Here we go again...

I viewed property investing a different way. I still need lots and lots of self-educating (I am not a big fan of a proper course in a classroom). I'm not sure by 'education' you mean DD. Without informed and detailed knowledge about a market you are interested in buying, it'll be a surefire way to lose thousands if you overpay or buy wrong properties.

Well, luck must be on your side, if you could flip a coin and decide whether you should buy a certain property or not, without educating enough about the areas and demographics.

 

Stupid comparison. Do people generally leverage as much into shares, as they do into property. No. For the most part, a small percentage would use margin lending (due to the risks), so most buy shares with cash.
This is not the case for property, where people leverage to 80/90%.

 

Add in the fact that you cant claim 'non-tax' deductions (eg depreciation).

The comparison isnt accurate.

Blacky

 

So is the issue the ability to easily leverage into property or the 50% CGT concession then?

You have claimed the 50% CGT discount "increases speculative investing, investor activity, and heats up the market" but that is not true is it?

 

Come-on, in Sydney, you could have bought anything in 2008/2009, and made at least 70% profit on it now. Throw a dart at a map, and buy.
Same with Brisbane after the 2011 floods, and 2012 market down. Buy anywhere, and you made money. Nice Indoorpilly (and 5km ring) houses were selling for $420k, now worth $600K+ in 3yrs (50% profit).
Gold Coast (had 10yrs flat), was always undervalued, and ready for growth. We are seeing that now.
Is that "hard work and education" - all 10hr per year of it

Who cares about demographics (demographics change over time). Some of the worst areas in Sydney have had the best percentage growth.

 

I don't remember whoever said this but apparently all attempts by bureaucrats & politicians to further tax the rich end up biting the middle class bureaucrats themselves because rich are smart and will find a way or change their strategy to keep getting rich.

Its not a coincidence that its the bureaucrats who end up paying the most taxes on every dollar earned basis.

 

Depreciation isn't available for all investment properties either. And rent isn't fully franked. Of course the comparison isn't "accurate". I was responding to the claim that the 50% CGT discount "increases speculative investing, investor activity, and heats up the market." Is this claim true?

The 50% CGT discount applies to shares held for more that 12 months. Does the 50% CGT discount for shares "increase speculative investing, investor activity, and heat up the market? No.

So, is the issue with property the 50% CGT discount or some other factors?

 

That's not really true.

e.g. explain how I get my 50% tax discount on income which isn't earned through the appreciation of an asset?

Of course you might suggest that anyone can benefit in the same way by buying property, but some simply don't have the resources.

If we introduced a hefty tax discount on an asset whose buy in price was $10 million, is that still a tax benefit that is available to everyone and anyone?

The bottom line is that government policy is largely to blame for a lack of affordability, so it's reasonable to expect government to do something about it:

Who's to Blame for Australia's Expensive Property?

Wrote more on this in the article linked above.

 

The Victorian Government proposals to address affordability have some interesting policies.

In 2015, Prosper Australia speculated that as many as 82,724 residential properties, or 4.8 per cent of Melbourne’s total housing stock appeared to be vacant in 2014 (1). That is a significant number if this is true.

The response to this issue is:

As part of a suite of changes to make housing more affordable, the Government will also introduce a new tax levied at 1 per cent on vacant residential property to target empty properties in Melbourne's inner and middle suburbs.

Owners will be encouraged to make vacant properties eligible for purchase or rent. (2)​

It will be interesting to see if this has any impact on vacant housing. To have high levels of homelessness, a housing affordability "crisis" and a large number of vacant houses does seem illogical.

The other side is the impact of abolishing stamp duty for first home buyers. Will this improve or decrease affordability. In Perth, when the FHOG was boosted to $15k? that sector of the market boomed and prices increased by more than the FHOG. I was looking for an IP in that price range and got priced out by first home buyers!

It will be interesting to see if the same thing happens in Melbourne.

(1) https://www.prosper.org.au/wp-content/uploads/2015/12/11Final_Speculative-Vacancies-2015-1.pdf

(2) Victorian stamp duty changes hope to make houses affordable for first-time buyers

 

....but in that example alone you've segmented the market. Why is it only available to a buy in price of $10million?

 

I think this is the point. You're saying that your social standing determines your accessibility to tax concessions. There are plenty of examples of poor people from lower socioeconomic backgrounds who have "made it".

I don't think this is necessarily the forum to discuss the intricacies of the 'priviledge' debate but for those of us who started with nothing and worked, strategized, saved and got ahead with no assistance or the notion of privilege, it's simply an argument that we know not to be true, fair or valid.

 

Maybe it's not specifically $10 million, but typically the asset type is priced anywhere from $10m to $100m.

Of course the individuals who managed to scrimp and save and purchase at the lower rungs would say something like 'I worked, strategized, saved and got ahead with no assistance, so everyone else can do the same, the opportunity is available to everyone and anyone', but that's not really true.

The CGT discount was introduced to account for the effects of inflation, but it is particularly generous given this low inflation environment and should be reviewed.

It is not reasonable that someone can hold a house and see it appreciate by an average wage and get a 50% discount on the tax paid while someone earning an income and paying tax on it receives no such benefit.

 

Indeed! I wish I'd have had the foresight and vision to buy in all of those areas at the perfect times you specified getting great deals with little to no input or research at all. We can only dream!

 

I guess the issue with government involvement is that their solutions are often worse than the problem they created to begin with. Greater affordability will come with lower prices, not juicing demand with incentives and reducing barriers to borrowing more.

 

As with any of these things, we could go around in circles all day. Would you agree that a complete overhaul of the tax system would be the fairest way to address this issue without targeting any one area in particular? It's a vast and intricate fabric and I don't think the ultimate goals can be reached by picking apart certain aspect of it in isolation.

 

Sure. A good place to start would be:

CGT discount should be changed back to inflation indexation across all assets.

Negative gearing should be quarantined to income from the same asset class.

 

That said I do believe there is a good argument to be made for treating an asset that caters for a basic human need differently to a lump of gold (for example).

 

But isn't this just a structuring thing? If the government implemented those measures, I would just buy my IPs in my company name. There are some tax advantages with this approach, with a major advantage being able to retain profits to distribute as fully franked dividends in future tax years.

So, instead of less investment in property and falling prices, we might just see a lot more investments in company names. The rise of the structure spruiker? This would be a boost to the tax accounting industry but ultimately not more productive for the economy.

 

This link should work http://www.couriermail.com.au/news/...s/news-story/483f8bf45a7e5eaef814d13144944fab

 

Throws up a subscription needed. I just googled:

Negative gearing review targets property moguls
​

and clicked on the link.

THE Federal Government has opened the door to negative gearing changes targeting rich investors with multiple properties.

The latest statistics reveal more than 18,000 Australians have six or more properties.

Highly placed sources said negative gearing relating to rich investors was on the table, however no decision had been made, and it might not appear in the May Budget.

Negative gearing changes could be part of a suite of housing affordability options, which could include tax incentives for low affordable housing and government-backed guarantees such as bonds to increase low-cost housing stock.
​

Read the comments. Hilarious!

Get rid of negative gearing, if it stays even up the playing field, allow everyone access to it, every home buyer,
​

Maybe at the same time we could reduce the CGT concession from 100% for owner occupiers to 50%