Negative Gearing charade continues in 2018

There is a simple solution to this. Have a look at why the investment is cashflow negative:
- low rents
- land tax
- council rates
- property management fees

So, we abolish land tax and council rates for property investors, rent controls mandating a minimum rent and regulate a cap on property management fees. Then everyone can have a positively geared property and negative gearing wouldn't exist.

 

Or just reduce max LVR to 80% for investors across the board and legislate all deposits must be cash, not borrowed from elsewhere, should make most new purchases neutral to positive.

 

Its all relative to your purchase price .
We make pretty good yields , but if I sold at market value , the next person would make really crappy yields.
The easy money in property disappeared years ago, every time a region goes through a growth spurt the yields get smaller and smaller.
Up to 10-15 years ago it was pretty straightforward to pay of a property mortgage every 10 years, depending on where you bought.
Many investors today do not even touch the principle of the loan for the first 5-10 years, at the same time they are still making big payments on their PPOR.

 

You’re dreaming .

 

Negative gearing. Isn't that a way for people to pay potentially zero PAYG tax ? What's wrong with that ? I mean, so what if other PAYG workers have to make up the difference ? Seems fair to me.

#throws more fuel in fire.

On a serious note, the entire taxation system needs to be looked at. Governments past and present are forever having tax reviews, producing green papers, white papers, all sorts of coloured papers, but really what changes ?

My take in really simplistic terms, is that negative gearing is a daft concept, but then again so are a lot of other taxes. I hear proposals like "remove stamp duty". Cool, remove it. I agree it shouldn't be there. It's by it's very nature anti-capitalistic because it restricts the movement of labour. That's just one example. There are many more.

The simple fact is the country needs "x" amount of money to function, and right now, even with our imbalanced and daft taxation system, we are producing "x - 50 billion" and can't even break even. It's sad.

Abolish negative gearing. Cool. But there are still many others taxes that need to be looked at and as for the issue of how our society equitably pays for everything, without running up huge debts that our children will be left with (surprise kids, here you go!), that's a discussion for another day. I suspect it's a discussion we are not mature enough to have as a society.

 

Australians are supposed to be an egalitarian lot!
It gives everyone a fair go - if they put in the effort and sacrifice, they deserve the accomplishment and success.
It is a democracy and 'free' society in progressive development.
I think the above is the shared sentiments of most people.

That said, shouldn't we tax people based on principles!
Tax people on true gains, ie true increase in financial wealth in an ongoing basis.
Revenue - expenses = profit
Tax on the profit.

The complication of negative gearing in rental properties for the individual is that the individual can conduct the undertaking without assuming a company structure while earning a wage at the same time.

In comparison:

A company can conduct divisions of undertakings without negative gearing policies being controversial:

Example:
A real estate company = division in selling properties + division in rental properties + innovative projects to make money in the industry with the following tax situation:
Tax basis for company = Accumulation of the the result of each division's revenue less its expenses

An individual with rental properties is being questioned:
Tax basis for an individual = wage earned + interests earned on 'cash' + any net taxable income from investments on the side + net taxable income of rental properties (all the hoo-hah on this!)

Reasons for unhappiness with rental property investor having negative gearing:
1) the historical share of investor/rent has overwhelmed that of OOs. The collective of Government, Reserve Bank and APRA engineered lending regime to make it difficult for citizens to be investors and for overseas investors. Result: the share is being restored with more FHBs and less investors in the market already.
2) Negative gearing as a tax policy for rental property individuals is perceived to benefit the rich more than the poor unfairly. The discussions in the thread, in particular Big Will and Perthguy, have demonstrated that this is incorrect. The rich, smart, healthy and diligent will always tend to perform better in any principled system, naturally.
3) investors historically drive up house prices making it unaffordable for FHBs. Copious discussions have been devoted to this. IMO, it has been reasonably established that owning a house has always been difficult but has accelerated in more recent years. IMO, this will always be the case for countries shown to be desirable to live in and Australia is leading at the moment. High valuation of house prices is a core economic benefit accruing to Australia in general and State governments are increasingly basing their revenues on land levy and taxes (eg ACT). IMO, the discussion on meddling NG is misconceived in the social-economic structure of Australia. It would be more beneficial for State governments to develop policies based on a percentage of intervention in welfare-concessionary housing funded from the land levy component of property owners. This approach will avoid the regressive impacts (and damage to basic principles) of the proposed Labor policy of abolishing NG (mentioned by Perthguy and admitted by the Grattan Institute).