Negative Gearing charade continues in 2018

Discussion in 'Property Market Economics' started by Sackie, 8th Jan, 2018.

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  1. Perthguy

    Perthguy Well-Known Member

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    It will stop investors from running a fully negative geared portfolio and claiming the tax deduction immediately against wage income. So a lower income investor just starting out, who can currently use negative gearing to help with cashflow in the first few years, will be blocked from investing. Lower income investors have less options. I should know. I was a low income investor and my investment partner is a low income investor.

    Put it this way. I earn more than my mate. If this policy is implemented, my tax won't change but he will be worse off. Does that sound like the system is fairer to you?
     
  2. Sackie

    Sackie Well-Known Member

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    Just deleted a post as I realised I misunderstood.

    Gotchya. Finally. Thick me.
     
    Last edited: 15th Feb, 2018
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Well put!
     
  4. Perthguy

    Perthguy Well-Known Member

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    Losses are not offset. Losses are used to offset an income tax liability. Pretty much, losses will be able to be used to offset income tax liabilities arising from investment income immediately or carried forward to offset future income from an investment property or ultimately to reduce the capital gain on the sale of the property. I also forgot that Labor will still let anyone negative gear if they buy a new build. I will work through each of these.

    Negative gearing
    Any investor will be able to negatively gear if they purchase a new build.

    Immediate deduction
    If an investor has an income tax liability from shares or investment property they will be able to use the loss from a rental property to offset the income tax liability. Note that this will not be called negative gearing but will have the same tax outcome as negative gearing.

    Carry forward
    Investors will be able to carry forward the losses on a loss making property and use those losses to offset the income from the property once it becomes profitable.

    Investors will be able to carry forward the losses on a loss making property and use those losses to offset a capital gain made at sale.

    The carry forward rules are not called negative gearing but have a similar tax outcome over the life of the asset.
     
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  5. HUGH72

    HUGH72 Well-Known Member

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    Hope you went easy on the toppings and bulked it up with extra dough.
     
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  6. Perthguy

    Perthguy Well-Known Member

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    And Capital Gains Tax socializes private profits, so the system balances out.

    I agree that Capital Gains Tax is unethical. Let's abolish Capital Gains Tax and negative gearing at the same time.
     
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  7. Sackie

    Sackie Well-Known Member

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    Very clear and concise. Thanks @Perthguy
     
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  8. Sackie

    Sackie Well-Known Member

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    Hell yeah! I'd be in favour of that in a heartbeat. Though the wealthy would be benefiting not the poor ..:cool::oops:
     
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  9. Propagate

    Propagate Well-Known Member

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    This is what I don't get, why bother fluffing about with it all when the outcome at the end, for most people and for the ATO will be about the same?

    All these people harping on about how unfair it is and it must be abolished as the country is losing so much money in unfair, uncollected tax losses.... it'd barely make a difference to the government coffers in the end other than hurt low income earners cash flow and stop them entering the market maybe. Sure, then maybe that means more stock for FHB to have a crack at but would likely also put pressure on rents? I don't know, I'm no expert and it deosn't really affect me either way.
     
  10. kierank

    kierank Well-Known Member

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    Ha ha!!

    If we did that, we would still be in negative cashflow 30 years later.

    That would make property investment a far better business to be in :D.
     
  11. kierank

    kierank Well-Known Member

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    Then that would inspire me to become wealthy :eek:
     
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  12. Perthguy

    Perthguy Well-Known Member

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    It's a vote winning exercise. The policy is popular with a segment of Labor voters:

    "Labor’s negative gearing and CGT reforms are no panacea for Australia’s housing affordability problem. They will help at the margin but won’t magically make Australian homes affordable.

    Still, they are worthwhile for all of the reasons outlined by Bowen above, namely: placing modest downward pressure on house prices, shifting the composition of housing away from investors towards first home buyers, raising much needed revenue for the Budget, and improving equity."

    Labor to stick with negative gearing policy - MacroBusiness
     
  13. Sackie

    Sackie Well-Known Member

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    Says the man moving to a skyhome! :p
     
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  14. New Town

    New Town Well-Known Member

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    Are you troubled with stamp duty payable in QLD, for example:

    Eg Purchase Price $400,000

    PPR: $ 5,250.00
    Investment property: $ 12,425.00

    That's straight up discrimination in my (capitalist) book!
     
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  15. Sackie

    Sackie Well-Known Member

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    It doesn't make sense to have cheap real estate in great countries to live in. Its illogical. Its so simple really . Australia has high demand because its a fantastic place to live . Highest demand is in most popular cities . It's not rocket science.

    Hell even Dublin ( up by 87% since 2013). is almost back to pre collapse levels . Many cities in US are back .

    Its not that hard to predict the long term trajectory of real estate in Australia. You can either sacrifice and get in board or rent which is fine too. All the complaining in the world won't make a difference .
     
  16. kierank

    kierank Well-Known Member

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    That is why I am not wealthy.

    It is owned by the bank and they have kindly allowed me stay there when we are ready :D.

    So it is currently a very NG property, allowing me to run up some tax losses for future years :eek:.

    I bought it because I thought Labor might win the last election and they would remove NG. Now that I have my tax losses, I don’t care what they do ;).
     
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  17. Sackie

    Sackie Well-Known Member

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    Your being way too modest p. I should take a lesson or two from you. :oops:
     
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  18. Big Will

    Big Will Well-Known Member

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    So if they do not allow NG benefits to be offset by wage who will it hurt? The people without an established portfolio as in the ones trying to get ahead.

    Couple A - Is rich couple with 10 properties will care if they cannot offset against their income (if they are still working) - no they have 9 other properties to help offset it so they wouldn't care.

    Couple B - Is a couple who has a CF+ property (could of been NG previously idc) and/or other income streams (shares) would still be able to offset the NG for what Labor is proposing so they don't care.

    Couple C - Is a couple has a NG property now without any other income stream besides wages also wouldn't care unless they didn't grandfather it but have already gotten the benefit of it regardless. I guess this couple is potential effected

    Couple D - Is a couple who is going to buy their first property (which happens to be NG) and who don't have any other income stream will not be able to get the immediate benefit of the benefit so they will have to wait for years/decades before they will realise the benefit.

    So the wealthier couples of A & B wouldn't care about the change as they can still benefit from NG today. Couple C have just started their journey and depending on the policy of grandfather (which is likely) they may or may not but their wealth is below A & B so if trying to close the wealth gap this policy doesn't make sense.

    However the worst couple which is D yet they have the lowest wealth and since it would be quarrntined it could be decades before they get the benefit yet ABC have all enjoyed the benefit and likely have further invested the money - Even if the benefit was 10k p.a. and you compound it at a 5% p.a. return for 10 years they would of had a benefit of $142,068 where as the couple D is only just able to start to offset their 110k losses that have been quarantined.

    This is going to INCREASE the wealth gap which is opposite to what I guess Labor is trying to achieve - unless Labor are trying to screw the poor/uneducated people....
     
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  19. Guest

    Guest Guest

    It's a bit funny how some investors here are worried about the wealth gap... unless someone is just trying to buy their first home for a reasonable price, in which case they're a whinging, entitled brat who should stop wasting their money on things they don't need and work harder.
     
  20. Perthguy

    Perthguy Well-Known Member

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    Let's put it this way. Would you support a policy that looks like it is going to increase the gap between rich and poor?
     
    Last edited by a moderator: 10th Oct, 2021
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