Turnbull Govt - reportedly drops Negative Gearing Model

The Turnbull government has reportedly dropped it's plan to reform negative gearing, as a new report says Labor's policy would kill 175,000 jobs, push about 70,000 households into rental stress with average rents increasing $2600 a year and cut $19 billion from the national economy. See link below

Negative gearing could push up rent $2600 a year

 

That report has been quickly ripped to shreds.. commissioned before Labor made their announcement, was not done on Labor's policy but on a different set of assumptions and then ScoMo jumped on it like a crazy person before taking the time to think.

It does still appear though that we're lining up to have election with NG/CGT as a core issue.

 

Libs have my vote based on this, if for no other reason than the stability that comes from no government tinkering in this area. Peoples perceptions right or wrong become reality...

 

Wow what absolute rubbish that report is. The Turnbull government is only approaching the issue from a political standpoint (can it help them win an election with enough lies about it ?). They don't care what damage negative gearing is already doing.

 

And I am definitely voting Labor for the first time based on their NG proposal.
I'm not interested in voting for a party that lies so blatantly about it like the Libs are doing.

 

All political parties lie (or at least greatly stretch the truth) if you don't want to vote for a dishonest politician you had better abstain from voting altogether.

Stand by my comment though, I still see the best outcome coming from either party leaving things alone

 

Obviously I've got it wrong ... I should vote for Labor , Because they NEVER LIE ...

Cliff

 

Labours policy also includes removing ALL negative gearing across ALL assets. (Shares, Small Business Assets), except new house only.

The report on the policy would be pretty simple.
THAT IS CRAZY!

 

Serious question from someone that pays no real interest in politics.

Can anyone name a period of time in which Labour was in office and at the same time Aus economy was considered to be booming ?

 

Exactly, madness!!

And in the same policy statement they claim they want to help FHB's into the market!! Yet they will be driving many investors into the new house market to directly compete with FHB's. And we all know what happens to prices in a very competitive market!!

 

Has BIS Schrapnel made any prediction that has come close to reality?

Not enamoured with Labour’s proposal but it deserves a better analysis than BIS.

 

Labour might get my vote too, for the first time ever. That's another issue that I'm not happy about Liberals, the first one was sacking Tony.

 

Have you actually thought about what the consiquences of the Labor proposal is?

Negative gearing is only applied to new housing. Even if the governments assumptions about future resale are not true, this has an undenyable and immediate effect, there will be a huge demand for brand new housing from investors.

This is the same market that is by far the most affordable for new home buyers. They will be immediately priced out of that market by new investment demand. The Labor proposal does nothing to address the fundamental problem of supply or reducing entry costs for first home buyers, these are both state based issues.

Labor claims to be making housing more affordable for first home buyers, but they're doing exactly the opposite.


Then there's the effect of scrapping negative gearing altogether. Almost every business at some point claims interest and depreciation costs which are key elements of negative gearing. A glance at my own business tax returns suggests these tax write offs is about 20% of the Average Australian wage in a business with only two direct employees.

If my own figures are indicative of Australian small business (they might be, they might not be), this would suggest that loosing these gearing benefits would reduce business capacity to employ people by 10%.


If something is income producing (property, shares, business, busking on main street) incurs expenses, those expenses should be allowed to be written against the income from that activity. That's what gearing is, negative or positive.


Whilst I don't have a problem with the government's stance, I do think they've made a political error here. It will be an election issue. It's unfortuante that the Labor policy is catering to popularist votes, it's a terrible policy.

 

The economy booming I'm sure was second on their agenda.

Right after their , 'wanting to help everyone, even when many can't be bothered helping themselves' policy was achieved.

 

Thanks for response.

Question still stands though.

In my short time on earth I only remember early 90's recession and circa '08 recession.
If anyone can shed light to a period prior to these in which Labour party was implemented in a boom economy.
I am interested to know.

 

That's bizarre , Liberals get rid of a right wing leader and you say that's a reason to vote for a left wing party ?

Cliff

 

Causality is not as straight forward. NG amendments are being supplemented by reduction in CGT exemptions. The cost of reducing income tax will go up on two counts as the

• NG loss will be quarantined against the income producing investments. Extract from Positive plan to help housing affordability "From 1 July 2017 losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. These losses can also continue to be carried forward to offset the final capital gain on the investment." NG will not be against the income but against investment income. So a distinction is being created between active (PAYG) and passive (investment) income and NG can be offset only against the passive income. All the investors offsetting PAYG income as NG will not be able to do so.
• CGT exemption will be limited to 25%.

How many investors will rush into FH investments when their holding costs are not being subsidised by NG and the profits have reduced tax exemptions ? The investments will flow into other tax minimization schemes like superannuation (depending on how much changes are made to it)

• PAYG is not business. Business investments will continue to offset the losses against income as is fair.
• IMHO the property ownership structures will shift from private / trust ownership to company ownership as the company vs individual ownership tax discrepancy has been done away. Terry_w's views would be extremely appreciated.

Currently this is not the case. Investment losses are being Negatively geared against PAYG taxes. Labor's proposal seeks to limit investment losses against investment income and gains .

 

I don't mind Labor governments .

Historically Dr's actually do well under labour , so while the economy and the property market crash , I have a good stable income and can pick up bargains from the poor sods who's businesses have been driven to the wall by labour ...

Cliff

 

How much impact on the economic cycle do you think the political party in power has?

 

Not that much, but bad policy can harm sentiment which affects spending which harms small businesses and therefore economic growth.