What does an ALP government mean for individual investors?

Yep! as the song goes "those were the days my friend....." I borrowed outside the banks at higher interest rates when faced with the same choices. As you ask, fair? and no easy money

 

And yet people are referring to negative gearing as a "tax rort". What nonsense. It's not rort , it's perfectly legal. We pay the taxes we are required to by law.

 

No , definitely not, Westpac had a near "death experience" in the early 90s, a few building societies went bust and one or two state banks went under, mainly because of very slack lending practices to business, lots of really bad debts in commercial real estate and residential real estate losses were up there when real estate in Perth ,Sydney and Melbourne saw really big rises after rates dropped significantly after the stock market crash. Then interest rates shot back up ,and then continued , many could not afford to hold , especially those on single incomes that had only recently bought in the last few years.
Many analysts are predicting that the next big headache is going to be caused by residential investors that borrowed to much money on IO terms and just expecting the market to continually rise. Its been discusses in depth here as many are now being pushed into P&I loans.
Much of it caused by slack lending practices by the banks.

 

Totally agree.

When we bought our PPOR in the early 80’s, it was funded as:

20% mortgage (the max the banks would lent us)
60% deposit (the max we could put in)
20% from my parents (the bank of last resort)

Slack lending practices!!! Holy ****!!!!

What do one call the last 5+ years?

 

Of course you like then , you have slowly watched interest rates go from a high of 17.5% down to 4%..
Do you think that is going to be replicated over the next 30 years.
My basic arithmetic says its impossible.
Many also saw about 15 years of wage growth running at 1.5-2% above inflation.
Since 2012 its been about ............O, but it took us a few years to realise, and in the meantime Sydney and Melbourne doubled in value
Some of the big upward movements(but not all) in Aussie house prices have happened when rates have been suddenly lowered by about 200-400 pts.
Especially when parts of the economy get into trouble
Unless rates start moving back up again, that almost an impossibility of ever happening again. How does one stimulate an economy mired in household debt and unable to seriously drop interest rates like happened after the 87 market crash ,the 2008 financial crisis and again from 2012 when the economy needed a kick up the pants.

 

To be honest it’s not so much a concern to myself as I can deal with the change but it’s less wealthy aging retirees that I feel for.

And I hate that younger higher income earners and risk takers are faced with such punitive tax rates which is going to get even worse under Labor.

The Liberals desperately want to reward risk takers who are trying to grow the pie where everyone benefits. But Labor has forced them into the position where distributing the ever shrinking pie to lower income earners and welfare recipients takes precedence.

This from Howard Marks is my fear for Australia’s future under a Shorten Labor Gov’t:

Marks and the tax system explained in beer - Cuffelinks

International diversification has never been more important.

 

Unfortunately many are going to have to experience that pain of the tenth man not showing up.

I have two clients in the property development game who have focused on less projects. Contractors have been let go. They are the ones earning 80 to 100k and now have entered the colleseum with raging tigers on the lose.

My clients are like the roman emperors who sit up the top and wait until the show is over. Go home eat drink and be merry and wait for the next cycle.

 

There is nothing stopping people still taking risk , you just start your own business up.
No one is stopping anyone from buying established investment property , you just wont be able to claim the losses against totally unrelated income.
For long term older investors you just offset the losses against your early properties that you bought many years ago and would be paid of, obviously its not going to work for speculators that never had any intention of actually owning property and were just interested in the generous tax breaks.

 

Until we see legislation the "rich" might still be able to get gearing benefits.

Business trading through a company. Shares held by a trust.

Trust also owns a negatively geared property as well as the shares in the company.

Dividend paid out to the trust. Losses from property used to offset dividend income.

Gearing obtained. Dont need to worry about loss of franking credits as the plan is to stop the refund of those.

Will have to weigh up the extra land tax against the gearing benefits but for higher income earners might be worth it. PAYG employees screwed over once again.

 

39 votes required to pass legislation in Senate.

Remember the mining tax which wasn't directly affecting anyones hip pockets got ALP to back down and most recent changes to commissions to mortgage broking which coalition has already backed off and no mention from ALP in any of their recent speeches. They didn't even make any mention of banking royal commission in the budget reply speech.

Some of their changes are directly affecting people's hip pocket. Can you imagine how difficult it's going to be to get it passed. One really bad poll could start making ALP nervous.

Me thinks we have a long way to go before any of the proposed tax changes get passed atleast not in the proposed form.

Full article here

Cheers,
Oracle.

 

How will investors react to ALP policies being implemented?

For me, no new investment, wait and see. I can live off what I have and don’t need headaches.

My elder brother would draw down his SMSF where he’s got shares, splash it out to make himself eligible for the age pension.

My sister would hold tight on her NG’ed property, unless rates rise due to inflation and she has to sell, in which case I think she’ll lose money. A second IP looks impossible. And no, buying a brand new IP in the boondocks isn't attractive at all.

My youngest son would be very happy, so convinced he is about buying his first home when property investors are smashed on their heads. Only problem, he hasn’t saved a cent after 2 years in the workforce earning a very decent salary.

 

Good idea but just acquaint oneself with Centrelink gifting rules.


Gifting - Australian Government Department of Human Services

 

Thats already been happening for a number of years and we have known a few people that have retired at 55, burn through their small super funds and by time they hit 65 , most of it is gone and they are eligible for the pension.
Apparently it can take up to 6 months to get all the paperwork formalised, before you can actually receive the pension so allow plenty of time
One of the reasons that has made SMSF so attractive .

 

So wrong on so many levels. Your family won’t be the only ones doing this .

There will be a whole stack of people “pulling these stunts”. But I fully understand why and, if I was in the same boat, I would be doing similar things.

This is what happens when a party has idiotic policies .

 

The chief executive of Australia's oldest listed investment company says Labor's plan to change dividend imputation rules goes to the heart of the fairness of the tax system, and will reverberate for generations.

Speaking on the sidelines of the annual general meeting of the Australian Foundation Investment Company, Mark Freeman said investors in the 90-year-old company would be among the hardest hit from the proposed changes.

"Have a look at the people here," Mr Freeman said of the audience of mainly elderly retirees.

"Do these look like the people Labor should be targeting? I'd love to get Bill Shorten here."

Labor has repeatedly insisted that the changes, which would stop individuals and super funds claiming cash refunds for excess imputations credits not used to offset tax liabilities, are aimed at the wealthy. Pensioners and those on part pensions are exempt from the plan.

Australian Foundation Investment Company joins franking credits fights

 

I see there is also this site..

Stop The Retirement Tax

 

He's done his calculations. If franking refunds go his income will be just a bit above the age pension. He’s got nothing to lose.

I’ve said this before. If Labor wanted to stop franking credit rorting as they’ve claimed, they could have easily done so without hurting modest self-funded retirees like my brother. Just put a cap on refunds and the job’s done.

As for my sister, Labor could also have removed NG from the big multi-IP investors without hurting people like her who can afford no more than one IP. What’s the point in penalising them?

All these policies appear to come from an anti-investment mindset that is very regrettable. And the anti-rorting discourse that’s dished out is detestable in its hypocrisy.

Disclosure: I’ve always been a swing voter.

 

Probably not. I have always found it interesting that the treasurer is not formally trained in economics. They are essentially just given advice and then make a call. It would be like a mechanic applying to be the CFO of Westfarmers and getting the job.

 

The ALP plan allows a refund only for an eligible pension which was being paid at March 2018 (the date the policy was announced). Not if a new pension starts after this date. The policy intent is meant to be automated. The ATO will know dates an eligible pension (eg Age pension) was being paid and a taxpayer eligible gets a refund. If not, no refund.

 

He knows he’d lose his refunds anyway so doesn’t intend to claim any.

To work hard all your life to be self-funded then realise you’re no better off than a pensioner, and maybe worse considering all the extras that pensioners get, is pretty depressing. So he’d rather splurge and enjoy life than hold on to assets that earn him no more.

All this is very sad I agree, for him and for the country. He’s always voted Labor.