Anyone know the status of the negative gearing review that is going on? Here is a link to the Senate Select Committee on Housing Affordability in Australia Report that had a recommendation that it be reviewed.
http://www.aph.gov.au/Senate/committee/hsaf_ctte/report/c04.htm
If there were going to be changes I wonder when they would be kicked in?
Just remember that there are not enough rental properties to meet the renter demand now. So if the Labor Government fools around with negative gearing the number of rental properties available to rent will decrease and hence the high rents will get even higher. This is what happened last time the government fooled around with negative gearing and investors left the property market in large numbers during the 80's.
The introduced lower tax rates are causing this also to occur as negative gearing is becoming less attractive due to the lower neg gearing income loss tax deduction, property tax and capital gains tax implications.
I have checked the following Labor site this morning (19/7) and there are 9 links to housing policy:
http://www.alp.org.au/policy/index.php#housing
There is much to say about other types of assistance given to investors but nothing about NG.
As you can imagine, as a potential FHO I am not a fan of NG and what it has done to housing affordability in Aus.
The main findings of both the 2003 RBA First Home Ownership report (Executive Summary point 22) and June 2008 Senate Housing Affordability report seemed to have evaporated into thin air.
If the govt cannot cut the root of the housing problem, ie. Tax discrimination against home buyers, then any number of so-called solutions it offers up are not going to work long term.
Property is a unique asset. Its main purpose is shelter.
Its secondary purpose is that it can generate income through rent. It should not be treated as a commodity by govt and the sooner that happens the sooner Australia can become a community again and not just an ever increasing social divide between investors and renters.
If you think there is no down side to gaping divisions in society, good luck with that.
Property is a unique asset. Its main purpose is shelter.
as a potential FHO I am not a fan of NG and what it has done to housing affordability in Aus.
I'm not sure that negative gearing has done anything to your affordability. What would you preferr, the Govt giving incentive to people to house you or you paying twice the rent that you do presently? There has to be a rate of return on Investment or else why would people bother to invest in Property?
Of course the other option would be for the Govt to go into the Property ownership business and provide housing to you for a pittance after all the rich people can afford more taxes can't they.potential FHO wrote:Property is a unique asset. Its main purpose is shelter.
G'day Sean, what about a container or two in the bush ? That could also be classified as shelter.
Quote:Its secondary purpose is that it can generate income through rent.
Without the NG and good CG you'd currently need at least 15% return on your rental just to equal the returns you could get by parking your money in the bank.
A rental property is said to be negatively geared when property expenses (mainly Loan / Mortgage interest) exceeds rental income. That is, the investment runs at a loss. Under current tax rulings, losses from NG can be claimed from other income sources.If Loan Interest deduction was only allowed against the rent of that particular investment property, not against other income, there might be some fairness in the property market. Currently, ease of property purchase is heavily skewed to investors.Also, if FHO are being beaten out of the market by investors with a greater borrowing capacity, one must ask whether these investors deserve negative gearing?As an example of tax advantage (includes positive and negative gearing):Assume a residential property investor buys a new $300k house:$60,000 = Tax credit (rental) on new property ($6000 for 10 yrs) $20,000 = Direct incentive ($2,000 for 10 yrs)$345,000+ = Loan Interest Deduction on mortgage debt for 25 yrs at 9%$50,000+ = Rates, repairs, depreciation, RE fees, insurance, etc over 25 yrs$470,000+ = Total approximate Tax credit / deductions for investor over 25 yrsCompare this now with a FHO / home owner buying the same property:$0 = Deduction / credit for Home owner, $7000 FHO Grant for FHOEven a primary school student could identify that $470,000+ is greater than either $0 or $7,000. That figure is still about $390,000 tax deductions ahead for investors buying existing properties.Apparently some commentators and our policy makers cannot see that is unfair advantage.So, I hope that explains what I mean when I say that negative gearing has destroyed housing affordability. I think the govt should be assisting home buyers, not those who least need assistance, ie. property investors. Investors have now proven they are not prepared to provide an adequate amount of housing needed in this growing economy (predicted 30,000 dwelling shortfall this year) nor maintain fair rents.
So maybe it time to swap recipients of tax deductions on debt. I think it is worth a try.
that costing is pretty much gibberish and doesnt really elaborate your point
there are benefits to those that take risks, they will come via tax, capital gains or rents.
if you by your own place the only risk is your ability to make the mortgage payments you sign up for and you pay no CGT.
really just sounds like the politocs of envy, they have something and I dont, so rather than me stepping up , they should be pulled down. With the Labor social engineers in power you will probably get what you wish for in due course. Once those undeserving investors are out of the way things will be much better,
I agree with Yarpos, sounds like a bit of the green eyed monster.
Potential FHO – you too can be an investor and claim negative gearing benefits. Sometimes the best way to get into the property market is to buy an investment so you can get the rental and tax benefits; and continue renting where you want.I wonder if a few years down the track with his first house purchased and nearly paid of. Will he look at inesting differently. Most investors after all are not greedy rich people. They are mum and dads just trying to provide a nest egg for retiremnt so the dont have to rely on a government pension. This is why there is insentives from the government. They want you to provide for yourself .
Is negative gearing all that it is purported to be by 'the mum & dad investors'? As Duckster points out NG is becoming less attractive with lower tax rates – so for those on low incomes it should be a no-brainer that a loss leader with little offset should be avoided. It is more beneficial to park your money in a bank/fixed deposit to earn 8%+ at the moment compared to -5% or more when including capital losses, high interest rates and increased charges by the authorities. There are more disincentives now to invest in property compared to other asset classes.
However, we are not all the same, some see the shiny side of the coin (or are dazzled by the lights/spruikers) and believe that you can make money by losing.
The last budget has made many more property owners 'high income earners' and not big Kev's battlers thus losing out on other benefits eg baby bonus, child care rebates etc. There will be alot more pain to be borne by 'the rich' and even more by the 'renters' should there be major shifts away from the government encouraging investment in housing (and not through the half-cooked housing investment strategy'.
(ok rant off).
What's the difference between NG and the following example?
I run a little business ( in my own name).
However, because it's just in the begin years it doesn't earn enough income to support me or in fact to cover it's own expenses so I have a part time job as well.At tax time I declare income earned from both sources and deduct all expenses from the business. Because the business expenses exceed the business income at this point some of these are effectively used to reduce the taxable income earned from the job.
Is that basically correct ? Should we call this negative gearing too?
Not a lot of support here for potential FHO, never mind.
I am reminded of a phrase a very friendly and intelligent person once said as we walked through a somewhat seedy part of town: “we are doing the work of karmic minesweepers”.
It is probably hard or even impossible to imagine that someone who is intent on seeing negative gearing (NG) abolished has investor’s best interests at heart. But this is the case.
For those readers who have just chanced on this forum and are interested in clear insights into the Aus housing debacle and NG try:http://www.prosper.org.au/2008/05/19/unprintable-remarks-on-the-budget-gavin-putland/
For some home truths about RE from an honest agent, The Tough Truth:http://www.jenman.com.au/news_article.php?id=237
2003 RBA First Home Ownership report:http://www.rba.gov.au/PublicationsAndResearch/SubmissionsToParliamentaryCommittees/productivity_commission_first_home_ownership.pdf
To paraphrase key finding of RBA: The main reason for housing unaffordability in Australia is negative gearing. (Point 22 Executive Summary of report)
2008 Senate report Housing Affordability:http://www.aph.gov.au/Senate/committee/hsaf_ctte/report/b02.htm
Senate recommendations included:
4.2 – Tax System Review Panel consider implications for housing affordability and overall fairness of the tax system:
a) tax discount for capital gains on investor housing.
b) exemption from land taxation of owner-occupied housing.
c) current negative gearing provisions.
Now, as property investor you are obviously intelligent enough to make your way in the world. I understand that your wish is to provide a better future for you and your family. No problem. However, if ones providence is based on the impoverishment of another that is a different story.
Investors now make up about 20% of tax payers but unfortunately, some are not paying any tax at all. All because of a rort called NG:http://www.theage.com.au/news/national/landlords-tax-bonanza/2008/03/18/1205602384109.html
NG is like sugar coated poison or a floating mine in the harbor of peaceful co-existence. It is dividing society into 2 groups – investors and renters. And if you think a society can function under that limitation, good luck.
Some of you may even soon come to the realization that you should request the government of the day to drop NG. Who knows?
Bigger picture of housing affordability is not going to be solved until tax discrimination, NG, is removed.
Enjoy the day and happy thoughts.has anyone got a handle on where the Govt is at the moment re progressing such recommendations? Is there any due dates for another submission/recommendation or something?
"Investors now make up about 20% of tax payers but unfortunately, some are not paying any tax at all. All because of a rort called NG:" ……..and some pay heaps of tax, like me for instance….whats your point/……you seriously beleive people -vely gear to the point they pay no tax?…..thats very naieve.
"NG is like sugar coated poison or a floating mine in the harbor of peaceful co-existence. It is dividing society into 2 groups – investors and renters. " actually there are 3 groups , quite a few people own their homes as well. My kids for example have somehow (magically and against the forces of NG evil) managed to get into their own places. I thought they had just shown a bit of spine and got on with things, but I must congratulate them on defeating the forces of evil. Parts of Europe where there is no -ve gearing far more resemble the 2 class system you describe. I seriously doubt removing NG is the panacea you want it to be , but I guess anything is worth a try , and it will at least remove one more excuse for why some people get no where and others progress. Thats just me though , I have always thought that my problems are for me to sort out , and if (for example) I cant afford to by a house the thing for me to do is improve my situation and do the things I can control, rather than waiting for the government to "fix" it for me.
I have recently returned from a 3 year stint overseas and I am shortly going to commence my real estate investment plan. I originally had two choices.
1. Purchase a property and live in it, claim the FHO grant and pay ludicrious mortgage repayments and not be able to save any cash to invest into other assets or further properties and live week to week scrounging for the next paycheck. or;
2. Purchase an investment property and have tennants pay a good % off the mortgage repayments and I chip in the rest. (the NG evil). Hence, giving me more cash to invest elsewhere, maybe in fully franked shares that I dont have to pay tax on when I receive the dividend! Also, I can rent a nice property to live in that I wouldnt be able to afford if I purchased it.I have chosen No. 2. I have decided that it isnt worth my while purchasing my own home and choosing to take the bait from the government incentive FHO grant of $7000. I believe, that in the scheme of things it is no worth the plastic it is printed on.
I have not intentionally decided that I would buy a NG property for the tax benefits. I intend for all my properties to be positively geared eventually and pay tax. This may sound strange but when I know that I have to pay tax I know that I am making money.Potential FHO, it is your choice what you decide to do. I cant believe that you feel so strongly about the evil of NG. What benefits do you get by paying off your own home? $7000 and the threat of interest rates jumping higher. I also hope you dont have full trust the in government that you wil get all your super when you retire either!
potential FHO wrote:Not a lot of support here for potential FHO, never mind.
I am reminded of a phrase a very friendly and intelligent person once said as we walked through a somewhat seedy part of town: “we are doing the work of karmic minesweepers”.
It is probably hard or even impossible to imagine that someone who is intent on seeing negative gearing (NG) abolished has investor’s best interests at heart. But this is the case.
For those readers who have just chanced on this forum and are interested in clear insights into the Aus housing debacle and NG try:http://www.prosper.org.au/2008/05/19/unprintable-remarks-on-the-budget-gavin-putland/
For some home truths about RE from an honest agent, The Tough Truth:
2003 RBA First Home Ownership report:
To paraphrase key finding of RBA: The main reason for housing unaffordability in Australia is negative gearing. (Point 22 Executive Summary of report)
2008 Senate report Housing Affordability:http://www.aph.gov.au/Senate/committee/hsaf_ctte/report/b02.htm
Senate recommendations included:
4.2 – Tax System Review Panel consider implications for housing affordability and overall fairness of the tax system:
a) tax discount for capital gains on investor housing.
b) exemption from land taxation of owner-occupied housing.
c) current negative gearing provisions.
Now, as property investor you are obviously intelligent enough to make your way in the world. I understand that your wish is to provide a better future for you and your family. No problem. However, if ones providence is based on the impoverishment of another that is a different story.
Investors now make up about 20% of tax payers but unfortunately, some are not paying any tax at all. All because of a rort called NG:http://www.theage.com.au/news/national/landlords-tax-bonanza/2008/03/18/1205602384109.html
NG is like sugar coated poison or a floating mine in the harbor of peaceful co-existence. It is dividing society into 2 groups – investors and renters. And if you think a society can function under that limitation, good luck.
Some of you may even soon come to the realization that you should request the government of the day to drop NG. Who knows?
Bigger picture of housing affordability is not going to be solved until tax discrimination, NG, is removed.
Enjoy the day and happy thoughts.Now let me see.
1# Low post count
2# Seems to be against Investing yet on a investing forum
3# Plenty of statistics and links to support there downward look on investing.hmmmm. I smell a rat.
But if you are a genuine poster wanting to buy a house. Then all i can say is for me personally. The small tax advantages i get do not sway my decisions and they hardly make investors rich. As stated the returns actually come from a greater loss. And if the government was willing to take over the housing of its people( Thats your tax money they would use). Then maybe abolishing it would make sense.I strongly believe that it has not affected house prices as much as you would believe. But we know what would happen if they removed it.
FHO,
I have plenty of support for a would be FHO. However, most should be realistic with their expectations. The McMansion complete with 40 months interest free furniture looks very impressive when keeping up with the Jones. However, that is not what the majority of investor purchase. I am tired of the continual "poor me – I cant find a house" mentality. There are a lot of investors currently buying properties with lower price tags. Ok, so it isnt where you would want to live, neither was my first home, a dated town house in a complex of over 100. I never viewed it as "the dream" it was merely considered a stepping stone, and a prospective rental property. Unfortunately we have become a society of gotta have it and gotta have it NOW!!!!
If houseing affordibility is too high where you are then move. If you choose not to, thats fine, but remember you ALWAYS have a choice and you must be willing to accept the choice you make, and not play the blame game. Thats the easy way out.
potential FHO wrote:Not a lot of support here for potential FHO, never mind.
/quote]Plenty of support Sean, just not for GHPC trolls. Try Ss, you may have better luck there.
Now, as property investor you are obviously intelligent enough to make your way in the world. I understand that your wish is to provide a better future for you and your family. No problem. However, if ones providence is based on the impoverishment of another that is a different story.
I certainly don’t want to take away from any other hard working motivated Australian, but I don’t want to subsidize any bludger who has decided that if he does nothing the world owes him a living anyway. This is the age old debate between Socialism and Capitalism.
I for one am all for equality. We should all pay the same tax rate no matter how much we earn – Every working person should pay rates (the cost of maintaining the infrastructure that we all use) – We should all pay the fire levy (not just home owners).
What is fair and equitable?Coming back to the question again….
Who knows where the government is at with policy issues. I would have thought that Trading Emissions is a higher priority though, at least until interest rates rise further or we get closer to the next election.
I am in favour of tweaking the tx rules on NG. My suggestion would be that you can no longer offset the 'loss' from negative gearing against salary income. However, you can carry it forward to offset against future capital gains.
However, the danger of doing anything is that it will tip the housing market over and Aus will follow the US in a housing-led recession. Don't underestimate how much money people have tied up in their homes. If home prices fall then the consequences will be significant.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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