"Shadow treasurer - Chris Bowen

To my understanding they would like to pass all their changes by 1/7/2019 but since it s doubtful this can be legislated that fast, 1/7/2020 is more likely

 

That explains a lot!!!

 

You obviously trust pollies .

People don’t call him BS for nothing .

 

First): You are not overpaying tax for heavens sake from one source...you pay what you should be paying based on the existing law (e.g. based on tax table, you pay taxes on ur income from your job)

Then you offset your taxable income that that source from the losses you made from another source (in this case your investment property).....

The first rule of investment is to make regular incomes + appreciation of the asset class...so if your investment is not making money, someone else is paying for your losses....so you are getting incentivize for your investment decisions...

 

No, the tax payer is not paying for anyone's losses. The tax payer is incurring their own losses. As it should be.

Abolishing NG involves redefining what taxable income means.

 

Don't be surprised if a few years down the track, Labor tries to introduce an update that states net distributions from a property will attract a minimum 30% tax rate.

 

The way it works now, with negative gearing, is that people pay tax at their own marginal tax rates - not higher or lower. I am not debating whether tax rates are too high or low.

But as a basic equity principle, taxes should be paid at the individual tax rates. Abolishing negative gearing changes that. Property owners would then pay tax above the marginal individual tax rates.

 

I just wonder when they will start to ""TAX"" the profit when people sell off the ""PPOR"" i'm sure the unseen faceless one's that guard against being caught out will bring that one out within a few years ..

 

It does not make sense to remove negative gearing while you still need to pay tax on your positive geared IP income and capital gain at your marginal rate.

 

My one-person software business trades as a Pty Ltd for liability and other reasons. If it were to lose $25K this year, then that loss would just has to roll forward, no offsetting it against my IP income.

 

Based on that rule, I wouldn’t NEVER have invested in property, I wouldn’t NEVER have invested in shares, I wouldn’t NEVER have invested in my own businesses and I wouldn’t NEVER have invested in cash.

End result: I would now be retired on the Aged Pension .

 

That's not really the same thing.

Your company is still netting an array of gains and losses to arrive at a net taxable income figure. If there was an overall loss to an individual tax payer, that tax payer would also carry forward the loss.

The ALPs changes to negative gearing aims to quarantine losses from property against gains from other sources.

To use your company as an example, it would be like government taxing you on your software product A that makes money, but not allowing you to take losses on your other product B that is new to market and makes losses.

Again, just so everyone is clear, the ALP's proposed changes to negative gearing is trying to separate your loss making and profit making activities so that you pay full tax on the profit making activities, but don't subtract your loss making activities. This inflates your taxable income.

 

No I dont think that is right, if you have +ve properties and -ve gear properties
you can offset one another and if your -ve is more you just carry that loss forward but not getting a tax refund

so you not paying extra on your +ve gear properties separately from the -ve gear one.

abolishing NG is really just delaying your return and reduce people cash flow if they rely on the refund, you eventually get them all back when you sell your properties, you just cant claimed pay as go each year via tax return.

They just stop you from using your personal income tax as an offset

but shares, properties income +ve and -ve can offset one another.

 

"They just stop you from using your personal income tax as an offset"

Yes, correct. So it quarantines income from all sources, even if you own the different assets in your own name.

Whereas it should add up all of your gains from all sources, and subtract all of your losses from all sources, and arrive at a net tax payable.

The ALP is proposing that you pay tax on your salary, but if you make losses on property, you carry the losses forward. Currently you add the gains and losses and pay at your net taxable income.

 

Yes coz one is classified as personal income and other as investment income...
If this concerns you, you can always open a company that invest in real estate..

And to be honest, there probably are only couple of countries that has this stupid arrangements (I think no developed country has NG)....

At the end of the day, you as a country only have so much revenue so how you allocate it towards different areas is up to the elected government ....Why pay close to $6 billion in deductions where most likely most of it going to existing properties..... I rather put this money in places like education, health etc..

And you will be grandfathered so existing owners won't lose NG provisions, the value of the property markets will always fluctuate and in short term may go down and stabilizes and then increase...macro issues..

And I have no sympathy for people who paid thinking their asset value will never go down....bloody hell I lost 20K last month in shares...

 

Don't you think that New Zealand and Japan are developed countries?

 

"And I have no sympathy for people who paid thinking their asset value will never go down....bloody hell I lost 20K last month in shares..."

Agree with that bit. But that really has nothing to do with NG.

Well, one is classified personal income, and the other is classified ... personal income. Up until now we have only differentiated between capital and income, not between sources of personal income.

And other countries that don't have NG, have to compensate for their stupidity by other interventions in the market. In the US, this looks like rent controls, and in the UK, they nee to have a lot more public housing. Both are much worse that individual tax payers paying tax at the correct marginal tax rates.

Grandfathered sure, but we all need to re-sell our properties into the market. So it won't matter that it is being grandfathered in terms of its impact on market prices.

Again, I am just saying that individuals should pay tax at their marginal tax rates, not higher.

It sort of shows how identity politics has infected economics. It seems that we don't mind if principles have been violated as long as the right category of people have been impacted. Weird. Bad.

 

I don't think NG did a lot for Japan property prices? ...

Also there are a lot of other developed markets where NG is not applicable....

Australia has one of the most generous NG policy, and to be frank without knowing all the details, any comparison can't be taken seriously...

Also the last time I read, NZ will make changes to its policies by end of 2019?

 

They could make an announcement during the first budget, and enact a legislation that's retroactive to the date of when the budget announcement was made public.

 

This is correct. It's all income, it's just from a different source and trying to quarantine incomes sources to an individual isn't fair or right. It will open a can of worms with respect to the entire taxation system and how income is treated.

So you actually sold them at a loss or the value went down by $20k? Two different things.

- Andrew