Treasurer Scott Morrison has just delivered his first budget on an election year. Here's the tl;dr summary from SMH — Winners & Losers. From tax perspective:
Winners:
Losers:
How are the OzBargainers affected by this year's federal budget?
Allowing negative gearing incentivises (sic) buying property SOLELY for investment purposes
Narrow minded thinking such as yours usually results with the same outcome..Whining about what one doesn't have, instead of using what is available in the current playing field.
I guess you don't realize that people could purchase their first house as an investment property..rent it out, and either positive or negative gear it, until such time as they can handle the mortgage whilst living in it and converting to a ppor ? Yes they might be 'investing', but the end purpose might still be to live in it.
How about making a first house purchase, living in it for a year, then using the 6 year rule whilst renting it out…
Sure negative gearing can help the wealthy, but it can help the average person on an average income reach for something they couldn't otherwise usually afford.
However, those 'rich' who have a proper plan tend to prefer to use unit trusts under corporations or discretionary trusts, instead of keeping a ton of houses and negative gearing under their own name - this would only increase susceptibility to liability. With trusts, negative gearing isn't even relevant..unless you are trying to use a hybrid trust in a dodgy way)
..I tend to think that with negative gearing a single person can get on the property market with an 'average' income without huge amounts of stress if they are willing to make short term sacrifices and compromises with their lifestyle. It is very achievable.
Logic chopping at it's extremest (sic) ? Sounds exactly like what you are doing to justify the inaction of whingers who flounder at something so simple as saving a deposit for a property.
In a vast majority of cases, the rate of saving (while living a reasonable lifestyle commensurate to their expected wage-bracket) is slower than the rate of appreciation real estate in reasonably decent areas.
Refer to the fore mentioned over generalization. Reasonable lifestyle choices depend on priorities. What does the average Australian spend on booze, smokes, gambling, dining out or going to clubs and pubs each year ? The priorities are clear. If you don't think these are standard activities for an average Australian you are the one who is out of touch. I'm not talking about edge cases..
The majority of people I've run into who complain about housing affordability have a lot of those activities in common. (apart from those who are unemployed, sick etc etc)
Almost appears to be from someone who is markedly out-of-touch with what actually constitutes living expenses, holds a job and is a functioning member of society.
"Get off the lawn my flying saucer is parked on you whippersnappers!". Of course I am over generalizing. Just as you are. People hate reading essays. Too bad, I just wrote one.
I had a huge response typed. Unfortunately I tabbed out and the page navigated elsewhere, effectively destroying my hour-long dissertation. :)
Prepare for another huge response :)
I guess you don't realize that people could purchase their first house as an investment property..rent it out, and either positive or negative gear it, until such time as they can handle the mortgage whilst living in it and converting to a ppor ? Yes they might be 'investing', but the end purpose might still be to live in it.
This is the only way most people on normal income can purchase a property in Sydney. However, some very serious considerations need to be made:
- interest rates need to be considered, as it is historically the lowest in quite a while, and it is bound to go up again. If this happens, what may seem reasonable now, can be financially debilitating (>50-75 of take home income).
http://www.loansense.com.au/historical-rates.html
- The person needs to factor in existing rental into the equation as well. So it means paying "reduced mortgage" (through rental)+ full rent for current property.
That aside, this has nothing to do with "negative gearing" as a tax benefit. The primary purpose is to reduce the mortgage by renting it out. My argument was around incentivising (yes that is a word) negative gearing for investment only real estate. While it may help Jimbob, making ~75k a year to buy a 700k apt, after saving up for 140k deposit (20%), since his mortgage is typically going to be over 60-65% of his take home (therefore severe mortgage stress), his primary concern would be to reduce that number by renting out. Due to his low wage (it's actually median wage), the tax benefits are nominal.
However, those 'rich' who have a proper plan tend to prefer to use unit trusts under corporations or discretionary trusts, instead of keeping a ton of houses and negative gearing under their own name - this would only increase susceptibility to liability. With trusts, negative gearing isn't even relevant..unless you are trying to use a hybrid trust in a dodgy way)
We're not talking about the elite with several 10s and 100s of million in investments.
We're talking about opportunistic solo investors who have have a number of real estate purchases intended solely for the purpose of flipping (which is absolutely fine), and get a beautiful tax break (which becomes substantial due to multiple properties) as well as the ability to maintain multiple parallel interest only mortgages.
Just so you know, Australia is one of the very few countries (I don't know of a single one) that allows negative gearing to be used against the aggregate income rather than be tied to specific income sources.
Logic chopping at it's extremest (sic) ? Sounds exactly like what you are doing to justify the inaction of whingers who flounder at something so simple as saving a deposit for a property.
It is non trivial to say the least. Instead of rehashing my arguments, here's an article that describes the situation fairly well:
http://www.theguardian.com/money/2016/jan/25/housing-severel…
[Extremest] (https://en.wiktionary.org/wiki/extremest) is also a word, look it up.
Refer to the fore mentioned over generalization. Reasonable lifestyle choices depend on priorities. What does the average Australian spend on booze, smokes, gambling, dining out or going to clubs and pubs each year ? The priorities are clear. If you don't think these are standard activities for an average Australian you are the one who is out of touch. I'm not talking about edge cases..
The majority of people I've run into who complain about housing affordability have a lot of those activities in common. (apart from those who are unemployed, sick etc etc)
IMHO, the anecdotal evidence you've presented is fairly skewed. I've only seen new grads or blue collar tradies exhibit this behaviour. In the case of the latter, I must say that this is fair enough and warranted as they have a hard job which typically involves intense physical labour. Most often, they also make above average wages to compensate for that.
My peers are in the age group of late 20s to mid 40s and we're all working in IT. None of us have a rockstar lifestyle you think is the standard Aussie way of life for youngsters.
On the point of saving up, for someone to make dramatic changes to their lifestyle to be able to afford a mortgage or to save up for a house, would typically indicate that they're buying out of their "league" i.e. the price is not commensurate with their income.
When this is the case, for someone making the median/average income (75-80k/year), buying a 700k apartment (substantially lower than the median house price of 900k - 1M http://www.news.com.au/finance/real-estate/buying/the-true-e…) this indicates that prices have run completely amok.
There is little to no correlation between income and house prices anymore.
My umbrage is with the negative gearing tax benefits being used to increase demand in an already over-stimulated market. IMHO, this needs to be examined carefully and some controls brought into place (maybe put a cap; or restrict it to a designated property).
At the risk of offending you a bit (I guess it is only fair, since you've been quite patronising to me in your responses), I must say the difference between you and me is that I have empathy for the moderate and low income earners. I really believe that steps needs to be taken to ensure govt provided benefits people who actually need them, rather than making it substantially easier for speculative investments to go haywire… and artificially inflate the market.
Narrow minded thinking such as yours usually results with the same outcome..Whining about what one doesn't have, instead of using what is available in the current playing field.
Being acerbic isn't really a valid argument. I can sympathise with the folk who do not have the starting equity to indulge in these financial gymnastics. For someone with a reasonable income, it will take a few years of severely restricting their lifestyle to be able to afford a deposit. However, with a year-on-year double digit growth in real estate prices, they're proper buggered.
I know couples who have been painstakingly saving up (with frugality in every aspect of their lives) for a couple of years now (combined income ~100k) to be able to afford a 20% deposit on what is essentially a moving goalpost. To me, their personal standard of living is substantially sub optimal. We are a first world country, yet we're living worse that an upper middle class family in a developing country.
Lastly, let me end by saying that this is not my personal circumstance. As a result of both luck and careful personal development, the combined income in my household is several fold the median income (and if smh is to be believed, among the top 5-6%). I also know that your opinions are intractable, so there is little point in continuing this discussion.
Have a good one!
PS: My arguments are centred around the Sydney real estate market mostly. Other cities in Australia are relatively sane.
I had a long post written out about how Jimbob wouldn't be stupid enough to be trying for a 700k property on a 75k wage.. and detailing what he actually would be doing.. But I figured it would go over your head because of a basic concept that you can't fathom.
Lastly, let me end by saying that this is not my personal circumstance. As a result of both luck and careful personal development, the combined income in my household is several fold the median income (and if smh is to be believed, among the top 5-6%). I also know that your opinions are intractable, so there is little point in continuing this discussion.
Yes I might sound patronizing to you, but that is because I am well aware of what actually constitutes living expenses, holds a job and is a functioning member of society. That is because it is obvious to me that it is you that is out of touch. Those people with the rock star lifestyle that I describe are average normal people that I know as friends who are in the 20-40age range bracket. And I tell them the exact same thing to their face.
At the risk of offending you, yes it was obvious what bracket you are in because people on normal wages don't go buying $1k chairs for themselves regardless of back problems. My jibes were an attempt to throw your comments back at you in an ironic way, yet it went over your head.
The point I tried to make as Jimbob, because I am Jimbob,.. is that those with money don't need to worry about whether negative gearing is nerfed or removed. Why ? Because they have the means and other avenues to monopolize the property market if it is removed. If house prices fall or become affordable by the average person as you say then those houses would most likely be positive gearing, which incentivises (sic) the investors to compete for those places regardless.
Negative gearing is quite possibly one of the few avenues and protections to allow an average person onto the market, yet the out of touch rich (don't need to care if it is removed), and stupidly poor want it changed out of anger. (Forgetting that tax was a system born and perpetuated by unfairness).
As for locational real estate. Stamp duty in Vic for a 700k property is ~37k…
Also, you don't need to be super elite to have trust accounts.
btw Michael Jackson is an alien.. here look it up
http://geektyrant.com/news/2012/6/25/michael-jackson-could-h…
But I figured it would go over your head because of a basic concept that you can't fathom.
Again, that is quite patronising. Instead of making a self-masturbatory statement, you could actually put forth your argument.
Yes I might sound patronizing to you, but that is because I am well aware of what actually constitutes living expenses, holds a job and is a functioning member of society. That is because it is obvious to me that it is you that is out of touch. Those people with the rock star lifestyle that I describe are average normal people that I know as friends who are in the 20-40age range bracket. And I tell them the exact same thing to their face.
Well perhaps in your wee circle. Lived in multiple states across the country and with acquaintances with a range of financial means. I must say that I do not agree with this.
At the risk of offending you, yes it was obvious what bracket you are in because people on normal wages don't go buying $1k chairs for themselves regardless of back problems. My jibes were an attempt to throw your comments back at you in an ironic way, yet it went over your head.
That was pretty low. :) Regardless, its a matter of priorities, I'm not penny-wise, pound-foolish. I'm not going to regurgitate my arguments, so if you feel so compelled, read the thread. I did not enter the workforce at my present pay grade. I was JimBob as well a few years ago.
I must admit your irony went over my head; or perhaps the fault lies with you for not being able to communicate effectively?
As for locational real estate. Stamp duty in Vic for a 700k property is ~37k…
So? 700k buys you very little over here in Sydney. Also stamp duty is about 27k for that amount. Thank your stars that you're in Victoria and leave it at that. It's like someone patting themselves on the back for somehow scrounging a place in rural bumfkville for a pittance and now thinking that they're the bee's knees when it comes to making statements about the property market a state away…
btw Michael Jackson is an alien.. here look it up
http://geektyrant.com/news/2012/6/25/michael-jackson-could-h…
Well, MJ may be an alien, but you seem very combative and condescending with little substance to back anything. As you've pointedly ignored a significant number of my arguments, coupled with the vitriol in your responses, we're at an impasse which will only degenerate. So I consider this conversation done.
PS: As I mentioned before, 'incentivises' is an actual word; or perhaps you think (sic) is a form of punctuation, is that it?
Again, that is quite patronizing. Instead of making a self-masturbatory statement, you could actually put forth your argument.
My argument is that there is no point in explaining it to you because you no longer are Jimbob. You no longer think in Jimbob's best interest. You thought you were arguing on Jimbob's behalf yet, here you are arguing against him.
All of your comments have been littered with patronising and sarcastic statements..so lets quit with the hypocrisy.
As for my "wee" circle. It is true, but it is my world. And in my world with people like myself scrounging for a place living in rural bumfkville trying to pave a way forward have a lot to lose if negative gearing were to be changed.
Which is why you could never understand that argument… Did you get on the gravy train before house prices went pants-on-head retarded? "Get off my lawn you whippersnappers!" /eyeroll
PS. You were supposed to have stopped the conversation two comments ago, so latest impasse statement was redundant.
That is just logic-chopping in it's extremest.
Allowing negative gearing incentivises buying property SOLELY for investment purposes. It absolutely does nothing to make it attractive to actual resident-owners.
With the quarter on quarter increases of most real-estate in Sydney/Melb, there is a captial gain even with those aspects considered. With several negatively geared assets building equity when you consider the appreciation (while incurring "losses"), one would have to be a right muppet to NOT be making a capital gain.
In a vast majority of cases, the rate of saving (while living a reasonable lifestyle commensurate to their expected wage-bracket) is slower than the rate of appreciation real estate in reasonably decent areas.
I could make a similar cyclical argument saying that if there weren't such a push towards investment properties, the prices wouldn't skyrocket allowing more people to actually become resident owners… thusly resulting in reduced requirement to rent anyway. ;)
This is quite an over-generalisation. Almost appears to be from someone who is markedly out-of-touch with what actually constitutes living expenses, holds a job and is a functioning member of society. What you've mentioned may be edge-cases who have actual financial trouble due to the "vices" (or in the case of having kids and getting divorced, unfortunate circumstance); they do not form a significant portion of the folk who think negative gearing needs a bit of a sanity check.