Negative Gearing charade continues in 2018

Here we go again, nothings changed. 2018 NG will be debated round and round again, he said, she said.


Government negative gearing claims contradicted by official advice, FOI reveals

 

My property portfolio should be CF+ before the end of this year. So, yeah, NG should be banned, not only on new purchases but retrospective ad well .

While they are at it, remove all CGT exemptions as well as I am not planning on selling any IPs (never have) .

Then hopefully rents will skyrocket. I have tax losses I would like to claw back .

It is all about me!!!

 

Have you been secretly reading my diary again....

 

Negative gearing is socializing the losses and privatizing the profits. Let's face it, it needs to end. Can't keep screwing over the next generation like this. It doesn't seem morally right watching young men and women at home openings distraught about the idea of getting a 450k loan to buy their first home.

Meanwhile my friend who is a restaurateur is just lazily putting offers in on his 4th IP using the equity on his previous buys. All expenses will come off his taxes no doubt and when the bubble busts he'll just cut his losses and wait for the bottom of the cycle again.

The whole system looks pretty unethical to me.

 

NG is available for all to take advantage of. Nothing unethical about it. What's unethical is that my tax dollars were ****** down the drain with the recent equality survey. 100m (pardon the pun) poofed into thin air. Don't get me started on Centrelink.

NG is not an aid for me personally, but I am more than happy for it to exist in order to help (just a little) other new investors build their portfolios. I am totally for those who want to get off their arse and make something of their futures. Those who only want to play and have fun, that's fine. Go ahead. Nothing wrong with that.

 

"The Grattan Institute, an independent think-tank, has previously estimated that halving the capital gains discount, and phasing out negative gearing after a decade, would reduce house prices by 2 per cent."

How did they come to this rationale? What were their assumptions (eg: 30% of all residential properties are IP? all resi properties are NG? Asset values are distributed equally through each state & region? CIP can be ignored? All CIP are cf+?)

 

I honestly believe its mostly hocus pocus wild assumptions and guesses in order to continue getting paid a salary.

 

That's why you get a job with 'strategy' in the title - no one dares question what you're doing as it is all market sensitive & highly confidential.

 

So, a $1M property is Sydney will crash down to $980,000.

Wow, that is a huge impact and makes property so much more affordable. What a great policy .

The other great news is that I will have to save $4,000 less for my 20% deposit .

 

Restrict it to a single asset class

Technically, yes. But it's much harder for some people to do than others. I'm not a single parent on minimum wage, but if I was, I doubt that I'd have any more than one or two IPs.
Negative gearing disproportionally favours rich people. While I don't think that we should get rid of it all together, I do think that we should restrict it to a single asset class, so you can offset it against another investment property, but not against your salary (ideally while grandfarthering NG for us).

 

i'll probably get slammed for saying this (oh well) but I really believe NG favours those who are willing to make big sacrifices to build something for themselves. They may happen to be richer than most but they (well most) didn't get 'rich' by working 9-5. I understand and accept that some people will have it easier than others and some will have it a lot harder. That's just life. But by and large I believe most people (especially in Australia) are generally where they deserve to be through the trillions of collective decisions they have made throughout their lives. Is there some unfairness in that? Most probably yes but I am pragmatic enough to accept this as OK. I truly believe (and have seen it many times) that most average joes, 1 income parents etc etc etc are able to climb the ladder of wealth, perhaps some faster and some slower. But many are just not interested to peruse it given the sacrifices involved.

 

The strategy behind the strategy...

 

But I want to be a gazillionaire AND have all of the trimmings from day 1 after my gap year. Are you suggesting that I can't?

 

I would never suggest that. After all, even last place in a school race gets a prize these days.

 

I still truly believe there are opportunities out there for people willing to work hard and wanting to get ahead. If people think working just the bare minimum and having a whinge about it, are wasting their breath. I do believe in everyone having a fair go, but why should the ones that were willing to forgo the good things in life suffer due to other people who were on cruise mode the whole time? Did Richard Branson, Jack Ma or Elon Musk get to where they are by doing 9 to 5 job and no additional work?

 

I don't really see the concern with the removal of negative gearing or as @spludgey suggests, limit deductions by asset class.

Would such a change stop determined investors from saving up a large enough deposit that they could rely on rent to cover property expenses? I think not.

If an investor cannot sustain the losses incurred from a negatively geared property (until such time that it is sold or turns positively geared), can they really afford it?

A tax break for those earning a million dollars a year is also technically "available for all to take advantage of".
Suckering people into a pyramid scheme is also "available for all to take advantage of".
Something being available to everyone or select groups of people really has no bearing on how ethical it is.

 

Firstly- great name for an investor.

Secondly- I actually agree with your sentiment regarding the difficulty first home buyers face (and some of these being the investors of the future)- being unable to get into the market due to government policy decision that are not favourable to them, including negative gearing. I also accept that negative gearing assists the rich to get richer, and the top 10% of income earners to stay in this societal class over generations.

But thirdly and on balance- doesn't the government have a responsibility to encourage a system that encourages hard work and entrepreneurship? A system that supplies housing for the rental market and provides jobs related to construction and development of housing for our growing population?

I wish I had all the answers.. perhaps thats why I'm not a politician!

 

I have no issues with things being available to others that may not be available to me because I haven't put myself in a position to be entitled to it. If I am not entitled to it then I am not entitled to it. People like to throw around the 'ethical' word way too much these days.

'Success' and 'unethical' are becoming synonymous in some circles. Personally I think its all rubbish perpetuated by generally bitter, envious, entitled individuals.

Time for lunch. Or is that unethical too.

 

Do we really want housing to be more affordable by a significant percentage (say 20% drop).

Yes it might seem good for FHOB that house for 500k is now 400k but it would grind the construction industry to a halt which would effect many many more industries.

I couldn't find a more update to date pie chart on my 2 mins of searching but the construction industry contributes 7.7% to the national GDP with a further 5.9% in manufacturing. I would also argue that some of the 5.8% professional & technical services would also be included (architects, engineers, surveyors) and likely finance and insurance industry would also be effected as less people developing/less money being spent = less employment.



With all these areas effected it would mean employment would drop making it harder for people to find employment and typically it would mean the younger people will have difficulties getting employment as they would lack the experience a person with 10 years experience has over a recent graduate. Thus making saving for a deposit or servicing a loan very hard for the individual/s.

So as much as I would like to see values drop so I can buy more (it would also effect my current portfolio so making it likely harder for me to get equity anyway) I would rather see values increase by 20% rather than decrease by 20% - as more money in means more jobs and stronger economy.