I was just reading Rich Dad’s Guide To Investing, and he says in USA, the government changed the law and made negative gearing something Americans couldnt do ( i think they took out the tax benefit of neg gear). And because of this the property market went down and there was a stock market deperession.
And he said we Aussies are still doing neg gearing like Americans before the US govt changed the law. Do u think the govt will suddenly change the law overnight?And what about peoploe like us with Positive Prioperties with Interest Only Loans? What are the implications if we cant get tax deductions for our interest payments for our loan (which is 100% interest payment and 0% principle).
hmm?[?]
I think the point Kiyosaki was trying to make is that while tax deductions are good for investors, it should not be the primary purpose for investing.
I do not think the laws will change overnight. It is always a possibility though that legislation changes. We then just have to reposition ourselves according to the existing opportunities.I think the Govt did abolish negative gearing once in 1987 os thereabouts. it caused rents to skyrocket as investors pulled out.
If the were to disallow negative gearing, they would only disallow the loss from a property to be offset against other income. So if you just did positive stuff, it wouldn’t affect you. Maybe they should disallow it!
Terryw
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Mmmmmm
Imagine if the govt did pull the pin on Negative gearing! Many investors would get out of property, and those that remained would increase rents etc.
What would become of the housing market, and particularly those people who rely on rental accomodation?
I think that the govt who did this (if) would certainly be an unpopular one. After all, us investors out there are helping the govt out by providing affordable homes for our community.. This saves the govt from having to do so….
Cheers
The govt did pull the pin on neg gearing and as Terry says, it was a disaster so they had to change it back.
The govt relys on us property investors to supply about 25% of the housing market. Of course they can’t afford to do it all themselves with public housing, so they need to encourage us in some ways like neg gearing, and the recent Ralph reforms with CGT exemptions.
More reforms are needed if they’re serious about encouraging investment and self funded retirement so hopefully they’ll also reduce or abolish stamp duty in the near future.
This would also fit in with their plan to reduce the pension and abolish it completely one day.It probably depends a lot on which government is in power and who they want to get on side.
Despite past evidence which showed that removing negative gearing created enormous problems for the little battlers in a short space of time, reality is that there are still plenty of charity organisations who regularly bring up the fact that the battler taxpayers are supporting the wealthy lifestyles of the landlords. Abolish negative gearing is a common catchcry.
So I don’t think we can truly say history will save us from seeing the same mistake repeated. Short memories are a very common feature in politics when there is mileage to be made by making a “popular” decision.Keep smiling
Felicity
I would agree that the point Kiyosaki was trying to make was that making positive returns from property is a much better approach than making negative returns (as illustrated by the removal of negative gearing)
I couldn’t really see any government removing negative gearing here in Australia. Stamp duty is enough of a pain in the butt without taking away ALL our incentives to invest in property. I guess it just comes down to which you prefer – reducing the amount of money flowing out of your coffers, or increasing the amount of money flowing into them.
Regards,
Brett []“Even if you’re on the right track you’ll get run over if you just sit there.”
In NZ the govt policy is to keep investors IN the game not get them out. There is no way the Govt can manage rental housing as effiently as private investors can. Remember that the tax benefits to owning rental property are in effect the same as owning any business – your expenses come off your income before you pay tax on it. Its not just a “loophole” for property investors, its a tax policy to encourage business investment.
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