thanks Steve – this was exactly the type of response I hoping people would post.
BTW – Re "no longer offset the 'loss' from negative gearing against salary income" – do you think this would blow the "living off equity concept" out of the water?
Anyone knows how long the minimum I need to keep the property as Owner Occupied before I can switch to Investment, without losing my FHOG?
I always wonder why people don't buy as owner occupied, claim FHOG, then say after 2 years switch into investment and takes benefits from the Negative Gearing?
That means you can take advantage of both worlds
duckster wrote: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.
Duckster, I read some articles explaining that the rental increase when negative gearing was last abolished wasn't as bad as people remember. Here's one of them
http://www.smh.com.au/articles/2003/08/24/1061663676588.html?from=storyrhs
The trouble with increasing rents, like spiralling property values, is that there is an upper limit society can afford. Rents are at or past it – look around and see that highly priced urban fringe properties aren't renting, regardless of any percieved population crisis.
The main reason governemnts are opposed to changing IP property laws is many members have similar invesments.
fandibong wrote:Anyone knows how long the minimum I need to keep the property as Owner Occupied before I can switch to Investment, without losing my FHOG?
I always wonder why people don't buy as owner occupied, claim FHOG, then say after 2 years switch into investment and takes benefits from the Negative Gearing?
That means you can take advantage of both worlds
you need to live in the property for 6 months starting within the 12 months from the settlement date. meaning you can move into it in and stay there for 6 months and the FHOG people will approve the money they gave you, just collect bills/rates/anything with your name and the address on it and send it all your away and then its done, You are free to rent it out.
Changing your loan to I/O is normaly very simple, most lost loans offer an I/O period 3/5/10 years as an option you can evoke. talk to your bank about this then from the date you rent out your PPoR is then Tax Deducable.
The problems then comes further down the track because if you want you can claim it as you PPOR because you lived in it for the 6 months (hopefully value adding, CG) and claim this when you eventually sell the property CGT free (only the protion of the growth for that time period). for this you must apply the 6 year rule for renting out your PPoR and depending on you state you may need to live in the property for longer then 6 months in the first 5 years to be able to claim it as you PPoR
Remember to get it independantly revalued each time to change phases eg;
Buy the house – revalue @ 200000
6 months of living in the house (value adding) – revalue @ 215000
12 months of renting – revalue @ 220000
12 months of living the in the hosue (value adding) – revalue @ 235000
18 months of renting – revalue @ 250000Over 4 years you gained 50k CG but because it was your PPoR (and u lived in it) during the main growth peiods, 30k of the CG will be tax free and only 50% of the remaining 20k will be liable for CGT
<br /:)” title=”>:)” class=”bbcode_smiley” /> this is an example only, remember to do your own homework!Neg gearing helped people provide for there own retirement. The sour grapes out there dont like the idea of investers getting a free lunch. But as stated over and over , investers do provide housing that the government are clearly not able to provide. House prices are correcting now so why would the government want to tamper with it now. Prices could really crash then. I know the sad ass gloomers would love it so they can buy in and then lets be honest. They would start buying IP,s too. ( You know you would)But the effect on the people who currently own homes would be shocking. Home owners are struggling now. Massive neg equity will not help things on top of high repayments.
devo76 – can't vouch for any-one else but I don't ever want an IP. Saying you know you would is being rather arrogant – you can not know what others value in life. I consider a housing a social right and not an investment right and that the long term stabiliy of society is a better investment for me and my family than the short term fiscal lining of my own pocket. What is the point of being rich if the world is broken? If I had enough money, however, I would have no problems with investing in commercial property.
That said, I agree that neg gearing can't just be scrapped – it would crash the market too hard and hurt too many people. It has to be phased out slowly and softly, over the next 15 years or so. For instance.
2010 – 10 IP limit for gearing
2011 – 9 IP limit and so on…This will bring balance back to market without causing anyone too great a loss. It is logical, which is why governemnts would never do it…
ummester wrote:devo76 – can't vouch for any-one else but I don't ever want an IP. Saying you know you would is being rather arrogant – you can not know what others value in life. I consider a housing a social right and not an investment right and that the long term stabiliy of society is a better investment for me and my family than the short term fiscal lining of my own pocket. What is the point of being rich if the world is broken? If I had enough money, however, I would have no problems with investing in commercial property.That said, I agree that neg gearing can't just be scrapped – it would crash the market too hard and hurt too many people. It has to be phased out slowly and softly, over the next 15 years or so. For instance.
2010 – 10 IP limit for gearing
2011 – 9 IP limit and so on…This will bring balance back to market without causing anyone too great a loss. It is logical, which is why governemnts would never do it…
I agree in part. IF neg gearing was to be changed it would have to be fased in over many years plus it would have to allow those currently neg gearing to continue until they sell. This is the only way they may get enough support to do it.
As for you never wanting to buy a IP. Then you would be one of a very small group of people.
If the market did crump and gloomers could afford there own home PLUS a investment. I bet most would eat there words and do so happily. And then next boom they will be accused of causing the housing affordability problem. And then they would be pushing the merits of investing having the wisdom and expieriance of seeing things from both sides. Wealth is a strong driver to which i believe many could not argue against.devo76 wrote:If the market did crump and gloomers could afford there own home PLUS a investment. I bet most would eat there words and do so happily. And then next boom they will be accused of causing the housing affordability problem. And then they would be pushing the merits of investing having the wisdom and expieriance of seeing things from both sides. Wealth is a strong driver to which i believe many could not argue against.Financial wealth is a bit of an illusion. It won't keep you healthy or make it safe for you to walk the streets at night. It won't stop some poor and disgruntled tenant from robbing and physically injuring you. Even in Rich Dad Poor Dad the author admits that by beating the rat race you are still a rat.
Don't get me wrong, I know financial wealth can have value and believe that hard work and invention should be rewarded in kind. I am niether socialist nor capitalist – I am slowly becoming a patriot and am worried about the countries' future more than isms.
It seems there is a fine line between wealth and greed. True wealth can mean so much more than financial, including freedom, health, friendship and all that kit. I think it is important not to fixate on material wealth alone. I know this forum is about material wealth but as I often say residential property investment carries a social responsibility with it and if investors can't be socially responsibile either the government or the economy of society itself will sort it out. If we are all suckered in by delusions of being the biggest capital investor on the block, than the block is lost.
The last time I heard the housing minister interviewed she categorically stated that Labour supported NG before the election, still do, and it wont change in this term. She also owns a few IP's.
bardon wrote:The last time I heard the housing minister interviewed she categorically stated that Labour supported NG before the election, still do, and it wont change in this term. She also owns a few IP's.have any links at all to the statement?
ummester wrote:devo76 wrote:If the market did crump and gloomers could afford there own home PLUS a investment. I bet most would eat there words and do so happily. And then next boom they will be accused of causing the housing affordability problem. And then they would be pushing the merits of investing having the wisdom and expieriance of seeing things from both sides. Wealth is a strong driver to which i believe many could not argue against.Financial wealth is a bit of an illusion. It won't keep you healthy or make it safe for you to walk the streets at night. It won't stop some poor and disgruntled tenant from robbing and physically injuring you. Even in Rich Dad Poor Dad the author admits that by beating the rat race you are still a rat.
Don't get me wrong, I know financial wealth can have value and believe that hard work and invention should be rewarded in kind. I am niether socialist nor capitalist – I am slowly becoming a patriot and am worried about the countries' future more than isms.
It seems there is a fine line between wealth and greed. True wealth can mean so much more than financial, including freedom, health, friendship and all that kit. I think it is important not to fixate on material wealth alone. I know this forum is about material wealth but as I often say residential property investment carries a social responsibility with it and if investors can't be socially responsibile either the government or the economy of society itself will sort it out. If we are all suckered in by delusions of being the biggest capital investor on the block, than the block is lost.
You raise some good points there and you seem to have genuine concern for our country. That is good.
But i believe wealth can provide most things you have mentioned. If you own a IP and sell it say 15 years later. What do you have after you pay off the debt. You have cash
Cash to put kids through uni
Cash to allow yourself to upgrade your PPOR
Cash to go on holidays and destress
Cash to pay for medical bill that you couldnt afford before
Cash to give you the SANF. This i believe is priceless. We all know how good it feels to have available cash.
I havent even touch on re-investing. Im talking pure cash advantageI have come from a very poor background and could write a book about what i have seen and had to live through. But i worked hard and now consider myself succesfull. But not yet rich.
I have great friends,a wife that loves me with or without money and great health plus a career that many would envy. If my life continued on like this until the end then i would die a happy man.But i have the ability to improve my situation through investing. I bought a IP 1 year ago. Truth be told if investors were not in the market my IP would have been a lot cheaper. But i dont blame them. I think if they can do it then so can i. This can be said for all people at all times in the cycle. I dropped the victim attitude and decided to have a go myself.
If in the future it pays of then i would have provided a better life for my family as well as helping all members of my family ( this i already do ).
I could have easily sat back and blamed the world for me not having a fair go but i didnt. I decided to give it a go instead.
devo76,
So long as you rate the loving wife, friends and health above your investment plans than I do not begrudge your choices. I just feel that if the majority of people aspire to similar plans there wont be enough tenants and cash in our society to go round.
IPs as a retirement fund are on the rise for the ageing middle class in this country and fairly new to be so widespread. This is, in part, due to the fact that people live so long now and only investment can fund such lengthy retirements at such a high standard of living.
It's unfortunate and I guess no one is to blame but the Western World has dug itself into kind of a deep hole with medicine, consumerism and materialism – I look at the amount of toys kids have nowadays (including my own to lesser extent) and am sadenned by what it means. We need a major downturn as much morally as we do economically.
And BTW, I don't blame the world in the least – I know I am luckier than 95% of it. I have travelled through some very poor countries and realize that I have so much more than most in this world will ever have (with or without a collection of wealth) but you know what, some of the people in those poor countries are happier and more emotionally fullfilled than the average Westener – wonder why?
Fair call. By the way my comment about blaming the world was not directed at you. It is more directed at people that want everything in life but do sweet f@#k all to get it.
You could spend the rest of your life analyzing and breaking down the faults and mistakes of todays society. I dont feel morally corrupt by becoming a investor after all there is a large element of risk involved that could easilly mean you gain nothing. Investing is open to everyone. I am simply taking a opportunity that is on offer as can anyone.I dont want to rely on a government pension. I want a better life.
Yes retirement from Ip ownership is becoming more main stream and what affect this will have is anyones guess. I would say as more become aware of investing in IP as a wealth tool the more likely it will be that it will continue to be used as such.I have concerns for where we are headed as a country but my biggest concern is for the protection of my family and i feel the best way to do that is to protect them with a financial backing. Everything else they need i am already providing.
mixedup wrote:bardon wrote:The last time I heard the housing minister interviewed she categorically stated that Labour supported NG before the election, still do, and it wont change in this term. She also owns a few IP's.have any links at all to the statement?
Sorry I dont it was on lateline when they were announcing the rental subsidy scheme if you wnat to search, definetly said it I can asurre you of that
devo,
I don't think where IP investment is heading is anyones guess – we are already there. It drives the value of housing up beyond what society can afford and the investments devalue, leaving over leveraged home buyers in the poo.
After this bust, people will shy away from it for a while. Besides, they will have no choice. The next gen to consider thier retirement is X and there won't be enough Y's to fill 2 other generations worth of IPs and niether X or Y are breeding fast enough to backfill the looming vacancy or sale rates. Yes, there is immigration but the governement is already thinking about cutting back to ease unemployment and inflation.
That said, with more or less the same amount of Y's in the workforce as X's, Y will be able to sustain the retirement of X. So long as all the boomers are dead, that is… otherwise we are going to have a massive problem with old people and palative care… meaning all we should immigrate are nurses:)
For all of these social issues, I think the weening of people off NG residential property is a good idea. If you read the bottom of the first page of the review that started this thread:-
Recommendation 4.2
The committee recommends that Australia's Future Tax System Review Panel consider the implications for housing affordability, as well as the overall fairness of the tax system, of the:
- tax discount for capital gains on investor housing;
- exemption from land taxation of owner-occupied housing; and
- current negative gearing provisions.
Only 3 issues tax issues are under considerration for revision. The easist one to change is a as it is the most recently implemented and I think that is what more investors should be worried about. Also, page 10
Other issues
10.104 While home ownership is an important aspirational goal for many Australians, long term rental may be a more attractive prospect if some of the benefits of home ownership could be translated into the rental market. According to the Western Sydney Organisation of Councils:
There appears to be the perception that ownership in its current form is the only form of desirable housing, whereas surveys indicate that what people really want is security of tenure.[86]
10.105 Lack of secure tenure was seen as one of the major deficits of the private rental market and something which often prompted people to enter home ownership even when they could not afford to do so:
We have transitional communities because leases are often for six or 12 months and people are moving endlessly. When they are offered the First Home Owner Grant, they think, ‘This is an opportunity for me to set up home, to have some security,’ but they do not have the income to cover their mortgage.[87]
10.106 Several witnesses suggested that security of tenure might be addressed via the development of more uniform tenancy laws across Australia:
We would like to see a consistent national framework specific to tenancy legislation. It is quite complex at the moment. We operate in a number of states and there does not seem to be any consistency.[88]
10.107 The Australian Council of Social Service suggested that such an approach might be incorporated in the future National Affordable Housing Agreement:
Many international experts have come to the country and said that one of the things that could possibly be done under… the National Affordable Housing Agreement, is to provide a national set of standards for people in the private rental market. Clearly, they are not strong enough.[89]
This could suggest that tenancy laws may be overhauled in the near future and long term tenancy agreements on fixed amounts may become a future law.
unmester
The rents didn't rise a large amount because the government of the time reversed their negative gearing policy decision as the rental rise and property value fall was beginning to affect their primary voters – Working class Australians rather than the intended victim being wealthy landlords.
I think a time limit on how long you can negative gear a property may be a consideration.
The whole point of negative gearing tax deductions is that eventually a profit will be made in the future and hence tax will be paid.duckster,
It's funny how an event that is only 25 years old is so hard to get an accurate beat on. You may be right, the govt of the time may have turned it around before rents had a chance to get out of control. We will never know for certain, i guess.
Thing is, how far can rents go? I am sure that there is an upper limit that people can and will afford to pay – not every tenant is going to be some single young proffesional on $140K + a year, most aren't. As soon as rent is close to a mortgage, I suspect the majority of tenants with money will cease being such. The poorer tenants are already missing out and cannot afford current prices – don't forget public housing stock was sold off during the 90's and early naughties,
Time limit is an interesting notion, though it would probably promote purchasing to keep getting a new IP with a fresh time limit.
My biggest problem with touching neg gearing now is that property values are already heading south. Why risk making things worse. Its the average mum and dad investor that will suffer not to mention PPOR owners.
Many have stated that investors have driven the market to current highs.I dont buy that. I think during good times the market is driven up by every buyer in the market until you reach a point that they cant afford to go higher. Then things correct. This is happening now and i believe it would continue to happen regardless of neg gearing.
The government gets its fair share from us through all its taxes and still does well out of IP owners especially when they provide for there own retirenment and dont rely on a pension.
Many have set up there finances including the neg gearing in there calculations. To remove this from them is unfair considering many have adopted a long term stratagy using it. All sour grapes aside it is a legit method limit tax during wealth creation and is there for all to use.
How would people feel if you sign on for a 30 year home loan at a known rate and then the bank implements a 4% increase on top of the variable rate due to a policy change in the bank. This is what people are asking investors to put up with.
As stated earlier things will cycle up and down as they always have.People are just on a head hunt in a time of high prices and IP owners are the easy targets.
devo76 wrote:My biggest problem with touching neg gearing now is that property values are already heading south. Why risk making things worse. Its the average mum and dad investor that will suffer not to mention PPOR owners.The factors sending our property values south extend beyond just the local market. Sure, the Australian housing market boom is instrumental but so is the growing global recession. The biggest spender in the world has just been caught with bad credit debts, what did you think was going to happen?
But I agree, over-correction greater than a 30% average in housing prices could be dangerous for the economy and scrapping negative gearing out right could cause that. As stated, the only safe way is phasing it out. Leave affluent Mum and Dad with their 1 property 10 years from now and things should be fine, giving gen Y somewhere to rent.
devo76 wrote:Many have stated that investors have driven the market to current highs.I dont buy that. I think during good times the market is driven up by every buyer in the market until you reach a point that they cant afford to go higher. Then things correct. This is happening now and i believe it would continue to happen regardless of neg gearing.Investors get blamed because they buy out of more than necessity. A PPOR buyer will buy 1 whenever the market and purchase is right for them and usually retain it for an extended period, having less overall effect on speculative values. That said, half of the PPOR buyers that fell into herd mentallity during this recent boom and accepted the prices are as responsible as investors for driving prices even higher.
devo76 wrote:The government gets its fair share from us through all its taxes and still does well out of IP owners especially when they provide for there own retirenment and dont rely on a pension.Many have set up there finances including the neg gearing in there calculations. To remove this from them is unfair considering many have adopted a long term stratagy using it. All sour grapes aside it is a legit method limit tax during wealth creation and is there for all to use.
The question isn't wether it is a legit taxation method for wealth creation but wether the product should be used for major wealth creation at all.
devo76 wrote:How would people feel if you sign on for a 30 year home loan at a known rate and then the bank implements a 4% increase on top of the variable rate due to a policy change in the bank. This is what people are asking investors to put up with.How do you know this isn't going to happen?
Ummester,
You seem to look at investors as these greed pig-like people that just want to feed off the poor tenant who is paying the rent. Its seems to me that you aren't looking at it the right way. To me having a investment property is a way that I can provide for my daughter's education and my life after I leave the work force. At the moment I am 30 years old and still have of time in the work force before I retire but that doesn't mean that I should wait until I am ready to retire before I decide that I don't have enough money to live on for the rest of my life. I look at my grandparents who are living on the pension and they get their money from the government but it isn't enough for them to do much except stay at home and watch the world as it passes in front of their house. While this might be good for neighbourhood watch it doesn't leave them with much to want to wake up to each day.
You mentioned that you are becoming a patriot, well that is good, we need people to be proud of Australia as the boundaries between countries gets blurred. As a patriot, I have seen some very bad places where the difference between rich and poor is so large. Gold taps and bath fittings, to mud brick houses with a satellite dish. These places the gap is too large for the majority of people to even get a look at it. So even though you don't think that NG is a good idea it helps people to get that little bit of a better life style. What I have read of your posts it seems that you would like the government to house everyone, maybe we could all live in the same style of housing and wear the same style of clothes and no matter the job get paid the same money. We could even line up for bread. Because without people tiring to better themselves and make money we would be living like that.
Maybe if you would like to live in a place where everyone is treated equal you could move to Cambodia.
Damo.
:)” title=”>:)” class=”bbcode_smiley” /> this is an example only, remember to do your own homework!
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