Why are we calling negative gearing a "benefit"?

But you could... it's available to everyone if so inclined.

 

Hi Simon, thanks for replying again. So if I'm understanding you correctly, you're saying that the rental housing supply vs demand in SOME areas (for example, yours') could change. That does make sense in areas you're describing ie: desirable to OEs, low rental yield. However, do you agree that this phenomenon only happens in certain markets, not all? In any case, would you also agree that overall supply and demand of rental housing remains unchanged? So using your situation as an example, if your landlord sells the house, even if you can't find another place to rent in that particular area, you should still be able to find a place to rent (just not necessarily in the area you desire).

 

Invest in residential property? I'd be running screaming into the night.

 

So you want me to explain it to him ?

This argument is rather pointless and circular from both sides and for now it is best to just agree there are variables to which we do not exactly know how they will play out, even if this is to be implemented.

Some people upgrade, some people are fhb, some people die and the property is sold. Investors may buy in or cashout.

Many seem to be overreacting about these possible changes. There seems to be of the notion that because the elections are just around the corner, that so are these changes. And that is not the case, even if Shorten does win.

I think Simon may of mentioned here that these changes need to go through a process, a process that may change or be held up or back for whatever reason. By the time these changes were put in place, even if that is to happen, the market may be somewhat changed from what we are seeing right now.

Prices may of fallen and found a floor by then, this oversupply now may also be reduced or absorbed somewhat. The reasons for implementing the changes may have changed by then, and the proposed changes may also be altered.

We could also have investors rush out and buy up existance dwellings before these changes are implemented or grandfathered. And then I heard someone only the other day saying maybe I should sell up before these changes.

So I would not be overly concerned at this stage. Remember, not every buyer or investor has negatively geared property. So it is not something that effect every buyer or seller.

And I could probably argue strongly both ways about how it may effect both prices and rents, but I will worry about that when and if Shorten gets in. And look at it more closely then.

 

It is a “double benefit/tax rort” if it is available to everyone BUT they weren’t so included

That is the perspective of many .

 

I was thinking I was in the negative gearing changes thread, not the benefit question one.

As for this thread and the question, have you guys had a poll on this ?

If not, perhaps put one up.

 

I would vote it would be a benefit based on the two reasons I believe it was reintroduced back in 1987.

 

If the question is being asked for an individual, which surely it is, then the counter argument that it balances out and others benefit aswell should be discarded. Because that is not the question.

Perhaps we should ask would people do this if it was not beneficial to them. And that the very reason they do this is that it is benefencial to them.

It would seem you guys are making a big deal of all this. What is the big deal about it being beneficial, or just saying yes it is, that is why I do it, so suck it up.

Because that would come with other connotations or questions , for which the same yes too bad should be given.

I am not saying I agree with it or not or who or what may happen as a result, but requarding benefit, that is how it is.

Now what is the problem with that ? I assume the further blame resulting from that for one reason or another.

 

The argument "that's one less renter" relies on the market being static. The market is not static, it's dynamic. There are constantly people entering and exiting the market as buyers, sellers, investors and renters. Houses are being built and houses are being demolished. The market is in constant flux. Assuming any renter will become an owner occupier if the property they are renting is sold is factually wrong. It may happen in some cases but in many more it won't.

 

I don't see negative gearing as a benefit. I see it as a tax outcome. At most, I would consider it a tax concession.

As you know there is a 15% tax rate for contributions to superannuation. So, someone on a 45% marginal tax rate gets a 30% tax discount on money they contribute to super. Is that a benefit or a tax concession? Is it fair or should it be abolished?

If I sell my family home I get a 100% discount on my capital gain. Is that a benefit or a tax concession? Is it fair or should it be abolished.

At the end of the day we only have negative gearing because of capital gains tax. Abolish capital gains tax and the need for negative gearing falls away. I would support capital gains tax and negative gearing being abolished.

 

Thanks. Nicely articulated. Those of us who are watching and participating in markets all the time know this intuitively but we don't always explain it so well. Getting the masses to fully grasp this concept is another matter and the media don't help hence many people have binary or overly simplistic understanding of this issue.

 

I'd support that too...but common now. You don't expect our pollies to act ( as you've suggested) in a more fair manner now do you?

It's just gouge, gouge, gouge the folks who are willing to take risks for their future. Then redistribute to centrelink. Or similar.

 

Yes, all this is true. And I do not wish to get involved in such an argument.

It is fair to say that is a normal market and in reguards to this, yes things pretty much balance out.

This is in response to your later post.

There is no need to bring other examples into the question. We just take that question on it's own and answer that question.

Is negative gearing a benefit ?

Yes it is, that is exactly why people use it. If it was no benefit, they would not do it. They do it for exactly that reason, that it benfits them.

Would they do it if it was a disadvantage ? Or of no benefit.

Are there any negatively geared investors out there willing to admit that I negatively gear to benefit myself, and if you do not like it, then too bad.

It is not much different to saying I invest to benefit myself and too bad if you do not like it. I have investment property with the whole intensions of benefitting me the best I can. If negative gearing benefits me more then so be it. I do not make the rules. They may not be fair, they may disadvatage others to benefit others, they may push prices higher than they would.

Whether it is good or not is not the question. But there is no doubt it is a benefit. It is a discount on the tax you pay, and that is a benefit.

 

No benefits if your asset has no growth and losses outweigh any profits. So it's a risk investors take. And in return they supply rental properties for yields which are crap, allowing many to live in areas they will never, ever be able to afford.

Anyway I personally don't really care one way or the other. I have no NG, only pay endless taxes. Just can't stand the entitled folks who think investors are getting an upper leg with NG. Such bulls**t.

 

Yes sackie, an investment may go bad and some could lose out. But that may not be negatively gearing as the cause or blame. And could just be a bad investment as could be the case with a non negatively geared property.

But the purpose and intension is to benefit.

The whole intension is to benefit by reducing the tax you pay on your income. If it does not work out, then that goes against the intension.

 

As Simon said, this is largely an ideological and I'll add, philosophical, debate . No point going round in circles.

 

Labour is not really removing a benefit. If it is grandfathered then anybody that already has it will still benefit. So anybody taking advantage will have nothing removed. And in the same way, no penalty is being applied if it is grandfathered. New investors may be disadvantaged, and this would allude to the fact they were unable to 'benefit' hence the disadvantage.

And was 'natural process' the correct term.

If it is not a benefit, then everybody should have no problem with the removal of it. Do you think it should be removed ? Should it be grandfathered or just removed altogether for both past and present investors?

Is it really fair for new investors while allowing older investors to continue to benefit by this grandfathering process?

The whole thing is a mess, being more a last ditch, desperate, illthought process in order to win votes. Will it work ??? I do not know, but it is certainly possible.