Jamie Alcock on Negative Gearing

Source: CHART: Australian capital city house price growth since the GFC

Cheery picking regions, looking at all the major capitals since the GFC only 2 cities are above the average most are 15-25% growth since 2009. However NG is available to EVERY Australian and there are high income earners in the not so well performing cities including Hobart which has grown by 2.3% in 7.5 years...

Yup NG is the blame for this or again are we cherry picking? If anything I feel the NG people are as they only choose Sydney and sometimes Melbourne for their argument....

 

Interesting comments by Chris Richardson on abolishing negative gearing on Q&A:

CHRIS RICHARDSON: I really don't think that will make a big difference to housing affordability. What is driving the affordability or lack of it in housing is because interest rates have never, never been lower. You can argue whether it's 2,000 years, 5,000 years, and when the cost of money goes down, the value of stuff goes up. So all over the world, you know, whether it’s housing in Sydney or, indeed, share markets, you know, all over the world, stuff has gone up. Taxes won't change that. They really won't. You know, state governments and supply can help. What I would love to see done on the policy front is sawing in half, taking half of Labor’s policy and half of the Coalition's. Two things on the tax. Negative gearing has, you know, a terrible reputation but economists will tell you there is nothing wrong with it. If you spend money to make money, that's deductable and should be in any system. We used to have negative gearing barely used in Australia back when the other half of this equation, the capital gains tax discount was lower. We give too big a discount to capital gains, so everybody tries to throw their money into housing or whatever it may be, and that's why they end up using negative gearing. You could have better policies in Australia and it's almost exactly halfway between both parties and, even then, it's not going to solve housing affordability.
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Exactly what I was saying. The problem with negative gearing is not negative gearing, it is the 50% CGT concession.

 

Everyone who has been around for a few decades already knows that prices rise and fall.

I am not saying they will move either way in the short term in this argument (personally; I think a couple of years of stagnation); just putting the hypotheticals to you about what can/might happen if NG is removed and who it affects, and how.

None whatsoever.

Our higher wages have contributed to the cost of housing going up - that is a given..we all have more money to throw at a house purchase and loan.

What has happened is we have shot ourselves in the foot with regard to cost of labour versus cost of labour from overseas manufacturers.

For example; Leave loading on Holiday Pay, Holiday Pay, paid sick leave, overtime and penalty rates, change of shift allowances, long service leave, travel allowances, carers leave, Superannuation Guarantee (still going up each year), Worksafe Premiums, Payroll Tax...the list is extensive.

One of my suppliers employs 35 people. On any given day - according to their CEO - they can expect to have 5 (that's FIVE) staff off work on average due to holidays and/or sick leave etc...it is a company with a lot of unskilled labour personnel.

They only actually need approx 30 people apparently, but they have to cover the ones who are not there.

So; their workforce is oversupplied by at least 15% - plus the extra cost to pay the staff that are covering the ones not there - who are being paid to not be there...double cost.

Extrapolate that out to hundreds of thousands of companies all of Aus.

 

i certainly dont agree with SM's OTT attack on property deductions and anyone using them but i often see people mentioning the politicians ridiculous golden handshake (i agree it is ridiculous) but that amounts to $45m per year, ie what the govt spends on NG in less than 3 days will pay for all the politicians supers/retirement schemes for the entire year.

of course it's great we are ultimately self funding our retirements and wont be a burden on everyone else, doesnt mean that tweaks cant be made along the way. personally after going through the budget and the big ticket items i just cant see how we can get to where this country needs to be financially (which includes having the money to support growth, innovation etc) without some sort of change to tax treatment of IPs and also money spent on pensions and other forms of welfare including middle class welfare imo. they dont have to be major wholesale changes, some just tweaks imo.

in the meantime, there is certainly nothing wrong in people working within the current tax regulations, generous or not. there are times when we might feel hard done by the tax man so why not take advantage of the times when it might seem possibly a touch generous.

 

Ultimately, I think you are right. There are a few gravy trains that will probably need to be wound back over time to be less "generous":-
* tax concessions on superannuation contributions
* 50% CGT discount on sale of shares and other listed securities
* 50% CGT discount on sale of investment properties
* 6 year rule for PPoR (negatively gear your PPoR for 6 years then sell 100% CGT free)

The trick with these is to wind them back in a way that doesn't impact the economy too much. The Labor proposal is simply a tax grab and nothing more. “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

I agree. People whinge that we are the hard done by generation and that baby boomers have stolen all our wealth. But given the tax concessions for super and sale of investments, I can't help think we are the lucky generation. Most of these are fairly recent. I would certainly rather be a property investor today than pre 2000.

And accusing people of tax evasion when what they are doing is perfectly legal is petulant at best.

 

I wish I can keep my knowledge and go back to pre 2000 with my assets, would know where the mining booms are and when to move it all to Sydney

 

Why no go back before Capital Gains Tax? Buy in Sydney and if you sell now, no Capital Gains Tax

Not to mention the price of your investments would have doubled, doubled again and doubled again! (although getting a loan back then was much harder and you would have had to have ridden the interest rates rollercoaster. 18% interest rates anyone? )

 

Allow me to take my dollars today to then and deal I will deal with the 18% interest rates

 

Yawning is certainly contagious. Your yawning just made me yawn.

 

Does anyone else think Labor's policy will simply increase the gap between "rich" and "poor"? This is the part of the policy that bothers me particularly:-

From 1 July 2017 losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities.​

Mr Rich earns $150k and has a $500k share portfolio netting 7% pa (unfranked). That's a nice little $35k income stream but of course he has to pay tax on it. Mr Rich also has a couple of negatively geared investment properties that each lose $10k per annum. So, at the end of the year he can deduct $20k from his personal income ($130k) but has to add $35k to that, bringing his total taxable income to $165k.

Mr Poor earns $80k and has struggled to buy two mediocre investment properties also losing $10k per annum each. He gets to deduct $20k from is personal income, bringing his taxable income down to $60k. This only really "saves" Mr Poor ~$7k per year in tax but that is a lot of money to Mr Poor.

Labor gets elected and implements their negative gearing policy. Assuming the investments above were bought after that point (i.e. not grandfathered...

Mr Rich simply deducts $20k from his share income, bringing that down to $15k and adds that to his income, bringing his total taxable income to $165k. No change from the current system.

Mr Poor has no other investment income, so has to pay tax on his full wage.

Mr Poor is $7k per year worse off. Mr Rich pays the exact same tax as now.

The gap between "Rich" and "Poor" increases. Labor values hard at work. What a wonderfully well thought through policy.

 

Please explain

 

If he isn't a left wing economist, his research, modelling and comments do NOT count .

 

I profiteer from the superannuation rorts. Does that mean I can't judge them as overly generous?

Nocookies

John Hewson: End the superannuation rort - MacroBusiness

They are unfair and superannuation should be reformed. Just because I benefit from a tax haven doesn't mean I can't criticise the system I benefit from. Otherwise no Australian with super can legitimately comment on the Australian super system

 

Who stole all my wealth then? (I'm a Boomer - just)

 

If he is an economist, and on Q&A....he is a lefty...otherwise he wouldn't get on the show (unless he was there as the token Righty to be crucified by the handpicked Lefty/protester audience and the stacked panel).

 

How about our ripper down here in Vic;

we forked out $1bill..... NOT to build a road.....that would help to lessen terrible traffic snarls across Melb.

That little promise got Daniel Andrews elected, and now we have no-one running the CFA, and in danger of it being taken over by the CFMEU..

Not bad; in less than 2 years we have flushed a Billion down the toilet, and destroyed a tremendous Volunteer organisation which saves lives.

I wonder if Billy Bob will thank him on Sat night just after the (lost) Election?

 

Keep in mind it was $1 billion to prevent paying a further $15-$17 billion. The projected returns on investment for the East-West Link were dubious at best, and the way the Napthine government rushed into the contract in the death throes of their term was ridiculous.

It's undeniable East-West will be built at some stage in the future, but in saying that, the Metro Tunnel to me is a far superior infrastructure investment. We keep pouring money into roads which are merely band-aid solutions to congestion and are obsolete by the time they're finished (gee, doesn't that sound alot like the current form of the NBN!). Glad to see some investment in public transport is finally being done in Vic. Not so happy to see that the Federal government continues to give us the middle finger in terms of infrastructure funding.

As a side note, the level crossing removal project is absolutely fantastic. Can't believe it wasn't initiated earlier.

As for the CFA/CFMEU stoush, the amount of misinformation surrounding it is ridiculous. To say the CFA has been or is going to be 'destroyed' is hyperbole at its finest...give it a year and it will all be forgotten just like the Ambulance Victoria dispute.