The negative gearing election

[Ratts of Tobruk]

But I want to deduct against my income as well - this is the disadvantage that PR is highlighting.

Am I currently exploiting the system - absolutely.

Will I cry if they suddenly pull negative gearing with no grandfathering - no. I will just need to adjust and pay off enough to not make net loss. Think if you make a change be whole assed not half asses.

But there is no reason why a "worker" can't have investment income, just like the "wealthy". Why can't you? The point is that the change in the policy stops people from easily deducting money from their wage/salary income. In order to take advantage of negative gearing you will need to buy a new house, or you will need to prove your ability to invest well by generating enough investment income to get the money together so you can deduct against it. The change in the CGT discount from 50% to 25% stops it being all about just buying a property and waiting for the price to go up so you're guaranteed to be ahead by far enough to make up for the fact it may have been a bad investment in terms of losing money year-on-year. The risk calculation is completely altered.

There is no need to encourage people to invest in housing. If people are buying a house for themselves they can't do it. Yet people being able to do it on an investment property gives them an extra advantage when buying AND puts up the prices for the person who just wants a house to live in. It has to stop.

 

[Frank Grimes]

I have one question about negative gearing. If it's removed does it only apply to interest of loans or would it mean you can't make deductions on things like council rates, maintenance, insurance etc as well?

 

[Maggie5]

No, I think he's just being a bit mischievous with terminology. Or I'm being generous to him..

Very generous once you get to understand his posting style.

 

[Crankyhawk]

But there is no reason why a "worker" can't have investment income, just like the "wealthy". Why can't you? The point is that the change in the policy stops people from easily deducting money from their wage/salary income. In order to take advantage of negative gearing you will need to buy a new house, or you will need to prove your ability to invest well by generating enough investment income to get the money together so you can deduct against it. The change in the CGT discount from 50% to 25% stops it being all about just buying a property and waiting for the price to go up so you're guaranteed to be ahead by far enough to make up for the fact it may have been a bad investment in terms of losing money year-on-year. The risk calculation is completely altered.

There is no need to encourage people to invest in housing. If people are buying a house for themselves they can't do it. Yet people being able to do it on an investment property gives them an extra advantage when buying AND puts up the prices for the person who just wants a house to live in. It has to stop.

Can't disagree with that last paragraph at all. Which is why I stated that if they were really serious they would remove the grandfathering.

And the "wealthy " as PR puts it still are incentived to continue current NG style (pushing up prices) because they can deduct from other investments and still take advantage of capital growth.

 

[Ratts of Tobruk]

I have one question about negative gearing. Does it only apply to interest of loans or would it mean you can't make deductions on things like council rates, maintenance, insurance etc as well?

All costs except actual mortgage payments, I believe.

Can't disagree with that last paragraph at all. Which is why I stated that if they were really serious they would remove the grandfathering.

And the "wealthy " as PR puts it still are incentived to continue current NG style (pushing up prices) because they can deduct from other investments and still take advantage of capital growth.

I think if it's like what happened last time then you can deduct within the asset class. I could be wrong on that, but essentially it maintains the rental market (since that is seen as the main down side). Of course if the Labor policy is successful and there's continued abuse in the sector (but by many fewer people) then they could expand that later. Even PR was saying limits need to be put on, it's just a matter of how it's done that he has campaigned against.

 

[Hoops]

hardly heard anything about NG for weeks. It was a vote winner for Labor too. If only the scare campaign focused on this and not the fictitious privatizing of Medicare.

 

[Ratts of Tobruk]

hardly heard anything about NG for weeks. It was a vote winner for Labor too. If only the scare campaign focused on this and not the fictitious privatizing of Medicare.

The Liberals are allowed to use fiction all the time. Apparently Labor is conducting a "war on business" by giving small business a tax cut which they took to the last election and are going to this election with as well. The Liberals tried to introduce a copayment in the last term, why should they get a free pass when Turnbull has hardly backed away from a single Abbott policy?

But, yes, I think Negative Gearing is a winner with younger voters, who don't own a house yet, and is probably front-of-mind for them and their parents. I think the Medicare ad using Bob Hawke shows you that they are struggling to get older voters who probably see Turnbull as a sane man after Abbott and aren't paying much attention otherwise. Reminding them of Medicare is probably the idea.

 

[Pessimistic]

hardly heard anything about NG for weeks. It was a vote winner for Labor too. If only the scare campaign focused on this and not the fictitious privatizing of Medicare.

Shorten protecting medicare even if he loses?

 

[JackOutback]

The Liberals are allowed to use fiction all the time. Apparently Labor is conducting a "war on business" by giving small business a tax cut which they took to the last election and are going to this election with as well. The Liberals tried to introduce a copayment in the last term, why should they get a free pass when Turnbull has hardly backed away from a single Abbott policy?

But, yes, I think Negative Gearing is a winner with younger voters, who don't own a house yet, and is probably front-of-mind for them and their parents. I think the Medicare ad using Bob Hawke shows you that they are struggling to get older voters who probably see Turnbull as a sane man after Abbott and aren't paying much attention otherwise. Reminding them of Medicare is probably the idea.

Turnbull caught in an outright lie today saying Labor opposed the China FTA but I dont know if anyone other than the Guardian mentioned it.

 

[Ratts of Tobruk]

Turnbull caught in an outright lie today saying Labor opposed the China FTA but I dont know if anyone other than the Guardian mentioned it.

Two lies on the second last day. A panicked politician to match a panic poll.

To think we could have had a normal length campaign in August or after the Grand Final if only the Liberals didn't think that the longer they stayed in power the further down their polls would go. No ideas. No ticker. No confidence.

 

[Seeds]

This is the only serious reform this year and even though labour wish they didn't make it the cats out of the bag now. We won't get another shot at this policy again as labour will surely scrap it if they lose. The country really really needs this policy to come in. Please consider it.

 

[Ratts of Tobruk]

This is the only serious reform this year and even though labour wish they didn't make it the cats out of the bag now. We won't get another shot at this policy again as labour will surely scrap it if they lose. The country really really needs this policy to come in. Please consider it.

It's hard to believe that the Liberals have no housing affordability policy at all. This would save us $6-8 billion per year, stop the rapid increase in house prices, and thanks to the 'grandfathering' element no individual or the economy who invests before July 2017 is negatively effected. I think you'll find Labor is very happy to have 'let the cat out of the bag'.

 

[Gough]

https://www.theguardian.com/austral...eowners-by-2017-report-finds?CMP=share_btn_tw

Fewer than half of all Australian adults will own their own homes by 2017 and superannuation is on track to be the largest source of wealth in the country’s households by the mid 2020s, according to a new report.

The Household, Income and Labour Dynamics in Australia Survey, or Hilda, released on Wednesday, found that home ownership among people aged under 45, particularly in Melbourne and Sydney, had “decreased quite dramatically” since the report was first produced in 2001.

The lead author, Melbourne University professor Roger Wilkins, said home ownership was also having an impact on household wealth, with elderly couples more likely to have higher net wealth because they had already paid off their homes.


“Basically on the trend they have exhibited between 2010 and 2014 we would expect that less than half of all adults will own their own home by next year,” Wilkins told Guardian Australia.

And still the government refuses to do anything to make home ownership more affordable.

 

[Todman]

https://www.theguardian.com/austral...eowners-by-2017-report-finds?CMP=share_btn_tw

And still the government refuses to do anything to make home ownership more affordable.

If we scale back our immigration then the demand won't be there therefore prices would rise more slowly.

 

[sherb]

https://www.theguardian.com/austral...eowners-by-2017-report-finds?CMP=share_btn_tw

And still the government refuses to do anything to make home ownership more affordable.

Protecting the value of negative gearers' investment portfolios is far more important to this government.

 

[Power Raid]

https://www.theguardian.com/austral...eowners-by-2017-report-finds?CMP=share_btn_tw

And still the government refuses to do anything to make home ownership more affordable.

They actually did make a substantial change prior to the election by implementing a mechanism to collect CGT tax on foreign owned property and run an ongoing FIRB audit.

 

[Maggie5]

If we scale back our immigration then the demand won't be there therefore prices would rise more slowly.

The only migrants that can afford housing are the cashed up ones this government encourages.

 

[Todman]

The only migrants that can afford housing are the cashed up ones this government encourages.

true.

 

[Todman]

And still the government refuses to do anything to make home ownership more affordable.

What is more affordable? Does that mean a fall in property prices?

 

[Scotland]

No govt gives a * about housing affordability. Not enough political mileage in it to offset losing the grey vote and the potential economic effect of housing becoming devalued. If there are 10m homes then it doesn't matter if there are 10m home owners or 10. It only matters to the govt if there are homes that no-one owns...

'Housing affordability' initiatives from Howard and Rudd consisted of cash incentives to buyers, which stimulated demand. Don't have to be an economics professor to know what effect stimulating demand has on prices. I know I bought when the market was going down (like 10% down in a year after 100% up in 2-3...) and the $14k bonus grant came in and prices starting going back up. A few months later and I'd have had $14k in the hand for another $50-100k of debt. Swell.

Anyway I think CGT concessions coupled with stamp duty discourages turnover which in turn promotes speculating.

Buy a house for $500k, spend $20k fixing it up, sell it for $550k, make $30k - for example. Sounds like a winner, except for the $15-20k in stamp duty and tax on the $30k. Hardly worth it. Even without negative gearing, it still discourages turnover as you have the stamp duty cost up front and need to wait 12 months for the CGT discount. You're better off waiting 5 years, copping a small loss each year on the rent and hoping that the value goes up more.

I'd prefer to see a system where stamp duty is more representative of an administrative cost (so $1000 not $20,000) and residential land held for investment purposes is taxed on an annual basis. I'd also remove any CGT concession that is timed based. A huge part of the reason people hoard houses then sell for huge profits is because they are punished if they don't.

 

[Long Live HFC]

I have one question about negative gearing. If it's removed does it only apply to interest of loans or would it mean you can't make deductions on things like council rates, maintenance, insurance etc as well?

All costs except actual mortgage payments, I believe.

i'd like a source for that. gearing may be "borrowing to invest", but all expenses contribute to the "negative" aspect.

 

[Long Live HFC]

And still the government refuses to do anything to make home ownership more affordable.

i know im in the minority here, but i don't think removing NG will do anything to increase affordability. it will reduce demand to an extent, but i am unconvinced this will make property significantly "more affordable". imo it will simply reduce the rate of price increases (due to the fact it's not the only factor involved).

 

[Ratts of Tobruk]

That is what the modelling predicted. Of course in some locations you may get a drop, and in others there may not be a difference as the demand is always outstripping supply, but overall due to grandfathering prices would just rise more slowly, making them more affordable that they otherwise would've been.

i'd like a source for that. gearing may be "borrowing to invest", but all expenses contribute to the "negative" aspect.

As in you want a source for the fact you can only claim the interest on your loan as a loss, rather than the loan repayments themselves?

 

[Power Raid]

I have one question about negative gearing. If it's removed does it only apply to interest of loans or would it mean you can't make deductions on things like council rates, maintenance, insurance etc as well?

all costs would have been captured

just like interest, the costs you highlighted would have had to be offset against other investment income (ensuring the wealthy can continue to negatively gear) or capitalised (those with just employment income).

 

[Long Live HFC]

As in you want a source for the fact you can only claim the interest on your loan as a loss, rather than the loan repayments themselves?

sorry, i totally misread what you wrote. i thought you were saying the removal of NG only related to loan interest payments.