Bill shorten poised to take negative gearing.

Apologies for the misunderstanding. I did interpret it as a justification.
I am not aware of the NG's provenance and still believe that it was introduced in 80's. Happy to be shown otherwise.

 

Ok, thanks. I found out why I thought it was introduced in the 80's.

In July 1985, the Hawke/Keating government quarantined negative gearing interest expenses on new transactions so that they could be claimed only against rental income, not other income. (Any excess could be carried forward for use in later years.) What is less appreciated is that Hawke/Keating had introduced negative gearing only six months earlier. Previous to their initial decision, the Income Tax Assessment Act 1936 had quarantined all property losses from deduction against income from personal exertion (other business or salary and wage income). Any losses incurred in any year would be accumulated on a register and be allowed only as a deduction from income from property in succeeding years. Property income and property losses were in one 'bucket', and personal exertion income and losses were in another 'bucket'.
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Negative gearing - Wikipedia, the free encyclopedia

Not sure if this is correct or not, it's wikipedia after all. My concept of negative gearing is that investment losses are (effectively) deducted from income from personal exertion.

Effectively then, the system before 1985 did not allow negative gearing for property as I understand it.

 

It depends on how to define negative gearing but I don't think negative gearing of property has been around for 100 years.

 

I'm for a change to negative gearing but I've a few issues with your figures.

Point 1, 11 Mill working Aussies, 8Mill full time. 1.2 Mill use NG and many of those would be one partner in a couple. It effects much more than 5%

If you combine points 2 and 3 then the average income of those 840,000 must be below $89,500.

The Rort you talk of 11.4 billion is the pre tax amount, I'll estimate high and say people would pay 35% tax on that which is just under $4 Billion.

Just saying

 

He said the Australian population. If you change the denominator then, yes, you will change the result.

You can't do this with mean values. It makes no mathematical sense. The distribution of income versus the distribution of deductions needs to be evaluated.

 

• No it does not. It is still these 5% who have claimed the rental losses on their tax return, irrespective of rental loss / income distribution amongst family or other structures. (With due apologies to all spouses) Spouses are passive beneficiaries at best, tax avoidance mechanisms at worst for the purposes of tax minimization.
  
• Statistical inflation by reducing the sample size (Considering only earning population) does not permit a like comparison. A policy incentive available to a select group of earners (specifically a sub group of earners who invest in loss making ventures with a view to reduce tax), still gets funded from the common pool of tax. Compare Negative Gearing with say universal health care or national infrastructure development. Policy / tax deployment has far more penetration, social impact and return on investment as compared to NG. It is for that reason national policies or statistics should be normalized over national population.

• I do not have adequate statistical information and therefore a reason to combine the two.The averages quoted are for overall population and not for the subgroups, so it is difficult to work out the weighted loss (and therefore income) of 840,000 group.
• Even if we assume your metamer has a higher likelihood (Fact check: Do most negative gearers earn a modest income?), it does not change the fact that NG has been utilized to reduce tax liability.

• Pretax amount- agree.
• 35% tax- Not so sure, tax payable is a calculation which can be done only if NG rort is eliminated. In the absence of NG following might play out:
  • Incentives to hold loss making property /shares would be diminished.
  • Investor participation in tax rort will reduce. Pre tax amount (currently calculated as 11.4 billion) will reduce significantly making tax calculations mute.
    
  • Net rental losses might turn to profits and push investors into the higher brackets.

Difficult to predict, hence this thread to collate various views.

 

No I was responding to a post a few weeks ago that suggested that housing was unaffordable EVEYWHERE in Australia and another post that suggested that the ONLY form of housing is, well , houses. Yes, Australian cities have been developed over time without proper consideration for transport. That was typical of last century thinking and society as a whole has learned from the mistakes of the past.

Sydney is not the centre of the universe and can people stop complaining about their sydney-centric problems, swallow a chunk of concrete and just alter their expectations. Guess what - plenty of people don't get to live in houses in inner- middle Sydney. Get over it. When the population density of Sydney gets to that of cities anywhere else around the world, say in Britain, France or Germany even, then we can really complain.

 

So, @Angel where are the affordable houses in Sydney for a mechanic and his child care worker wife? Let's say they have 2 kids and in their early 30s.

It's all well and good saying the Sydney market is not Australia, and I agree because I'm not in the Sydney market. But there are people out there who need to provide services to Sydney but aren't paid that well. Where do you propose they live? Of course they aren't going to have a 4 bedroom executive home in Ryde. The problem is the massive gains in the outer ring, no real investment in public transport, and a continuation of a policy of urban sprawl. No consolidation of lots, no intensification of density in a wider sense. And the largest houses in the world.

It's pretty short sighted to just go, well it's not an issue in Broken Hill, so anyone can afford a house, when in reality some people are needed in large cities to do the work that the middle class doesn't want to do.

 

Hi Andrew. You are absolutely correct. We can discuss this further on a separate thread if you like.

 

Plenty of people needed in the small towns too.

 

They rent.

 

so does that mean if the labor party will next election in 2018or 2019, the cut off date is june 30th 2017
if so, do u need to settle the property by then or just sign contract of sale by then and settle a few mths later

thanks in advance

 

This is a really old thread. The article was talking about the previous election.

 

It is likely the policy will be updated closer to the next election.

 

thanks guys.

so that means they most likely wont backdate to july 1st2017 ,but date it after they get elected in the future?

 

It's really unknown at this point. We will have to wait until the policy is updated.

 

thanks perthguy

 

Just to clarify, negative gearing in its current form has existed since the 30's. The only thing that the Keating government did was quarantine then reverse it.

Negative gearing is not a special section of the tax code, it simply allows any investment loss to be deducted against personal income. This wasn't relevant until the 80's because housing didn't make for a good investment prior to that, rent controls played a big part in this and so did the lack of capital growth to encourage investment.

Written Off: Negative Gearing Report

 

It's interesting that it is a fact that negative gearing existed prior to the Keating changes in the 80's yet people choose to believe it was introduced by Keating in the 80's. What would drive a person to choose to believe something that is simply not true? It's quite baffling?

 

Moral of the story...... turn negative cash flow into positive cash flow, otherwise you will feel the pain