Endgame - What are you aiming to live off?

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I have never seen such a short and succinct summary of a philosophical position as that!

 

Sanj, don’t presume to know my situation. You have no idea what my situation is and you are assuming much based on my ‘lofty’ plans posted here for my future end game which is a work in progress and not set in cement. Plans are made to be broken and I am old enough to know that I need to prepare for lots of contingencies.

I do recognise that our welfare system needs reassessing and that with most of the baby boomers reaching pension age, more than 70% will be eligible for the pension. It is unsustainable. There are some thoughts of making the PPOR assessable under the assets test and forcing pensioners to use the equity in their houses to fund their retirement. This of course has lots of ramifications the least not being that most pensioners will be relying on selling the PPOR to fund their move to nursing homes and health treatments. If they use the equity of the PPOR to live on then they won’t be able to afford to move to nursing homes. What then?

Now let’s look at your figures you stated above. Your figure of about $60bn for pension is actually made up of $44bn for the aged pension and about $17bn for the disability pension… so let’s get those figures straight for a start. It isn’t $60bn for the aged pension.
Budget 2015 - Overview - A fairer pension system

It will be interesting to see the ATO statistics for 2015-2016 on the cost of property investment to taxpayers when it is released. In the meantime looking at the statistics for the 2010-2011 FY:
“Of the 1,811,174 individuals that reported to the ATO as having an investment property, 1,213,595 of these individuals, or two out of every three investors, were recording a loss on their rental income. The total value of these losses over the year was $13.285 billion.”
There were 1,213,595 individuals with a negatively geared property over the 2010/11 financial year

Or we can also look at the: “re-analysis of the 2013-2014 tax data that shows that each negative gearer claimed an average loss of $8722 per year. Seven out of 10 had income before deductions in the top or second-top tax bracket. The average amount of tax saved by each of the 1.2 million negative gearers was $2900 per year.

Spread over the remaining 11.7 million taxpayers, the average cost was $310 each. The total, $3.646 billion, is about as much as the government spent on assistance to jobseekers and vocational training, and twice what it spent on assistance to indigenous Australians.”
Peter Martin: Revealed. What negative gearing costs other taxpayers

“ALMOST 30,000 people have five or more homes negatively geared for tax offsets, costing the nation up to $5 billion a year in lost revenue.”
“http://www.heraldsun.com.au/news/taxpayers-fork-out-as-investors-fill-pockets/news-story/f128be66baee86d07590bd2074e9f1d7?nk=41767dfb3553d0ba81a999d5e9a86ccf-1469466037

“Negative gearing: a legal tax rort for rich investors that reduces housing affordability”
Negative gearing: a legal tax rort for rich investors that reduces housing affordability

Based on those statistics posted above I can't see how your holier than thou attitude toward my pension shows merit to tell the truth. But hey everyone else is doing it so why not blah, blah

 

Sanj, I think you are a tad hypocritical. In the following thread you advise would be immigrants, who haven’t contributed to Australia’s economy, or paid taxes here, or worked here, or served our country, that they can take advantage of our tax breaks and super that us taxpayers have paid for over the years including setting up systems. Seems you have one rule for some and another rule for others that don’t suit your agenda. I don’t see you jumping all over them for their temerity to even suggest coming here to do that.

…”short answer is yes it's possible and if done correctly potentially highly lucrative as they're the perfect age to take advantage of the super tax breaks.”
the perfect age to take advantage of the super tax breaks.” https://www.propertychat.com.au/community/threads/parents-tax-free-threshold.12365/

Instead of asking why the taxpayer should fund pensions to those eligible you should be asking why the taxpayer keeps propping up property investors rorting the tax system and contributing toward unaffordable housing for the younger generation.

 

Thanks Gockie. I really appreciate your vocal support of me. It is particularly hard when one is new to a place and gets jumped on. Thanks again!

 

jumped on? I made factual remarks along with some opinion. feel free to debunk any of the stats, which to be fair you have in a very reasonable response or explain why "but they did it too" is apparently a valid excuse.

what on earth does negative gearing have to with the issue of there being a fair few bludging pensioners put there amongst the many genuine ones? you have picked the wrong person if you think I'm a NG advocate btw.

 

I am an emotional person, I make no apologies about that. Takes all types to make the world go round.

Most people in property investment negative gear their properties and it is how many make their fortunes and peoples end game would include having negative geared IP's but it was me, the pensioner you decided to target and not everyone else who also have had significant tax breaks at the expense of the taxpayer. So, it seems everyone is working the system. That was my point.

 

The holier than thou attitude comes from the basis that using negative gearing concessions IS in the spirit of the tax rulings around NG whereas being able to invest in property and claim the pension is less so in the spirit of the purpose of the pension. To many peopl the pension is supposed to be a last resort not a means to become an investor.

Now that said there are many people here who believe or accept that NG concessions have to and will change. There are also many investors here (like myself) who rarely recieve any benefit from NG as we are neutrally or positively geared. The only benefit I recieve is depreciation which IMO is a deserved benefit.

Could you be working to earn more than the pension? Could you put your energy into reducing your need for the pension rather than trying to retain it?

At the end of the day it's just a different mindset or philosophy that many people like @sanj and I share. We are investing so that we don't need the pension.

All that said, this is not a reason to be scared away like @Gockie suggested. There are plenty of posters on here with a diversity of opinion and for the most part they manage to keep it civil.

Trust you'll hang around long enough to find out.

 

anyway, all that being said, I agree with above that I hope this doesn't scare you off because your first response to me makes me think you might have a fair bit to contribute.

 

Hello Cactus and thanks for your reaching out to explain how some people think here. Even if a property is postively geared it is still receiving significant tax breaks to make it so. Is this correct? Mind you I say good on you for being a smart investor. I don't begrudge people lawfully making good in their lives.

Regards staying here. Well I really don't think this forum is the place for me. I was hoping to meet other people in my situation to find out how to make the pension last til death do us part but it seems the old people here are already set up and don't want to know about those on pensions.

All the best.

 

OK guys, let's stay on track.

This is an interesting topic - would love to know how others plan on pulling the pin and would be equally good to hear from those who have done it. Details would really help too if not overly personal eg how much they're LOR-ing on for example.

 

I am yet to read your share thread - I have it bookmarked, but I am looking at that also.

 

If it is positive geared then you would be paying tax on any extra income (income tax).

If you are talking about the property is positive but then with depreciation or with expenses it becomes negative it will then become negatively geared and you will receive money back on your tax. If this was what you were refereeing to just remember that the assets that was depreciated is worth less than it was before (look back 10 years ago to houses today, there is now home automation, people expect marble bench tops etc). So if the building is worth less why shouldn't the investor be able to recuperate it?

That money can be used (if they wish) to keep the property to the same level of standard, which in turn will provide jobs (e.g. replace kitchen - chippy, electrician, plumber, flooring subbie and suppliers) and increase the rent ability (less chance of it being vacant and becoming NG. Which again the investor will be able to claim the depreciation. If the property was 40 years old (with no improvements) there will be no depreciation and if they were to completely renovate it what incentive would there be if they were unable to claim deprecation besides only collecting an extra $20 P/W.

If the expenses (land tax, insurance, etc) made it go negative then they also should be able to claim this as this is a business expense (same as deprecation).

Hope that clears it up

 

I am looking to generate 6 figure passive income through rent or dividends.

Excluding the super.

 

Relative newbie to shares...but relying just on rents ain't going to cut it.....the income cab become unstable. So build wealth with property but also have a portion in top 15-20 companies which are consistent dividend payers.

 

I agree about living on rents. I am setting myself up so I don't have to. It would feel very insecure to me to just rely on rents.

Income streams for me:
Super
Rent
Dividends

I don't have an end goal or a retirement date. Just keep working and investing as long as I enjoy it. My parents are active property investors and are both nearly 80, so it's in the family to keep investing into retirement.

 

That's what I am interested in. Sounds like it will manage the risk relatively well.

 

End goal is not to be dead by 40. Should stop eating junk food and exercise more.

On a serious note, definitely not equity but a combination of rents and other sustainable income sources and frequent flyer points

 

OR

 

I guess if you have enough FF points you could spend your dotage flying, showering in lounges and getting free stuff, never to leave an airport.

That gives me an idea for a docco... 3 million FF points, 3 months on planes and airports. Never once going through immigration.