Negative Gearing and Capital Gains Tax Discount Should Be Abolished

Lclearance fan on 11/09/2021 - 20:29
Last edited 12/09/2021 - 09:13 by 1 other user

Property investors have had it too good for too long, claiming Negative Gearing and CGT tax incentive. Property investments sectors are mature and highly profitable, NGs and CGT serve no purposes.Investors provide rental housing are not out of their kindness or altruism but post the opportunity cost for home seekers.

NGs and CGT tax breaks should be abolished so that these funding can be recouped as Government's revenues. People's' power can force policies makers to flatten the forever housing prices rise then you'll have a chance to buy a house at OzBargain.

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Comments

  • EightImmortals on 12/09/2021 - 10:59
    +2

    "NGs and CGT tax breaks should be abolished so that these funding can be recouped as Government's revenues. "

    Uh-huh, cos we all know how responsibly the government spends all the money it steals.

    https://www.youtube.com/watch?v=LO2eh6f5Go0

    • brendanm on 12/09/2021 - 19:18

      Uh-huh, cos we all know how responsibly the government spends all the money it steals.

      More champagne breakfasts and helicopter rides coming up!

  • Scantu on 12/09/2021 - 11:29
    +2

    Today on "my dumbshi*t opinion on the economy n such"

  • Oofy Doofy on 12/09/2021 - 12:25
    +1

    ETF code DJRE has an inception return of almost 10%pa and its been almost 10 years. That's not an unreasonable place to park some money while you think about what you want to do.

    My philosophy is that I'm not going to pay stamp duty and a bunch of ongoing costs to hold property when I can pay a small MER fee and have somebody else deal with all of that. I owned a house in inner Brisbane for 10 years and after factoring for inflation I lost money, but at least I wasn't paying rent. In the period since, I invested what I got out with and have come out way ahead of inflation putting my money elsewhere. Just ideas for anyone reading through this thread.

    I've met a few Vietnam veterans who're running around in decked out vans after being silver divorce raped, seems like the way to go if you don't have a family or the kids have grown up.

  • drfuzzy on 12/09/2021 - 12:30

    Retrospective changing of tax policy should be abolished. It's very hard to save for retirement when there are people like the OP are trying to change the rules for people who have bothered to work hard and made a plan.

    • Oofy Doofy on 12/09/2021 - 12:34
      +1

      Grandfather the changes.

  • rektrading on 12/09/2021 - 12:42
    +1

    If investors can't sell then they'll hold and drawdown instead.

    First home buyers that think it's expensive now should see the price in 30 years.

  • bemybubble on 12/09/2021 - 12:54
    +6

    To those who think negative gearing involves losing money, you know your property can be negatively geared but you can be in a cash positive position, right? 🤷🏽‍♂️

    • idjces on 12/09/2021 - 17:14

      Write down your asset year by year, claim back all that tax from the government. Then when the time finally comes to sell for mad gains, and re-adjust your accounting basis to match the true sale value vs the "write-down's" you deducted earlier… oh, look at that… government 's decided to give out a free pass and not claim the CGT.

      What a brilliant system to rort :)

      • dji1111111 on 12/09/2021 - 20:48

        Write down the asset? How? Re adjust the value? How? You must have a very creative accountant

        • idjces on 12/09/2021 - 22:46
          +1

          https://www.ato.gov.au/Individuals/Investments-and-assets/Re…

          The government has predetermined rates for how much you can depreciate (write-down) assets. The accounting "expense" creates a lower book value, and gives you back a tax deduction. Since you don't actually pay this expense, this is how you end up negatively geared yet cashflow positive.

          Years later if you decide to sell, you have disposed of the asset, and so you record the difference between what you sold for, and the lower book value you have on record, as capital gains (income).

          If you were paying the full tax rate, the difference would be zero, the government would recieve back the exact same amount of tax it refunded you in earlier years (ignoring differences in marginal income rates).

          Instead with a CGT discount, you get to keep even more tax that should actually be owed to the government.

          • dji1111111 on 13/09/2021 - 07:35
            +4

            @idjces: Non sense… how many people actually build new houses and are eligible? And capital works Is over 40 years lol
            You talk as if all property owners essentially claim deductions for write down for their entire purchase value.
            Capital works deduction claimed over the years cannot adjust the cost base so your incorrect claim that about the cost being adjusted is far from the truth

            You don't need to teach me basic tax law. Lol
            I'm a chartered accountant

            • idjces on 13/09/2021 - 08:46

              @dji1111111: Bad phrasing from me, but doesn't the maths work out the same?

              (Sale price - purchase price - postdepreciated carrying basis of other items like capital works) = CG, less CGT discount.

              You get back more tax on your depreciated items thanks to CGT discounts

              You don't need to teach me basic tax law. Lol
              I'm a chartered accountant

              Fair enough, I misunderstood your comment, makes sense now with the follow up post. Was trying to convey my understanding of the maths behind it.

          • bemybubble on 13/09/2021 - 13:29
            +1

            @idjces:

            Since you don't actually pay this expense, this is how you end up negatively geared yet cashflow positive.

            But you do pay for the expense - What did you think that million dollar property is made of of, Avocado's and Latte's?

            The question is if you buy a million dollar property, how do you quantify what it's made up of? This is the glorious role of a Quantity Surveyor 8)

  • quick-dry on 12/09/2021 - 13:05
    +3

    negative gearing is just deduction of income generating expenses from income, no different than other business expenses that offset income.

    All those "end of financial year/tax time sales" - that people take advantage of, getting the new car or ute and putting it as a business expense… same thing. The ACA style headline could be "Hilux hoarding tradies driving up the prices for regular aussie mums and dads".

    This same topic came up a week ago at most.

    • Vote for Pedro on 12/09/2021 - 14:28

      Except it’s from an unrelated wage income that is not part of the property investment ‘business’

      I’d have no issue if it was an offset against the property investment business only.

      • zephyrfox on 13/09/2021 - 10:04
        +1

        Except that is it is the same for all investment vehicles. If you borrow margin for shares, the borrowing cost are tax deductible. What you really want is to keep negative gearing and CGT discount but exclude residential property.

        Residential property is big business for Aus. Lots of people employed in the process. Hard to exclude this from investing and not hurt a lot of people.

        • itsme56 on 13/09/2021 - 14:18

          I bet OP would claim km's on his Car if he had to use a personal car for work. That is also "negative gearing".

  • Deals For Days on 12/09/2021 - 13:11

    It is indeed a rort. Related research from the Grattan Institute says it benefits the rich more than everyone else:

    https://www.smh.com.au/politics/federal/negative-gearing-ben…

    • dji1111111 on 12/09/2021 - 17:46
      +6

      Omg.. do you need a research to come to that conclusion. Two people with same tax loss but on different marginal tax rates will benefit different amount. The rich benefit more just from them being on higher marginal tax rate not because the system itself is a rort. Are people on Low income rorting the system then just because they earn less and are on lower marginal tax rate?

    • MrFunSocks on 13/09/2021 - 10:44
      +2

      That's like saying that someone earning $100k will benefit more from a 5% raise than someone earning $50k would, therefore a % pay raise system is a rort lol.

      • cadwalader on 16/09/2021 - 01:03
        +1

        You raised the doctor's salary by 30k, absolute rort if you don't raise the barrista's salary by the same amount.

  • Rako on 12/09/2021 - 13:19
    +2

    When Paul Keating tried scrapping negative gearing rents rose dramatically.

    • drfuzzy on 13/09/2021 - 02:40

      Not sure why you were downvoted - it's true.
      Perhaps the argument is in the connection between the two events?

      • RecklessMonkeys on 13/09/2021 - 12:14
        +1

        Correlation is not causation.

        • drfuzzy on 15/09/2021 - 23:44

          It's a bloody good hint in this case

  • drfuzzy on 12/09/2021 - 13:24

    Housing is quite affordable at the moment relative to history provided interest rates do not rise. That's a big if. It was harder to buy in the 1980s when incomes were lower and interest rates were in the mid-teens. I see risk as the issue for young people rather than affordability.

  • Herbse on 12/09/2021 - 13:36
    +3

    Tax payers lose billions offsetting people's already profitable investments. Money that can go into health and education instead goes to making already high return investments even more money by offsetting people's already high income.

    It's a strange system that benefits well off people. No wonder the Libs want to keep them.

    • RockyRaccoon on 12/09/2021 - 18:20
      +2

      And most of the "taxpayers" who are complaining are on lower incomes, and are often in no tax or very low tax brackets and get allowances from government. Hence, pay very little, if any, tax, so they aren't "paying" more.

      • Herbse on 12/09/2021 - 18:21

        There is very much an inbetween low income on benefits and high income with multiple investment properties.

        • brendanm on 12/09/2021 - 19:20

          Yes, these are the people working hard and never getting a thing.

  • kokita on 12/09/2021 - 15:14

    I think Negative Gearing and CGT abolished will not solve the problem for the ever increasing property prices.

    "The Hawke government's reversion to the earlier system in which property losses could not offset income from labour was unpopular with property investors. These investors claimed this reversion had caused investment in rental accommodation to dry up and rents to rise substantially. This was unsupported by evidence other than localised increases in real rents in both Perth and Sydney, which also had the lowest vacancy rates of all capital cities at the time."
    Source: https://en.wikipedia.org/wiki/Negative_gearing_in_Australia

  • pogichinoy on 12/09/2021 - 15:41

    Add it to the long list of other things tax payers are subsidising people with.

  • ozpaisa on 12/09/2021 - 15:50
    +9

    Plenty of people who earn less than 100k including me, saved and bought investment property. Took 5 years of saving and cutting back on holidays, expensive cars and eating out. Nothing comes free. The whole notion that property investors are just some old retired millionaires is a myth.

    Stopping negative gearing won't reduce the rent, the market demand and supply decides. The landlord will always try to get the maximum rent they can get at any given time.

    • brendanm on 12/09/2021 - 19:22
      +1

      saving and cutting back on holidays, expensive cars and eating out.

      Omg! Like, how could you possibly live in such terrible conditions?

      • kokita on 12/09/2021 - 19:41

        Just live in necessity. This is a great reminder that we should think the next generation.
        So, if the question how the next generation will afford a house? The answer is us now have to prepare a support system for them.

        • brendanm on 12/09/2021 - 20:40
          +5

          I was being sarcastic. People love to say that they can't afford a house, but then go on a million overseas trips, eat out 24/7, buy an Audi on finance etc.

      • cadwalader on 16/09/2021 - 01:11
        +1

        Won't you have some pity on me as well, I didn't like Sydney prices and I wanted a backyard so I moved to a regional city where I only had to borrow 2.5X our household income to buy a nice place. According to some knowledgeable and righteous Sydney-siders I must be the only employed person here and everyone else is working for free. Can you imagine the torture I've willingly inflicted onto myself for the next couple of decades (and possibly onto retirement).

        • brendanm on 16/09/2021 - 06:41

          Sending thoughts and prayers your way, friend.

  • Vallani on 12/09/2021 - 16:17
    +5

    Interests rates are so low that negative gearing doesn’t provide much benefit these days. I doubt it has much effect on property prices, even for those that are highly leveraged.

    I have a $1.5m loan on an investment property. I pay approx $45k/yr interest, earning $50k gross rent. After various deductions I make around $12k losses, which provides a total tax benefit of $4-5k/yr. It’s certainly worth something but not a great deal in the context of a $2m property. When interest rates were 5%+ negative hearing would have been much more valuable, but not anymore.

    • Mrgreenz on 12/09/2021 - 18:10
      +1

      So you effectively have a "free" HUGE hedge against rising intrest rates. But that doesn't influence prices?

    • brendanm on 12/09/2021 - 19:23

      Why on earth are you only getting $960 a week for a $2million property?

      • Zephyrus on 14/09/2021 - 22:32

        Property is heavily based on land value, rent is based on house value.

        Shit house in a good spot.

    • Krankite on 13/09/2021 - 13:58
      +2

      So you are saying now is the perfect time to abolish it? not a bad argument.

  • AMLagonda on 12/09/2021 - 17:59
    +6

    I am poorer than almost all of you OzBargainers and I have an investment home, its not just the rich that invest :/

    I worked my ass off to pay for the home I own now and I decided to buy a cheap house for my Mother inlaw to live in in her old age and not worry about all the fuss of rentals and yet I always see posts on rich Boomers (I am not, im 48) with investment properties but the OPs never look outside the square and never think of the battlers just trying to get on with life and not trying to buy a huge house in the best suburb for their first home.

    I was earning pittance and bought a cheap home for my first ($86000) in a shitty suburb in 96 just to get a home, got no government (first home) grants, no baby bonuses, nothing and interest was 8%.

    In saying all this negative gearing does not do much for me and It didn't make a difference in owning an investment property.

    • horice on 12/09/2021 - 19:32

      So you bought Pre Howard

      $86000 is approx $152,000 in todays money !

      The fact that Neg gearing and Cgt discounts are a large part of the problem that allows Taxpayer funded "Property investors" to gather in a circlejerk outbidding each other Usually on existing housing stock) and every other poor sod to the absolute max with rents increasing again to the absolute max

      You got yours so Flap every body else

      And i will ad Airbnb as well using up existing stock of what used to be affordable rentals

      • dji1111111 on 12/09/2021 - 20:55
        +2

        Nicely misled by silly media and clueless people. Real asset prices including properties are sky-rocketing not because their value have increased. It's because value of our money has decreased. Explain why property prices are going through the roof even in countries with no negative gearing.

        Try taking away negative gearing and cgt discount and see if it does jack all to the price. When the money is flooding the economy and returns are low money usually finds its way to obvious places like sharemarket and real estate. Do you really think the share market is at record high because the economy is doing great? Lol

        Amazing how people have zero clue about the state of the world economy.

        • netjock on 14/09/2021 - 14:44

          It's because value of our money has decreased

          Not if you look at the price of a loaf of bread or 1L of milk at the supermarket.

          For assets then there is massive inflation but that is as a direct result of lower interest rates but also rising incomes.

          People moan about rising prices for milk and bread but they'd more than happy if their property goes up 20%.

          Only people who moans about rising properties is those won't / can't buy what they want (the $1m property when they have / want to pay $800k) or those who want more of it.

          • dji1111111 on 14/09/2021 - 15:34
            -1

            @netjock: you must be blind. Inflation is spreading like a wild fire and you are talking about bread and milk.

            • netjock on 14/09/2021 - 18:31

              @dji1111111: You can do without a car but can you do without food?

              The problem is when people compare their worth to escalating asset prices. You will never be able to keep up or be satisfied.

              • dji1111111 on 14/09/2021 - 18:48

                @netjock: That's not my point. If you think food price hasn't increased and won't continue to increase you need to open your eyes. A basic search of commodity price history will answer this for you.

                • netjock on 14/09/2021 - 22:02

                  @dji1111111: It depends on what kind of commodities and the availability of substitutes.

                  Most people will quote economics supply and demand but forget there is substitutes and price elasticity.

                  In a nut shell:

                  • Substitutes - if one thing get expensive people will search for alternatives. During oil shock of the 70s, people traded down to smaller engine more fuel efficient vehicles.

                  • Elasticity - some good are inelastic like the only Picasso painting or some items that involve a patent that cannot be invented around

                  Why is a 55" LCD TV in real and nominal value a lot cheaper than a 40" CRT 1990 TV.

                  Notice how a lot of the supermarket brand items are not imported because they constantly search for lower cost countries to keep items at a certain price point.

                  Over simplification of economics gets everyone jumpy and start blowing bubbles whether it is the property market, share market or crypto markets.

                  We think property is expensive but it is both a function of lower interest rates, also increase incomes, larger houses and smaller blocks. There is actually substitution (trade off for smaller blocks for larger houses) and paying more for newer better houses / updated houses. Notice 3BR houses in 1960 - 1980s having smaller rooms and less bathrooms than ones built now.

      • AMLagonda on 13/09/2021 - 12:03

        No I sold that house and bought a bigger better house and paid that off too….

        But yes I made a lot a sacrifices like no new cars and not many holidays, but I still have hobbies and spend money.

    • avinit86 on 12/09/2021 - 22:12
      +1

      I’m in the same boat as you buddy! All about sacrificing and living within your means, especially when it comes to housing family.

  • onetimeuser2 on 12/09/2021 - 18:31
    +8

    Bet the OP only wants to live within 10km of Sydney CBD. The system isn't going to change to benefit poor people. Live within your means. Or make more money. Everyone of us is playing by the same rule book.

  • Poor Ass on 12/09/2021 - 19:37

    No thank you

  • HeWhoKnows on 12/09/2021 - 20:07
    +2

    Here is a definite NEWBY in the tax arena

    Time for an explanation….

    But firstly YES I agree to remove negative gearing.
    It is totally unnecessary and would force property investors to treat property like a business instead of a tax break.
    This would effectively bring down prices as annual property costs and cash flow would become a significant consideration.

    But on capital gains tax….

    It was only ever designed to place a tax on REAL capital gains which is fair and reasonable.
    This is how it differs from income tax which does not take into account indexation of the cost base (acquisition cost)

    Originally with CGT your property price was CPI indexed and at time of sale the indexed price was the effective cost base.
    Anything over that was considered a REAL profit for tax purposes.
    But indexation of property prices became far too complicated so for simplicity it just became a tax on half the gains.

    So there is your justification for the calculation capital gains tax
    and NO its not supposed to have concessions in REAL terms.

  • trevor99 on 12/09/2021 - 20:35
    +6

    CGT used to be indexed to inflation but because it became so complicated they changed it to 50% discount.
    You have to hold an asset at least one year to receive the 50% discount.
    Inflation is low at the moment but isn't always, so it's not so wonderful as you think.

    Investing is not a one way street and in capitalism capital is everything. If you don't have incentives capital will move to where it's treated better and you'll all be poorer. Attacking capital is the first step to communism and Venezuela as an extreme example.

    As for interest payments off your income for investment properties (negative gearing) do you realise there is now land tax at around 2.5% which would be similar or more than the savings at the current rates. So renting properties out with costs like rates, maintenance etc is pretty much cashflow zero or even negative before interest payments. The buying and selling costs are around 5%+ so the investor already forks out hard. It only works when property is rising and yes it has been a great period for the investors but won't always be.

    • idonotknowwhy on 13/09/2021 - 10:41

      CGT used to be indexed to inflation but because it became so complicated they changed it to 50% discount.

      Didn't know this, makes sense. I assumed it was to reduce liquidity in the stock and property markets.

      Long term I'd prefer the original system to be honest. If I hold my investments until near retirement age, inflation is going to eat a lot more than 50%.

      That being said, I enjoy the CGT discount when a shitty stock pumps 500% after 12 months of holding it :)

  • trevor99 on 12/09/2021 - 20:44
    +2

    Another point to make about these so called think tanks and institutes, they're often funded by offshore money. Offshore owners don't care about Australian taxpayer issues they want us to pay more so they can pay less. If you notice they want a reduction in company tax which will benefit them. Australian taxpayers will net the company tax into their tax returns so reduction in company tax makes not so much difference to the locals.

    So don't turn on each other the culprits are the offshore owners of big multinationals like Apple and Google and others who pay not much here by engaging in transfer pricing and other tactics. If they payed their 30% the treasury would be swimming in money.

  • dylan345 on 12/09/2021 - 22:05

    ….. Idea I don't seem to see much mentioning, grandfather current negative gearing and only allow negative gearing for new builds on new land.

    Bam current investor market stabilized, and negative gearing/new investors incentivized to increase housing supply instead of inflating current demand on homes in already over populated areas.

  • avinit86 on 12/09/2021 - 22:10
    +7

    Where are rentals going to come from? Social housing? Lol, ok.

    I bought a unit so my mother could rent a place without being moved yearly or paying extreme rent due to a shortage. And I will never ever let her live in social housing. I’m actually saving the tax payer by removing another person to house.

    And it’s actually positively geared so I pay more tax. People can be very narrow minded when it comes down to things like this.

    • Poor Ass on 12/09/2021 - 22:20

      loan?

      • avinit86 on 12/09/2021 - 22:22

        Yes with high lvr that I took a penalty for.
        Didn’t do it for negative gearing, as it isn’t. Did it for other reasons as explained. Not everyone with an investment property is doing it for purely monetary reasons

    • SBOB on 12/09/2021 - 23:21
      +1

      bought a unit so my mother could rent a place

      And it’s actually positively geared so I pay more tax

      Sounds like you're just charging your mum too much rent

      • avinit86 on 12/09/2021 - 23:22
        +3

        Incorrect. Charging her market rate, which is what is required.

        • funnysht on 14/09/2021 - 08:14

          No it isn't..if you're renting to friends etc cheaper ..say 50 percent..then you reduce interest rate cost by 50percent etc

          • filmer on 15/09/2021 - 11:48

            @funnysht: If you don't charge market rate, or near market rate you cannot claim any deductions as if it was an investment.

              • filmer on 15/09/2021 - 13:26

                @funnysht: Big difference between 80% of market rate and 50% of market rate.

                One is intending to still produce income, the other is to not lose income.

                Edit: This is akin to the limitation of potential deductions if you buy an investment property with no intent to rent it. I shouldn't say it's absolute that you wouldn't be able to claim deductions if you are charging rent at 50% market value, but if you are doing this it's something you would want proper advice from, even contacting the ATO themselves.

    • horice on 14/09/2021 - 21:16

      Where are rentals going to come from

      Not from a bunch of Taxpayer funded"Investors" outbidding each other on existing stock

      That just Increases the prices and rents without adding anything

  • D3HUN on 12/09/2021 - 22:25
    +3

    Oh. We still really think that property prices are unaffordable because 'investors'? Sydney.

    The suburb next to ours seen >20% increase in the last half year, and as I see it is mostly mom and dad with the kids…

    You know what? Everyone want to live next to the beach and right now money is cheap (interest rates) and easy to get it. Whoever can get more, will get the house. That is it.

    Yes, sometimes it is investors, so they sell and subdivide and then… Profit: they can sell to two families, with some profit, but two more families are able to afford to live at the same location.

    In the meantime, another suburb, investor (where we rented) sells unit at ~15% loss after ~3 years, on the market for ~200 days. Unit in an outer suburb. No one wanted to buy it as it is at less desirable location. Not even the 'I can't get enough money for the deposit'.

    As I see there are plenty of (relatively) cheap property.

  • drfuzzy on 13/09/2021 - 02:38

    Is that you Bill?
    Say hi to Chloe and remember to take your meds.

  • moneyhungry on 13/09/2021 - 08:25
    +3

    I don't think property investors have it good at all. After paying yearly land taxes, council rates, insurance, agent fees, gas and electricity inspections (every 2 years), maintenance costs you barely are making anything. Stop complaining and if you really need to purchase, there is a lot of affordable property in the outer suburbs.

  • Crustypizzaman on 13/09/2021 - 09:39
    +1

    If this "forever housing price growth" is flattened, do people still want to own a house?
    It would become a massive depreciating asset in an inflating economy.

    I would expect more people to choose renting in this scenario so they can switch from one new home to another new home without the worry for maintenance and deflating values.

  • A9z4444 on 13/09/2021 - 09:46
    +1

    WHY DID THE OP OPEN A BRAND NEW ACCOUNT TO POST THIS TOPIC

  • zephyrfox on 13/09/2021 - 10:09
    +2

    Lots of these types of posts lately. Unpopular opinion: This has nothing to do with Negative gearing and CGT and all to do with rising property prices.

    Property is going for significantly over reserves in lots of areas. Might be over 100 people wanting to buy one place. That means 99 people are missing out on the property and can then come onto Ozbargin and complain it's due to negative gearing and dirty investors. Not due to the fact that the one person who won the property had more money or wanted it more.

    When property is going significantly above reserve do you honestly think this is the investors still bidding?? You're crazy. It's called Investing. Paying more for an asset than it is worth is pretty bad investing. These people wont be buying up lots of property because all their funds are now tied up in an overvalued property and they will never get the equity out. So they are likely not the issue.

    • Ghost47 on 13/09/2021 - 13:52

      Investors may not be the majority but there is evidence they are returning to the market.

      Do you honestly think that no investors are making bids on properties above reserve and elbowing out FHBs?

      • zephyrfox on 13/09/2021 - 17:23

        It should be a numbers game for an investor so they should be easier to push out and have firmer limits. They are also looking for a return on investment which is harder to achieve if you are paying above market. However I do concede there are always bad investors…

        So honestly I expect there might be some, but also expect these type of people would be there regardless of CGT and Negative gearing so removing it would not remove them from the market.

  • bobolo on 13/09/2021 - 10:17
    +6

    Plot twist:

    1. remove negative gearing and landlords increase rent across the board.
    2. No CGT discount means landlords won't sell
    3. OP still can't buy a house but now has to pay higher rent as well surprised pikachu face
    • idonotknowwhy on 13/09/2021 - 10:37
      +2

      That's not actually accurate

      remove negative gearing and landlords increase rent across the board.

      Rent is dictated by supply and demand. Landlords will charge the maximum amount of rent they possibly can at any given time.
      Their expenses have nothing to do with the rental price. If their expenses go down (interest rates drop), you don't see them dropping their rent.
      And (in VIC), they always increase the rent whenever they're allowed to.
      If landlords suddenly put the rent up, their properties will remain vacant.

      No CGT discount means landlords won't sell

      I'm a big fan of the CGT discount as it saves me thousands of dollars per year in the stock market. That being said, this statement isn't true.
      It'll have little effect on whether or not landlords sell and if anything, it could slightly increase liquidity in the property market.

      OP still can't buy a house but now has to pay higher rent as well surprised pikachu face

      I agree, OP still won't be able to buy a house, but not because of higher rent.

      • bobolo on 13/09/2021 - 11:32
        +3

        I'm a landlord with a few dozen properties. Most of the houses are unencumbered. I have 2 on the market at the moment and if there were no CGT discount, I wouldn't sell unless I absolutely needed the money (unlikely because I have a lot of cashflow and equity).

        This is probably the situation with most landlords who owned property whether 1 or 100, especially in Sydney and Melbourne prior to 2015.

        Like it or not, its the reality. I don't even like negative gearing but I can see abolishing it won't do diddly squat right now. We are too far in the rabbit hole

  • Proteus on 13/09/2021 - 10:40
    +1

    My views on some ways to address this issue:

    1. Increase taxes (generally) on foreign property purchasers, so Australians are not unfairly competing in the market with foreigners.

    2. Allow low income persons (the issue is how you define "low income") to claim a tax deduction on the mortgage / rental costs of their place of residence. (If businesses can claim a tax deduction on the cost of their warehouse, office etc. as it is an "operating expense", why shouldn't people, especially those doing it tough, be allowed to do the same?)

    3. Promote sustainable new housing in new areas by increasing development in complementary infrastructure (roads, school, hospitals etc.) and strategic rezoning to increase housing supply.

    4. Marginally increase the stamp duty (or some other tax) for the third investment property onwards, in order to act as a minor disincentive and to put downards pressure and reduce excessive competition between investors vs genuine home buyers.

    5. Promote investing in the sharemarket through public education so people are aware of alternative ways of investing their money.

    • idonotknowwhy on 13/09/2021 - 10:42
      +2

      Promote investing in the sharemarket through public education so people are aware of alternative ways of investing their money.

      Hold off on this one for a few more years please as I'm still buying in ;)

      • Proteus on 13/09/2021 - 10:56

        Oops. Shhh…

  • Duckie2hh on 13/09/2021 - 11:23

    How does CGT discount apply to investors? If anything CGT discount are for home owners.

    • Mrgreenz on 13/09/2021 - 11:36

      Main residence is usually CGT free.

      Investment properties attracts CGT, which is reduced by 50% if held over 1 year.

      • Duckie2hh on 13/09/2021 - 11:57

        Ah yes correct thank you. It is the same for shares or any other investment vehicle. So @OP based on your logic, should we also remove CGT discount on all investment vehicles?

        How about we fix loophole that is really taking a piss. CGT exemption on vehicles. WTF?

  • Duckie2hh on 13/09/2021 - 11:25
    +5

    How about if people learns to stop spending money on smashed avocado and alcohol so that you can save more than 10% of your take home pay for a house deposit?

    • Ghost47 on 13/09/2021 - 13:43

      How do you know that people aren’t doing that? It’s the same argument as “millennials are the most entitled and lazy generation”, fraught with anecdotal fallacy and prejudice. Just because your mates eat smashed avo and complain about house prices doesn’t mean everyone does that.

      Same as the comments from some OzBargainers here too, who think they know how much other OzBargainers earn and how they spend their money based on one or two comments they've made or posts they've created.

      • Duckie2hh on 13/09/2021 - 14:59

        some people are probably doing that.

        There are numerous reasons as to why housing affordability for millennials is such a problem (i.e., wage growth relative to housing costs, borrowing limits, perception of houses vs apartments, liveability, proximity to CBD, etc). I am just highlighting one factor (discretionary spend) to address OP's point about the changes to the government regulation.

        People's' power can force policies makers to flatten the forever housing prices rise then you'll have a chance to buy a house at OzBargain.

    • Cluster on 14/09/2021 - 10:45

      It must be all the overseas holidays millenials are always taking. They wasted so much money in the last couple of years. Oh wait…

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