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Negative Gearing tax "loophole"

Discussion in 'General Property Chat' started by fullylucky, 26th May, 2016.

  1. fullylucky

    fullylucky Well-Known Member

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  2. House

    House Well-Known Member Premium Member

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    Can't access as subscription only...
     
  3. EN710

    EN710 Well-Known Member

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    Got into paywall

    upload_2016-5-26_14-31-48.png
    upload_2016-5-26_14-32-14.png
     
  4. wylie

    wylie Moderator Staff Member

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    Google the title and you can find it.
     
  5. Bayview

    Bayview Well-Known Member

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    Why anyone would deliberately leave their apartment vacant to access NG is beyond me.

    Only a microscopic section of the human race have more money to burn than sense - and also willing to do this dumb thing.
     
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  6. Player

    Player Well-Known Member

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    Am I missing something? If it's vacant then no expenses can be claimed unless they are pretending to have it for lease for three times the appropriate rent and no tenants are found. o_O
     
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  7. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Someone said this at work the other day and I told him rubbish, but people are really doing this.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is right. There are no tax advantages with this as expenses couldn't be claimed.
     
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  9. Depreciator

    Depreciator Moderator Staff Member

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    Yeah, it is just a kooky thought bubble that embittered renters have grabbed and run with. I tried to explain to someone the other day why it is dopey to leave a place vacant. I heard that there are a lot of new apartments in the three eastern capitals owned by mainland Chinese and left vacant. I'm not sure if that's true.
     
  10. Marg4000

    Marg4000 Well-Known Member

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    If they are doing this, then they had better hope they are never audited.

    Our son was. One of the first things the ATO did was look up the rental advertisements and compare his listing with comparable properties. His asking rental was in line with others so he passed the audit ok.
    Marg
     
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  11. Ed Barton

    Ed Barton Well-Known Member

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    You might get away with it unnoticed for a few months, but not years.

    Was the property vacant for an extended period?

    I've heard that most ATO audits are not random. eg - work related deductions with very little work income, property deductions with no or little income etc.
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Hoarders :)

    ta
    rolf
     
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  13. mcarthur

    mcarthur Well-Known Member

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    I may be dopey at the end of the day but I don't understand - if I have a property, and loan repayments are $20,000. Management is $3,000. Land tax et al is $7,000. It's available for rent (at whatever value I like).
    Then why don't I have
    income from the property = $0,
    expenditure on (trying to) make money from the property = $30,000.
    I've made a $30,000 loss, plus depreciation, = rather spectacularly negatively geared.
    Now I'm not saying buying some just to have negative gearing is sensible, at least for me, but @Terry_w are you saying that the $30,000 expenses + depreciation would not be a tax advantage?
     
  14. Player

    Player Well-Known Member

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    @mcarthur it needs to be income producing. If you are just leaving it vacant then the expenses would be a capital expense and get added to the cost base if it is ever disposed of by sale/transfer. On the basis that it is available for rent but is vacant for a protracted period, then I imagine the asking rent on any advert needs to be "reasonable."
     
  15. mcarthur

    mcarthur Well-Known Member

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    Ah ok, but I can have it on the market for rent for weeks and it still counts (assuming it eventually rents). What is the definition of "income producing" - obviously from my little example simply making money isn't quite right. I assume it's something like "available to make money" or something.
    So how long...?
    Perhaps the answer is "as long as an ATO assessor's pencil" :D
     
  16. House

    House Well-Known Member Premium Member

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    This is true but exactly how many, nobody knows. But I can guarantee you it's nowhere near as many as the MSM make out. Apparently plenty have moved their capital to Aus and US and even though they're losing $'s, it's safer than at home so they don't mind losing money.

    I doubt they're all negative gearing but as usual a few will do the "unethical" and try.
     
  17. Marg4000

    Marg4000 Well-Known Member

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    Long vacancies triggered the audit.
    Marg
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The taxpayer has to be genuinely seeking tenants otherwise not deductible. This is what some with holiday houses tried to do, but the ATO was all over em - like vomit on a sweater.
     
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  19. wategos

    wategos Well-Known Member

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    I can assure you many people get away with property rental fraud (under or non-declaration) for years, even decades. Most people never get audited so plenty get away with it, ATO detection mechanisms are not that great, real estate agents don't have to report anything and there doesn't seem to be any cross referencing of rental properties and declared properties.

    As for NG yeah it is a legal tax loophole/shelter/dodge call it what you will.
     
  20. Ed Barton

    Ed Barton Well-Known Member

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    How can you assure me?

    If a taxpayer is claiming significant deductions related to property investments and no income they WILL get audited. If they're not claiming deductions and just pocketing the income then they're unlikely to get audited.

    You seem to be talking about undeclared income. Totally different to what is being discussed here.

    It's been a fundamental part of our tax system for generations. Call it what you will.