

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    It is said about 70% of companies in the ASX made a loss and it is similarly reflected globally. Fortunately it is not a reflection of their permanent state of existence. Not many started off with a profitable company unless it is a green field with few competitors.
     
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  8. fpap

    fpap Active Member

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    Amazon made losses for years before they really started to make money, but they had a PLAN and stuck to it.
     
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  9. fpap

    fpap Active Member

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  10. kierank

    kierank Well-Known Member

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    Sounds exactly like my investment property portfolio.

    Maybe they are copying my strategy :D
     
  11. hobartchic

    hobartchic Well-Known Member

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    Forbes analysis shows Amazon is reliant on cheap capital (that's likely to end) and share market players (which could also end):
    The Amazon Era: No Profits, No Problem
     
  12. Ted Varrick

    Ted Varrick Well-Known Member

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    Thus thread should excite some of the long suffering gold bugs...