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Hockey's farewell speech: Negative gearing must go

Discussion in 'Property Market Economics' started by Waterboy, 21st Oct, 2015.

  1. Waterboy

    Waterboy Well-Known Member

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    bye by Hockey, enjoy Washington DC.
     
  2. Waterboy

    Waterboy Well-Known Member

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    "
    Mr Speaker, our taxation system needs reform for the 21st century economy, integrity is crucial for that and through our leadership of the G20 we hardened the resolve of major economies to address base erosion and profit shifting.

    Integrity is hugely important but the best way to get compliance is to have lower, simpler taxes. We abolished seven taxes and fixed 96 tax problems but reform had to go further and through a comprehensive review of the tax system.

    I endeavoured, and failed, to keep all options on the table.

    We must increase and over time broaden the GST, we must lower all income tax those people and companies are given more incentive to take risks and receive rewards.

    As a minimum, we should aim for a 40-20-20 rule. 40% top personal tax rate at a much higher threshold, 20% tax rate for most taxpayers and 20% tax rate for businesses.

    We should be wiser and more consistent on tax concessions to help pay for that, in particular tax concessions on superannuation should be carefully pared back."

    In that framework, negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property and we should never ever forget small business.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Works for me, it's definitely a statement aimed to promote small business.

    Adjusting the tax tables really means that most self employed will adjust their income and never pay more than 20% tax (I currently pay 30%).

    The implementation of loosing negative gearing will more likely be to retain losses in the asset class and write them off when they make a profit. It would likely be fairly universal, you can't treat property too differently from other assets after all.

    Again, most of my investing is done via trusts so my own portfolio is already in line with this, I imagine many small businesses are similar.

    Here's the really interesting bit. GST is essentially a consumption based tax which businesses are exempt. The more you spend the more you pay. Let's face it, there's a lot of small businesses that channel personal expenses through the business. Again the small businesses have more avenues to avoid paying more GST.

    Whilst I can't say that this is entirely equitable tax arrangement, I do support it (an not just because I stand to benefit personally). Small business does need a lot more encouragement, they're the largest employment provider in Australia, the basis on which our economy runs. This will encourage more people to go into business for themselves, and make it easier for small businesses to operate (God knows it isn't easy at the moment).
     
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  4. Barny

    Barny Well-Known Member

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    If gst was raised, how do you think this would effect everyday people in regards to there current weekly spending budget? Just curious on some basic examples to have a better understanding of what it will do to family expenses. Say it went to 15%.
     
  5. Waterboy

    Waterboy Well-Known Member

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    Depends on how much income tax is cut to compensate for the higher GST. The ones in the lower brackets will potentially be worse off.
     
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  6. MRO

    MRO Well-Known Member

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    Based on a rough guess that most people spend 50% of their income on items subject to GST (debt repayment and rent are big items that would make up a chunk of the non portion) i think a 5% gst increase would increase the average family expense by 2.5%.

    I have no evidence to support the above.
     
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  7. Perthguy

    Perthguy Well-Known Member

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    That is why he is the ex-treasurer.
     
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  8. juzzy

    juzzy Well-Known Member

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    I would be happy to see NG go if income tax and company tax rates dropped also.

    It would stop the far left from whinging and, if done properly, everyone could end up with more money in their pocket (except the government, which is the way it should be).

    Increasing the GST isn't a bad idea either. In addition to that, we could luxury tax the s#!@ out of of expensive cars (say anything over $200k), yachts, private jets, etc. This is probably already done, but this is where I would prefer to see taxes raised. These are the truly wealthy people who can afford to pay a little extra. Not the people who are tight with their money and own a couple of investment properties.
     
  9. Perthguy

    Perthguy Well-Known Member

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    They already tried this by increasing the tax free threshold to $18,200. This has resulted in low income earners effectively paying the government for the "priviledge" of putting money into super. We don't need tinkering around the edges of the tax system. The tax system needs a complete review and overhaul.
     
  10. Barny

    Barny Well-Known Member

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    Would the cost of building a new home increase if gst is increased?
     
  11. D.T.

    D.T. Adelaide Property Manager Business Member

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    Of course
     
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  12. 2FAST4U

    2FAST4U Well-Known Member

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    They should start taxing super contributions instead. Obviously you would grandfather it in so people aren’t left worse-off, but that is one avenue, which is literally costing the Government billions in forgone revenue. The whole ‘but it’s stopping people from relying upon the pension’ argument is a load of bollocks because the people currently taking advantage of the scheme would never be on the pension anyway (the part-pension at best, which is slowly being tinkered with to cut down the people eligible for that anyway).
     
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  13. Perthguy

    Perthguy Well-Known Member

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    Come on, what is a lazy $50bn per annum amoung friends? ;)

    the cost of the tax concession will soon overtake the pension to become ''the single largest area of government expenditure,'' by 2016-17.
    '''The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14,'' the study found.
    It notes that the Commonwealth bill for these concessions is projected to rise at a staggering 12 per cent annually to be $50.7 billion in 2016-17.

    Read more: http://www.smh.com.au/federal-politics/political-news/its-super-tax-concessions-not-pensions-that-are-killing-the-budget-20140421-zqx7p.html#ixzz3pAXBPMXI
    :eek:
     
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  14. Perthguy

    Perthguy Well-Known Member

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    But really, I think a reasonable tax incentive to encourage people to save for the future would be good. 30% is not reasonable. Personally, I would be happy with 5% or 10% at the most. So super would be taxed at 5% less or 10% less than your marginal tax rate. It would also be good if low income earners didn't have to effectively pay the government for the "privelege" of contributing to super.
     
  15. Barny

    Barny Well-Known Member

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    I'm still trying to work out how raising gst and lowering tax brackets on paid income, will effect the average person, and investors.

    So the cost of living for the average family will go up slightly, I also read a report indicating more tax for the government will be raised this way than raising tax on people's income.

    New homes will go up in cost to build, so people that have established places relatively new will benefit perhaps?

    This will be excellent for business owners, and others not on the higher tax bracket as more money will be available.
     
  16. Bullion Baron

    Bullion Baron Well-Known Member

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    He defended negative gearing for his whole time as treasurer, it was only on the way out the door that he changed his tune. If that is why he is the ex-treasurer then it suggests he should have been for axing negative gearing before he got booted ;)
     
    Last edited: 21st Oct, 2015
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  17. THX

    THX Well-Known Member

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    The problem is no government, Labor or Liberal will root and branch reform taxation and if they did, there would be so many trade-offs and compensation for changes, it will all end up being meaningless.
     
  18. Perthguy

    Perthguy Well-Known Member

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    Ending negative gearing no silver bullet for affordability
    Runaway growth in home values currently being experienced in Sydney and, to a lesser degree, Melbourne has put affordability at the centre of debate. And it’s little wonder that housing is becoming a politically sensitive topic.
    ...
    Negative gearing is essentially a way in which the Government outsources social housing to the private sector or at least this should be how it works. If we take a look at dwelling approvals data you can see that very few new approvals have been granted to the public sector over the past three decades.
    ...
    Ultimately the private sector takes on the role of construction of homes and it appears private citizens are incentivised to provide rental accommodation via the provision of negative gearing.
    ...
    The housing market has many moving parts that result in relatively expensive housing prices here in Australia. While the removal of negative gearing may help improve the Budget bottom line it is unlikely to be the silver bullet which improves housing affordability.
    Zoning restrictions on developable land which drive up the cost of housing, the tax-free nature of the family home, stamp duty, the mass-centralisation of our population and shortage of jobs away from the major capital cities all conspire to make housing less affordable.
    Any discussion about improving housing affordability shouldn’t solely focus on just one of the issues such as negative gearing rather it needs to look at all of the factors which contribute to high housing costs.
    http://www.realestate.com.au/blog/e...g-no-silver-bullet-for-housing-affordability/

    Interesting.
     
  19. Barny

    Barny Well-Known Member

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    Would raising gst to15% be meaningless? I'm slightly confused by what you wrote.
     
  20. THX

    THX Well-Known Member

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    Confused how? tax reform is meaningless if no reform is actually achieved. Raising the gst is not reform.