If Negative Gearing was Scrapped!!!

Discussion in 'Property Market Economics' started by Johann_, 17th Feb, 2016.

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  1. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Person A has a lower disposable income than Person B. Person A will likely miss $3,000 pa more than person B will miss $15,000.
     
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  2. radson

    radson Well-Known Member

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    I guess we could agree that's at least debatable.
     
  3. Tyler Durden

    Tyler Durden Well-Known Member

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    Person A (according to the numbers has 80k of personal income) how many of these "Person A's" are part of a dual income household?

    It's a weak argument by Scott Morrison and it's been debunked by every commentator in Australia who isn't in the FIRE industry, the Property Council of Australia or the HIA.

    Need some fresh material because the lefty, independent press are starting to get a little nasty.

    The war between rent-seekers and taxpayers | The New Daily
     
  4. joel

    joel Well-Known Member

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    Surely if theres an increase in demand for new builds, the cost of building goes up.. and price of existing homes go down..
     
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  5. Tyler Durden

    Tyler Durden Well-Known Member

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    The land element is a big part of what keeps the price of new construction up. This can be addressed with a broad-based land tax and/or a government that does not allow big developers like Stockland to drip feed supply into the market.
     
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  6. Perthguy

    Perthguy Well-Known Member

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    This is satire but the point this is making is that is has been reported that the majority of people benefiting from NG have a taxable income of $80,000 or less. The reason the article is making a joke of this is because for example:
    - my income is $100k
    - I pick up a couple of NG IPs losing me $30k a year
    - my taxable income drops to $70k per year

    I am now classified as a 'mom and dad' investor with a mediocre income benefiting from NG. The argument is used to justify why NG doesn't benefit 'the rich'. It is a joke. The reason is because they stats use taxable income, not gross income. If the stats used gross income, it would show that higher earners benefit more from NG and that is not the message the government wants to give out.
     
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  7. bez23

    bez23 Well-Known Member

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    Whatever they do, I think all existing IPs NG will be grandfathered. So this is purely to change the dynamics of future investors. This will have similar effect as APRA last year, good on you if you have invested. If you have not, sucked in because it will be harder to get ahead.
     
  8. Barny

    Barny Well-Known Member

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    There seems to be some different opinions on who uses negative gearing the most.

    we have some politicians telling the public how negative gearing primarily benefits the middle-class mum-and-dad investor such as nurses and police officers. Yet as a snapshot of who benefits, tax figures show that property investors from the wealthy electorates of Higgins and Wentworth incurred net rental losses of $214m and $185m respectively in 2012/13. This was 46-times and 40-times the electoral average alone. This data tells us that middle-income professionals are not the primary beneficiaries. Between politicians and the lobbyists, the public is told one thing, yet reality is telling us the contrary.
     
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  9. Angel

    Angel Well-Known Member

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    No when the ato released these figures they specified the under $80k incomes belong to f9lks like me whose salaries per industry are under $80k. Read the original article. They refer to teachers, cleaners, childcare workers etc. The 80% of the population who earn below the average. sorry I won't link it, I'm in the car two day's drive away from my laptop.
     
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  10. Ran Gus

    Ran Gus Well-Known Member

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    Everything I've read indicates that the $80,000 figure is taxable income, not gross salary.

    If it's a figure released by the ATO it's even more likely to be taxable income that they're talking about (as this is the primary figure they are concerned with).

    Negative gearers aren't poor, Mr Morrison

    As already mentioned by others, while there are more people in lower paid jobs utilising negative gearing, the majority of the benefit goes towards higher income earners.

    In saying that, this is the case with all tax deductions. The higher your marginal tax rate, the larger the benefit you receive from any deduction.

    Negative gearing benefits the rich far more than everyday Australians, analysis shows
     
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  11. Ran Gus

    Ran Gus Well-Known Member

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    I'll have a go at answering your questions:

    Disclaimer:
    • I don't use negative gearing currently, but I'm very likely to be someone who would benefit from it in the future, so I believe I come from a fairly neutral perspective.
    To me, it's an unnecessary tax concession. I'm of the opinion that negative gearing, the 50% CGT discount and some superannuation concessions should be removed. These could be removed over time, rather than in one go (e.g, reduce CGT discount progressively over a number of years).

    I agree that there are heaps of other places government could start outside of negative gearing (hell, getting rid of or reducing the CGT discount is probably the easiest change they could make), but I'm happy for them to start somewhere.

    RE negative gearing: I find something fundamentally wrong with rewarding people for losing money. This goes for ALL investments - shares, property, etc. I'd have no issue at all with people reducing their income (of the same type) to $0 and carrying forward remaining losses. Allowing surplus losses to offset other forms of income has never sat comfortably with me.

    If you invest in something knowing that you'll be losing money (at least in the short term), I don't see why you need to receive tax benefits because of it. Reduce associated income to $0, carry forward any remaining deductions to offset future income of that type so those losses aren't wasted. It's my belief that this is more than enough of a concession.

    Do you think a proposal such as the above would be a reasonable change to negative gearing?
     
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  12. Perthguy

    Perthguy Well-Known Member

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    The original article is satire. The actual article states:

    "Two-thirds of the people who use negative gearing currently have a taxable income of $80,000 or less," Treasurer Scott Morrison told Sydney radio station 2GB on Monday.

    Read more: http://www.smh.com.au/federal-politics/political-news/negative-gearers-arent-poor-mr-morrison-20160215-gmulf6.html#ixzz40PT7mfSH

    This is the commentary:

    It's genuine as far as it goes. It comes from the Tax Office. But it's not what it seems. Note the use of the words "taxable income". The figure of $80,000 is what two-thirds of the people who use negative gearing manage to reduce their taxable income to as a result of negative gearing. Before negative gearing, their incomes were higher, in some cases far higher.​

    Unless you were referring to a different article?
     
  13. Perthguy

    Perthguy Well-Known Member

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    Sounds reasonable to me. To unwind NG benefits over time could be simple too. Start with a cap, i.e. in the first year the max NG per individual is $25k, next year $20k etc.

    I would prefer that approach to grandfathering which could have unintended consequences.
     
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  14. Angel

    Angel Well-Known Member

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    I am referring to the article published some years ago when these figures were released by the ato, in reference to the financial year being quoted. I read the age newspaper on Saturday with Shorten's plan which, as far as I recall, was surprisingly accurate. (As far as I recall).
    It was Morrison's reported response which misrepresents the income levels quoted.

    We discuss this every month. Someone else will most likely find the ato article tonight, I am happy to be proven incorrect. As I said I am relying on my old lady memory.
     
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  15. Natedog

    Natedog Well-Known Member

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    High income individuals also pay ALOT of tax.

    Temporary levies aimed at high income earners, reducing private health rebates, additional super tax are all taxes that high income earners just have to cop.

    Through their own time and effort turned into paid income they contribute ALOT to the government coffers.

    So in a way, why shouldn't they benefit a little more from tax concessions available to them when they are pumping a lot of $$$ back to the government?
     
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  16. Cactus

    Cactus Well-Known Member

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    Because we need to fund more socialist activities and the only way to do that is to tax those who have benefited from capitalism. It's all part of our ultimate disincentive for people to realise their true capability and instead look for government to provide.

    What's next... Oh that's right we will Blame immigrants for the fact we can't afford a nice new house with stone bench tops in "insert nicely located suburb here".
     
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  17. Big Will

    Big Will Well-Known Member

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    but but it is UN-Australian, NG is open to all, remember these people are still going without..
     
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  18. New Town

    New Town Well-Known Member

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    Too many unintended consequences of getting rid of NG.

    Here's one - Properties are to be rented or available for rent to be eligible for NG. Wealthy owners may figure if no NG why have the hassle of a tenant. The owner locks the doors and there is one less supplied to the market

    And another - The government now forgoes the income tax from builders/ handymen etc that repair and maintain properties because stingy landlords decide as there is no tax break for it so let the tenant's toilet overflow
     
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  19. EyesClosed

    EyesClosed Member

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    I see a lot of sense in what you say @Ran Gus. It's the system they have here in the UK, though recent announced changes will in future restrict the % of interest expense that can be deducted against rental income as well (UK is phasing in this change over a number of years). A change in system like this in Australia will affect how people make investment decisions and the type of asset class they invest in.

    Permanent grandfathering of NG for current investors I feel rather unfair for the portion of the population that has not been able to take advantage of the tax concession that is NG - namely the younger population (generalisation I know). But some form of grandfathering is likely to be needed if we undergo such a dramatic change and not cause more havoc than necessary. Maybe a phased approach to grandfathering such as 1st year, 80% of property losses can be offset against your wages/other income, 2nd year 50%, 3rd year 10%, 4th year 0% ... all the time left over property losses can be carried forward to use against future income from other properties as @Ran Gus suggested.
     
  20. wategos

    wategos Well-Known Member

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    The 80K figure is a massive distortion, since as others have pointed out, this is the TAXABLE INCOME, i.e. after the NG deductions. Of course the main beneficiaries of negative gearing are high income earners, not people on sub-80K gross salaries, and the stats clearly point this out.

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