If Negative Gearing was Scrapped!!!

For <Insert your nominated deity here>'s sake, can somebody call an election?

And if some of the original Somersofters are bored, can they call up Dazz and tell him to get to the Batcave?

Australia needs a new tax policy.

But the terms of reference will specifically state that no special interest groups need to pay more or receive less....

 

Hey, I do it too with 1, but it's not a loss, it's bad business sense.

 

But @Azazel NG is not only a situation that occurs due to speculation. It often also occurs when renovating, developing or holding a property that is 'losing money' while you are preparing it for some type of business deal that will yield a good profit when complete. I honestly don't know too many businessmen or entrepreneurs that from a business perspective at least, see much sense in scraping it.

 

Yeah, I don't want to get rid of it at all.
But if they're going to change it, they should target the people taking the wee wee, like the ones with big mortgage repayments and low yield waiting for CG. I don't see that as a loss.

 

Thanks in advance. Can someone please confirm what the rule changes will be?

1. Can I still offset negatively geared property losses with positively geared ones?
2. Are interest payments still offset against rental income with only the loss ignored for the purposes of tax?

My worry is that I could be paying tax on positively geared properties at the top tax rate whilst also making unclaimed losses. That seems unfair.

Leveraging up to the hilt with only negatively geared properties is not my concern as that is a highly speculative play in my opinion.

 

If it's done on a property by property basis, I guess you'd need to arrange your borrowing so that no individual property will show a loss if others will be showing a profit. I guess the alternative would be to consider IPs in two pools, qualifying for NG and not. The complexities of this would perhaps favour capping NG losses and considering all properties in one pool.

 

I agree with Leo’s take on this discussion.

NG is not a magic pudding available only to an elite sub-set of our society – like some sort of toy only rich kids (or old kids) get to play with. It’s actually a darn risky strategy every adult taxpayer can choose to use and TBH it’s actually a fairly mediocre place to find yourself in at this stage of the cycle, although the media loves to spin it as a mystical tax-avoiding tactic of the wealthy.

Investors of all ages who are ‘overly’ negatively-geared today will get a giant bollocking from the market anyhow in the event of a market downtown or correction – that’s the true beauty of our market-based economy – just ask Kate Maloney (aged early twenties) and others about that. It’s a function of the risk you take with eyes wide open.
So instead of adding more bubble-wrap to our already bloated tax legislation why not instead devote that time and effort to focus on economy boosting projects in the once-clever country ? We are so academically besotted with crazy socialist thought bubbles that we’ve lost the plot I reckon. Both BS and MT equally as silly in this regard.

 

@Foxy ***** great post.

I have stopped trying to understand why so many people/investors have lost the plot a long time ago, and as people ponder scrapping NG, or bubbles, or market collapses etc, I just focus on getting the best real estate deals possible, all year round.

Some people's map goes haywire taking them in all directions. I prefer to keep going in one direction. Upward and forward.

 

Let us not just blame the media though, a massive problem is the accounting practices and other businesses who push it as a tax haven.

I have actually gotten two cold calls in the past 6 months asking me if I would like to save tax and then try to push me developments. Safe to say the unexpected caller leaves the conversation with their tails between their legs but to the masses, many who are uneducated on all things properly like the PC community, it would sound like a dream.

 

Wowsers, where did they get your number from?

 

One of them my wife got a call and said speak to my husband the other no idea.

 

Hmm, I would suspect someone has got your details from some sort of RE list.

 

The Turnbull Government has reportedly dropped it's plans to reform negative gearing, as a new report says Labor's policy would kill 175,000 jobs and push about 70,000 households into rental stress. See link below

Negative gearing could push up rent $2600 a year

 

Was just watching Bowen on the news. He was saying no negative gearing on any investments including shares. The only exception is new property. I've never negatively geared shares, I'm guessing it's a less common and smaller sums involved, any thoughts.

 

Factual errors of the report
Shrapnel blows up in Scott Morrison's face

Commissioning of report unknown.
Reproduced from the age article below ""Mr Morrison could not or would not say who had commissioned the research, which appeared on the front page of The Australian newspaper.

Scott Morrison dithering on reforms
Negative gearing stoush intensifies amid reports Turnbull government will leave policy untouched

Will have to wait for the policy announcement.

 

I am embarrassed by both major parties and have been for a long time. They seem to be getting worse and worse.

 

It's been that way since Keating got in I think.

 

Foxy, I sort of agree with you but not quite (assuming I haven't misunderstood where you are coming from...)

If I were on a 47c tax rate, I would be much happier with a NG strategy than if I were on a 19c tax rate.

If there were a market downturn as you suggest, and I'm sure Kate Maloney can attest, and RE prices grabbed their ankles, then this is not so relevant to the amount of deductible interest (which should remain the same), but more a matter of an accountant's ingenuity, should a "mark to market" valuation adjustment be required. Note that I am not an accountant, but I know that 2 and 2 don't equal 5.

Although when I sell and get a big capital gains tax discount, I would much rather be on a 19c tax rate.

FWIW, I agree with your thought bubble comment 100%.

Another poster mentioned something about positive gearing, and I also wonder what would happen if either party fiddles around with NG, one would hope (possibly naively...) that they would do exactly the same in reverse to PG properties...

 

Cheers Ted
I guess the thrust of those howling loudest about NG is that its mainly old buggers with equity in their PPOR and other IPs that are best able to play this game. And then they try to join the dots into an argument that its squeezing FHB’s out of the market as the NG people have crowded out the market. Suply, Demand blah blah.

I would argue the bigger impact on the supply/demand side has been aggressive investors (of any age) with this “all you can eat” attitude. ie I must have 10 properties in 5 years and I can do this with equity pulls on incredibly-high LVRs. Pete Tersteeg and Euro73 mentioned in other posts somewhere that the APRA adjustments have been a game-changer on that front, and my own conversations with agents confirm that in many markets owner-occupiers are starting to dominate real estate transactions the last few months. To me that’s actually a desirable social outcome, but there’s no political mileage in it! And If you own a brokerage business or a RE agency you might expect to be contributing less to the national economy going forward as a result unfortunately.

In Australia we seem to seem fixated with redistribution of wealth. We are a lucky country with a pervading sense of fairness towards those in need I reckon, but in my view it has been overcooked to the point that our highest achievers are overwhelmingly penalised by the ridiculously onerous marginal tax rates imposed. It just drives our best talent overseas or into kooky tax schemes and that’s about the dumbest outcome a smart country could have. eg If you are a medico or a barrister getting reamed at nearly 50% tax rates (when even our top companies are subject to 30%) of course you are going to consider all sorts of tax-favourable investment strategies – that’s absolutely rational behavior in my view.

My solution to fixing any perceived bias toward negative gearing is to address the real reason that people look that way in the first place – if our top personal rates were the same or very close to our corporate tax rate, I guarantee the practice would cease overnight. With more disposable cash in the economy our highest earners will re-invest back into the economy, therefore growing the pie. GST has a part to play in all of this so we can fund the schools and hospitals and help the needy of society. And that my friends is why so many traditional conservative voters are so absolutely disappointed at our present leadership team – they are waffling ad neuseam about reform ideas being on the table but don’t have the stones to say what they know needs to be said. Why? Because our lazy and greedy electorate don’t like taking medicine – they are addicted to free stuff. Last Qld election a case in point.

Disclosure : I am a crusty old coot and don’t expect everyone to share my views! Love hearing all the differing views on this fantastic forum. Cheers.

 

Though I don't agree 100%, in general I do and enjoyed reading your posts.