Do you think negative gearing should go?

So we have a tie.

 

No no no.

 

don't you buy in trust

I buy everything in Trust so negative gearing is not relevant

 

I would guess that's 18 people sitting on the sideline waiting...

 

Yes we do and some not in trust. Also most of our props as far as I know are positive. It doesn't concern me as much, its more for others who can get some 'cash back' from the losses incurred. Makes no sense to me to want to give that up.

 

waiting for...?

 

The government to remove NG from the greedy landlords so they can swoop and afford to buy?

 

Who you calling greedy!

Ok ok I am

 

I don't think NG should go as such but I do think it should be limited similar to capital losses in that it would only be applied against future rental income. So people would be encouraged to buy positively geared property instead of negatively geared and only gain a benefit from any negatively geared periods if they hold the property until it is positive.

This would basically remove the government subsidy on property speculation without actually impacting anyone but the speculators and those making terrible investments as those who make sound investments will recoup any initial losses over a reasonable time period.

The CGT concessions remain the bigger part of the problem though and if it was a question of addressing those or negative gearing I would be voting for the CGT side of the equation every single time.

 

@wogitalia are we talking residential property here or commercial property too? I haven't seen that same arguments applied to commercial property so I don't know if investing in commercial property is harmful to the economy Out of interest, do the comments hold true for shares? or are we going to treat negative gearing for different asset classes differently. See if you agree with this:

I don't think NG for shares should go as such but I do think it should be limited similar to capital losses in that it would only be applied against future dividend income. So people would be encouraged to buy positively geared shares instead of negatively geared shares and only gain a benefit from any negatively geared periods if they hold the shares until they are positive.

This would basically remove the government subsidy on stock market speculation without actually impacting anyone but the speculators and those making terrible investments as those who make sound investments will recoup any initial losses over a reasonable time period.​

Like with NG, the CGT concessions (for investors) are the same for shares as they are for residential investment property. Are we removing CGT concessions for shares, or just residential investment property, so that different asset classes have different CGT concessions?

The reason I ask is that IMO, our tax system is already ridiculously complex. Treating NG and CGT concessions differently depending on the asset class will add more layers of complexity to an already ridiculously complex system. There are costs associated with this which should be considered when contemplating changes to the current system.

Say that current NG and CGT concessions remain for shares but were removed for residential investment property and shares became a preferred asset class. What would be the consequences of this?

I am not arguing the NG should be retained in it's current form, because I don't agree it is a good policy. I am just pointing out that however it is done there will be consequences. We need to make sure the impacts are wanted, not unwanted.

 

I think NG in its current form should go. While we are waiting for our next residential investment property deal, there is cash in an offset account against our investement loan. This means instead of the property costing us money every year (negatively geared), the property will actually be profitable until our next purchase. My investment partner has complained that this will mean he pays more tax. I argued that it means we will be more profitable, which is a good thing. He conceded this is true but complained that he just doesn't like paying tax. I blame NG for that type of mentality, which incentivises people to not make money. The purpose of investing is to be finacially better off, not financially worse off. In this regard, NG does not provide the right incentives IMO.

 

Personally, negative gearing won't matter at all to me whether it stays or goes BUT I think if the government wants to mess with it, then whatever they decide to do should be the same for ALL asset classes.

 

Buying an investment to deliberately lose money (from a cashflow perspective) is not really investing. Investors should invest to make money, especially from a cashflow perspective you want your investments to look after themselves ....

 

CG in horizon makes NG attractive. I will do for short term.

 

Wouldn't mind seeing it removed if you own just the one IP, help weed out those awful tax avoiders from the real investors.

Always wondered why the vast majority don't continue on to more IP's and guessing it's due to the classic accountants advice of "negative gear to save tax, you can't lose"!

 

And then they lose and can't afford to buy another one.
Maybe those good old OTP's at the Gold Coast.

 

The discount should go on all asset classes, it's a stupid system that makes buying and not using assets a more profitable venture than actually running a business or being a wage worker, why have sources of income that are lazy and unproductive compared to most other sources be the ones that taxpayers incentivise? I'm fine with indexation so that people aren't just paying on inflation but the discount is broken.

I don't mind the SBE CGT concessions because they encourage and reward those who invest directly in business and provide an incentive for worthwhile ventures.

As for NG, I'm fine with doing the same with dividends and interest (both are a fair bit harder to negatively gear due to the leverage side of things but it's a perfectly valid point). I'm not anti-property in any way or against people using it to invest, I'm firmly against taxpayers being used to incentivise and subsidise those who do though, it's ridiculous the amount of taxpayer money being wasted to encourage people into loss making endeavours and speculation on property prices especially when you consider the massive social cost that unaffordable housing prices entail.

I'm firmly on a tax system that interferes as little as possible and where it does interfere that it should be minimised and kept to the most efficient methods. Personally I think income tax rates should be cut massively, our corporate tax rate shouldn't be higher than 15% and I don't see any good reason for the marginal rates to go much higher or really even higher than that at all (why force higher wealth people into unnecessarily complex structures, what does it really achieve other than increased administration costs?). I'd do away with payroll tax (the worst tax of all, actively punishing employment, great idea that..), stamp duty (replaced with a far broader land tax that has no loopholes or exemptions). I'm all for greatly simplifying things.

I'm fully aware that all of this is a pipe dream, governments just wont make the sweeping changes needed because change upsets people and upset people don't vote you back in to make that pension you're in it for that much better (speaking of bloated money wastes...)

 

One would hope that curiosity doesn't extend to a clock that has some funny blue or red wires coming out of it when you are holding a pair of tin snips...

 

Maybe they are all positive geared and don't really care about being negatively geared...

 

Wouldn't scrapping NG reduce demand and lower capital growth?