In light of recent media reports regarding potential policy changes to Negative Gearing and Capital Gains Tax (CGT), what is the practical perspective within the OzB community?
Should government reassess property investment and the claims associated with it?
WRONG WRONG WRONG WRONG WRONG!
Landlords always say that. it is because they got rose tinted glasses on.
In the UK they don't have negative gearing. Banks will only loan it your rent is 145% of P&I repayment. London house prices are not any cheaper than our capital cities.
The idea that NG is a permanent feature of property investment is actually something that only Landlords (I have 3 investment properties) can do mental acrobatics in their head to make work.
The idea that NG is a permanent feature of property investment is actually something that only Landlords (I have 3 investment properties) can do mental acrobatics in their head to make work.
Untrue. NG gives me an incentive to keep my business in Australia, and to reinvest into AU. Without it, other options are more appealing.
NG gives me an incentive to keep my business in Australia
Untrue because NG only applies to people who are PAYG. Much as you think you're a "business" you're not really a business. How many full time jobs do you actually create?
to reinvest into AU
If you look at the share market, zero financial planners (or anyone's opinion worth their salt) would suggest you keep your investments in Australia.
Just as rich Chinese are getting their money out of China (concentration risk is one reason and political risk is another), Australian people seems to think going all in domestically is the way.
If in doubt refer to this https://fund-docs.vanguard.com/AU-Vanguard_Index_Chart_poste…
Untrue because NG only applies to people who are PAYG.
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You don't understand what you are talking about.
Not bothering replying to anything else as you clearly lack basic knowledge on the subject
@netjock: That chart doesn't consider franking credits and the higher dividends of Australian shares.
Australian shares provided higher returns when you add everything in, particularly over a long timeframe of several decades (as AI has taken over the market recently).
Doesn't mean it is a good idea going forward, probably a better idea to invest in India/SEA
Agreed
Too many accountants tell thier clients they are paying too much tax and to go and buy a negatively geared property. (i.e. borrow as much as they can)
Surely an accountant recommending someone goes and buys an investment that is losing money, with a huge "overhanging" loan and reliant on constant funding from other sources of your income is displying the height of irresponsible advice. Its a sure way to going bust!
Accountants are not investment advisors, nor retirement planners.
They should stick to counting beans and ensuring your tax return is completed correctly and lodged on time.
The correct strategy is to purchase "self-funding" investments and if/when costs such as interest rates unexpedidly go up, negative gearing can be used to temporarily and partially offset the higher costs. But that stragey is also reliant on keeping your main job when times get bad!!!
Accountants are not investment advisors, nor retirement planners
That is why they got locked out of providing investment advice to anything that requires a AFSL
Accountants don't tell you to go and buy a property just the tax deduction available. You could bet the watered down rules around real estate would be due to real estate industry.
Being in the industry (accounting broadly but my P&Ls and budgets have been in billions) most public practice accountants did accounting in university and probably didn't do too well academically then all they did was look at books of small companies. Definitely not qualified to give any advice.
I had an accountant recommend I pay down my HECS debt to reduce my tax. I do my own taxes now.
CGT discount is a problem IMO. My income from actually working doesnt get a discount. Its a perverse incentive.
'Demand exceeding supply is the problem'
Spot on - which is why immigration needs to be drastically reduced, at least in the short term. Inward migration levels should be linked to housing availability. Recent news reports that students who fail to get post graduate work opportunities can, and are, appealing with some even claiming asylum needs to be stopped. The only way to smash this bullshit is to remove any post graduate work visas for international students - finish their studies and go home immediately. The current system isn't working and is being gamed and it's time for it to be changed.
Sometimes. If you're on a lower bracket you COULD be lose $1 just to claim back 20c, and THEN when you sell it pushes you to the top bracket and you pay back 40c on the "savings" you made years ago.
ANyway it's all too complicated glad I'm not a LL.
Cancel it so we don't have to hear the whinging about NG being the magic problem.
Demand exceeding supply is the problem
Like with the good old toilet paper during COVID, stockpiling is/was the devil.
One dwelling (as a home) will suffice … as a necessity, not as an investment.
This is completely false. Yes, demand exceeding the supply is the problem, the problem started in 2000 when John Howard introduced the half price capital gains discount for houses on top of the existing negative gearing policy that was already in place. You can see that house prices did not start jumping by 2% every year from then onwards, demand caused prices to increase exponentially. If we reduce immigration back to pre-covid levels and remove the half price capital gains discount, that will be sufficient to cut the exponential growth in house prices. If we also allow for the construction of apartments everywhere, that will completely solve the housing crisis.
This is completely false. Yes, demand exceeding the supply is the problem, the problem started in 2000 when John Howard introduced the half price capital gains discount for houses on top of the existing negative gearing policy that was already in place.
I respectfully disagree.
a) The CGT Discounting replaced another form of CGT discounting by indexing (increasing) your cost base thereby reducing your capital gains. Discounting has always been there in one form or another CGT discounting made it simpler.
b) There are also other much more significant things that happened around 2000.
i) Dual income households became more prevalent as more women got into and stayed in the workforce longer full time.
ii) The Banks relaxed lending standards, making easier to not only borrow money but borrow even more money.
I'm a landlord. I like negative gearing as an individual because capital appreciation isn't the only factor. There's also the fact that some dude is paying into my equity while I just service the peripheral costs of ownership. 2% of contribution to cost isn't much though I guess. I'd still axe it. If it's no big deal then you won't miss it.
Yes but the issue with negative gearing isn’t the every day investors with one or two properties. It’s the foreign “trust” funds buying up 100s of properties and using it to pay no tax, while also gaining equity and income on each property. At the very least, there needs to be a limit.
Agreed, all my investment properties are positively geared. I think anyone going out of their way to lose money to pay less tax in the hopes of offsetting those loses in asset growth is crazy. Particularly when you've got capital gains to pay at the end. Your ROI wouldn't be much. Better off putting it into shares / pre-tax super contributions.
This is very true.
Negative gearing is terrible.
However, many rents don't cover interest expenses, by a far margin in $1 million plus properties.
So if you get rid of negative gearing, you're hoping that people will sell their investment properties so renters can buy them?
1 million people negative geared in 2022.
The issue is, assume people negative gearing are making $150k plus a year - where do you think they will invest their money?
Investing is not as easy as it sounds and there is often nothing more secure than property.
Most financial advisors return less than the market, let's not even go getting investment advice from your accountant…
The only thing I am sure of is it will 100% decrease the rental supply even more.
Not true, you stand to gain much like the other landlords owning multiple properties at our expense.
Gotta say those fat rich little fingers got gold coins stuck to them like a good capitalist lol
All people doing NG are just evil and the scheme needs to be abolished right now.
Negative gearing makes sense on assets that can go up and down. Therefore by investing (which means there is a risk of loss) then you should be able to write off the "running losses" each year.
This doesnt and has never made sense for property, especially in Australia.
Most negative gearing is cashless, that is, comes from the building write off. That doesn't make sense either because although the residential building is depreciating (over 40 years), the land is appreciating at a far greater amount for the depreciating building to ever matter. Claiming depreciation on a car over 8 years when the car is worth double at the end of 8 years wouldnt make sense now would it?
Another thing that needs to be looked at is the 50% capital gains discount. Hold up, you're telling me I can write off all these losses throughout the years on a clearly appreciating asset. And when it comes time to pay tax on the gain, 50% of that is completely disregarded. Wow that shit ain't right!
In saying all this, I think there needs to be a middle ground. We can't dissuade mom and dad investors from trying to purchase a second property. We want our citizens who are able, to flourish. Perhaps a middle ground is to keep the current rules for the first investment property and get rid of negative gearing and 50% discount for any investment properties after the first. That way most people who just want to work hard and try to get ahead have an opportunity while dissuading those with 5+ investment properties to continue to exploit SHELTER.
Happy to have a civilised discussion if anyone has a different opinion.
Resident tax expert, Nicole :)
We can't dissuade mom and dad investors from trying to purchase a second property.
The govt doesn't hand out free money for people to invest in shares, so why should anyone get any form of assistance to own a second house? Owning multiple homes should not be a given.
what hand outs are available for property that aren't available for shares?
shares can also be negatively geared.
shares can also qualify for the 50% discount
If anything, we are taking away things from property assets that aren't taken away from share assets.
The reason I suggested having the rules stay the same for one IP is that we dont want to completely turn off people from purchasing properties as investments. After all, that is where the renters will live. Some people live pay to pay and will never own a home. They will always need to rent somewhere.
What we should try to stop is the people with 5+ IP who keep borrowing on their IP equity to purchase more IPs
what hand outs are available for property that aren't available for shares?
I recall carrying forward capital losses from share trading for years till I sold other shares and the profit canceled it out. With houses, any loss incurred (e.g. with rent not covering mortgage) is offset against regular taxable income.
If anything, we are taking away things from property assets that aren't taken away from share assets.
We should do that IMO because homes are essential for secure living. Many people can survive without investing the share market.
@soan papdi: I agree with you which is why my initial comment advised i was in favour of taking away some of the benefits due to property being inherintly used for shelter.
Without going into too much detail you are wrong about the share trading but its too complicated for me to go into. Just trust me.
shares can also be negatively geared.
Sure, theoretically, but this is not the case in practice.
Almost 100% of individual property investors are highly leveraged, almost 0% of individual shares investors are highly leveraged.
Additionally, as a property investor, you can use negative gearing to make capital improvements to your investment properties, which you will pay significantly less tax on down the line because of the capital gains discount.
You can also use existing equity in your investment properties as collateral to borrow money to invest in other properties, which is not something that most individual investors in shares would be able to do. Even investment funds who engage in this sort of leverage and structuring have significant financial regulations.
If anything, we are taking away things from property assets that aren't taken away from share assets.
I wouldn't compare property to shares, I would compare them more to operating a small business.
Tax rules are such that if you were to operate a small business, you can only claim business loss against your personal income in very limited circumstances (which basically do not apply to the majority of small businesses).
The reason why negative gearing has become such a "problem" (or at least a hot button issue) is because the amount of leverage that property investors are able to access is unprecedented and unavailable to any other form of investment (e.g. you would never be able to get a small business loan for 80%+ of the value of your business). The tax laws, as they are, just cannot deal with this level of leverage and negative gearing on a large scale.
I'm not against "negative gearing" as an idea, however, it is also clear that the way it is being used by property investors today is not "in the spirit" of why we might wish to allow investment income losses to be offset against personal income in the first place.
@p1 ama: i am in complete agreement with you. and my initial comment said as such. I was just replying to the commenter to thought property has some magical rules not available to other investments.
negative gearing and capital gains should be abolished for "shelter" that has been masked as investment. I agree :)
Shit post. You can negatively gear shares exactly the same way you can negatively gear housing, and shares also get the CGT discount.
No one gets any special form of assistance to own a second house. Indeed, land tax ensures that property investors are treated worse than share investors.
Owning multiple homes isn't a given. Neither is owning a single home.
If you want to make life fairer, institute an inheritance tax so that children don't inherit unearned homes. That's fair. But don't punish those who, by hard work and a high income, are able to afford their investment properties with their own money. My partner and I have paid off three houses. We are millennials. We studied and trained in high-earning careers to be able to afford and pay down the mortgages. What's wrong with that? Nothing. We are not negatively geared, obviously, but there is no reason to remove it from one investment class when it remains on other investment classes.
to play devil's advocate, the only reason I think it should be removed from this particular investment class is that some poeple don't view residential property as an investment class but rather as shelter to house citizens.
as more and more prople like you hoard three properties fully paid off, the price of property continues to rise and pretty soon most people won't be able to purchase a home. the only people who will be purchasing homes is those who already have homes or have people who have homes guaranteeing their purchases.
that is not right because residential property should be viewed as shelter. it shouldnt be viewed as a fool proof investment that doubles every 7 years or so.
@nicolemcmilllon: I think it’s pretty clear from this little debate shows that it’s all about perception. How you perceive the situation matters most on how to approach this issue.
I find it mildly unfair that a home buyer doesn’t get to deduct interest from their income, yet an investor does. Meaning, it’s cheaper to buy a house for investment than to build your home, build your family, build the foundations of life.
So I am in favour of removing NG.
@cloudy: This is so right! I'm a single person, own my house (paid off many years ago) and had no help from the government, family etc what so ever but if I was doing this today, I would not be able to afford my house.
You can negatively gear shares exactly the same way you can negatively gear housing, and shares also get the CGT discount.
Can you point me to where individual share investors can access the same level of leverage as property investors (up to 80% of capital value), and have the same terms (e.g. not being subject to margin calls, very low interest rates…etc.)
Yes, whilst it is true that it is theoretically possible to negatively gear shares, the mechanisms for exploiting that negative gearing (i.e. high leverage, ability to make large capital investments…etc.) is obviously not the same as with investing in shares.
Similar comparisons can be made to small businesses - if I were to own a small business, I would not be able to offset year-on-year business losses against my personal income (unless in very specific circumstances, which would not apply to most small businesses).
No one gets any special form of assistance to own a second house. Indeed, land tax ensures that property investors are treated worse than share investors.
Curious as to why you chose to own "three houses" instead of investing most of your wealth in other asset classes?
If you want to make life fairer, institute an inheritance tax so that children don't inherit unearned homes. That's fair.
Great!
But don't punish those who, by hard work and a high income, are able to afford their investment properties with their own money.
The availability of negative gearing or not is not "punishing" anyone, though. It's just a shifting of how we tax property investors, particularly around running losses and large capital investments.
I'm not even in favour of "punishing" property investors, but it's more around how we evolve the taxation to be more reflective of how people invest today. I've been around for a while - there were obviously property investors 20-30 years ago, but back then, negative gearing was not a widespread issue because we didn't have the high levels of leverage that we do today. Additionally house prices have risen much faster than rents, meaning that mortgage repayments have increased much faster than rents, so we have (as a percentage) a greater number of investors engaging in negative gearing.
My partner and I have paid off three houses. We are millennials. We studied and trained in high-earning careers to be able to afford and pay down the mortgages. What's wrong with that? Nothing.
Good for you, my friend. Why do you feel the need to announce this on every thread about property investment you engage in? The fact that you own properties doesn't make what you say more or less valid. I would give your views / opinion the same respect whether you own zero or three properties. Glad you're doing well, but smell a bit of a chip on the shoulder.
@p1 ama: "Curious as to why you chose to own "three houses" instead of investing most of your wealth in other asset classes?"
We invest elsewhere but houses are a convenient method of keeping score. Hoping to get to 7 or 8 then retire asap.
"The fact that you own properties doesn't make what you say more or less valid. I would give your views / opinion the same respect whether you own zero or three properties. Glad you're doing well, but smell a bit of a chip on the shoulder."
If I don't stipulate it, people will say that we either inherited the houses, didn't earn them from hard work or are boomers, none of which is true.
As for margin lending, banks (mortgagees) have the ability to control borrowers too; they can arbitrarily vary your interest rate. Margin loans also have much lower transaction costs than property (no stamp duty). So there are pros and cons all around.
Can you point me to where individual share investors can access the same level of leverage as property investors (up to 80% of capital value), and have the same terms (e.g. not being subject to margin calls, very low interest rates…etc.)
Lenders offer high leverage on property because it’s considered low-risk collateral.
But you can use any valuable asset as security to borrow for shares The interest on such loans is also tax-deductible.
If you want to make life fairer, institute an inheritance tax so that children don't inherit unearned homes
That is double taxation which is what makes it worst.
You pay tax on income and use that income to pay for your mortgage (PPOR). You pay tax on your on rental income of your investment property and CGT on sale.
The government loves it when these type of ideas bubble up because it is an excuse to raise more revenue.
Notice how government never have enough money? It is like that relative that is always short of money and need a small loan that never gets paid back.
Before anyone starts telling me how good the current government is doing. They aren't making much progress on government debt (it is because they want to keep it there as an excuse to raise more money) why do you think ALP gave LNP $300bn of debt then LNP added to it to close in on the $1tn mark.
@ nicolemcmilllon
You have got it ALL WRONG!
Firstly
"Most negative gearing is cashless, that is, comes from the building write off"
INCORRECT. The main tax deducion that leads to negative gearing is the interest paid on the loan
Secondly
"Another thing that needs to be looked at is the 50% capital gains discount"
If you bothered to look up the history and intention of CGT it was set up to tax the REAL gains over and above inflation.
The original legislation allowed a tax payer to index the purchase cost of a property to inflation thereby only paying tax on the REAL capital gain. It was based on the British CGT legislation.
It became evident after a few years that keeping such records over time became very complicated so John Howard simplified the calculation to 50% of the capital gain.
So folks that why you only pay tax on 50% of the capital gain.
It all about TAXING REAL CAPITAL GAINS over and above the inflation rate.
And its been argued that interest income from savings accounts should only be taxed when the interest rate earnt is above the inflation rate.
Im sure everyone agrees with that rule.
But the government did some calculations and realised they would lose a heap of tax income!
Except this didn't work, it artificially increased demand exponentially for existing properties and turned them into investment vehicles for a new class of rich land lords who are currently fanning their money over their poor rent slaves who will never be able to afford a house. Whilst negative gearing/50% capital gains discount on their own are completely fine, coupling them together is obviously not. The facts speak for themselves. Housing should be a human right, not a luxury/investment for the upper class. They just need to remove one policy or the other and it will be fair and fine again.
@supersabroso: That is because property is the second safest investment after saving account/term deposit. If the interest from saving account is treated in similar fashion just like what @HeWhoKnows said, much less people will go into property.
@soan papdi
You also have no idea of Negative gearing and capital gains tax
The government only hands out money to first home buyers via the first home owners grant my friend.
Such grants dont apply to first share buyers
And all investors are intitled to claim legitimate tax deductions.
eg The interest on an investment loan is 100% tax deductible whether used to purchase a property or shares or a business.
The debate about Negative gearing is just a CASH FLOW argument.
Its whether an investor can claim all thier investment property tax deductions today vs tomorrow.
Obvously the tax office benefits today by pushing back tax deductions until tomorrow and visa versa
I’ve learnt as much in this thread. But like I stated in another response, houses are for living first and we should not be making it easy to speculate on them. People needing a roof is more important than profits. Those wanting profits can start a business, buy stocks or crypto. So I still support removing negative gearing on homes and other changes that bring prices down.
The next response will likely be that it will reduce houses for rent because investors will pull out, like the articles we see everyday now. Surely this can be modeled by those with access to data, otherwise the real estate lobby won’t need to resort to interviews to generate buzz
The 50% CGT is standard because it removes the need to index for inflation. If you want to remove it on housing then there's no logical reason to not remove it for shares or any other asset class - which would then impose an unfair burden on investors.
Your axiomatic approach is that housing should first be shelter and not an investment. That's not something everyone agrees with.
Your axiomatic approach is that housing should first be shelter and not an investment. That's not something everyone agrees with.
We just have to disagree and leave it at that. You own three fully paid-out homes as mentioned in another comment, good for you. So I can see why you would be against any changes to the system.
unfortunately most people only see things from their perspective and what directly affects them so of course this person with 3 fully paid off properties doesnt want their value to tank.
however, how someone can view housing as an investment before they view it as shelter is mind boggling and kinda ends the debate for me.
literally all residential housing "houses" people. that is what shelter is. all these investment properties house people. people use it as shelter to live in.
anyway to the person above you, enjoy your 3 fully paid off homes while other people can't get into the market.
@nicolemcmilllon: I'm actually happy for my house values to tank. It's not like I'm going to sell them. Low house prices mean my 4th, 5th and 6th properties will be cheaper to buy and pay off.
What I really want are fair rules that remain the same for everyone. Penalising housing investors when share investors aren't penalised distorts the market. It's like saying we are going to tax AFL players' salaries but not NRL players' salaries, to use a simple analogy.
If people can't get into the market they are welcome to rent. I think the government's role is to provide a fair playing field, not to cram people into houses that they didn't earn.
@justworld: "housing investors" is the issue here.
shares are investments we cant eat or sleep in shares
houses are not inherintly investments they are shelter providing housing
nothing is going to convince you and thats OK, enjoy your 5th 6th and 7th properties
@nicolemcmilllon: Thanks for the civil discussion and for pointing out to the other misguided commenter that shares can easily be negatively geared just the same as houses.
The ignorance of many on here is astounding.
@nicolemcmilllon: Investing in housing is honestly one of the least productive ways to grow wealth. It doesn't create jobs or boost innovation—it just pushes up prices and benefits a small group of property owners. Meanwhile, everyone else struggles with affordability, and the economy doesn’t really gain anything from it. It’s a pretty inefficient way to use capital when there are better options out there that actually help society as a whole. Good for anyone "owns" 3-4-5 properties while thousands sleep on the street.
@clover: Why did you put "own" in quotation marks? Do you not acknowledge the concept of private ownership?
@nicolemcmilllon: Say investing in housing is illegal - and no one is able to be a landlord. House prices go to normal prices.
I've turned 18 and moved to another city and to get work - where do I live? I could live in a hotel or tent, but everyone has a right a house. How will you address the fact I don't have a house to live in.
@nicolemcmilllon: It really annoys me when the entire "shelter is a right" crowd starts talking. How ignorant does one have to be to take such a position.
Land has value, so do materials, so does labour. To conflate these simple truths with people's immidiate needs is stupid.
I have zero paid off properties and still have a healthy respect for the value of housing as an asset. Whether I live I am it or not.
You need to put the communist manifesto down and go work harder.
@ nicolemcmilllon
You have got it ALL WRONG!
Firstly
"Most negative gearing is cashless, that is, comes from the building write off"
INCORRECT. The main tax deducion that leads to negative gearing is the interest paid on the loan
Secondly
"Another thing that needs to be looked at is the 50% capital gains discount"
If you bothered to look up the history and intention of CGT it was set up to tax the REAL gains over and above inflation.
The original legislation allowed a tax payer to index the purchase cost of a property to inflation thereby only paying tax on the REAL capital gain. It was based on the British CGT legislation.
It became evident after a few years that keeping such records over time became very complicated so John Howard simplified the calculation to 50% of the capital gain.
So folks that why you only pay tax on 50% of the capital gain.
It all about TAXING REAL CAPITAL GAINS over and above the inflation rate.
And its been argued that interest income from savings accounts should only be taxed when the interest rate earnt is above the inflation rate.
Im sure everyone agrees with that rule.
But the government did some calculations and realised they would lose a heap of tax income!
The problem of limiting to 1 house etc. Is that you still need to have exceptions for commercial landlords. So now you provide tax incentives that only the most wealthy benefit from.
I think they need to reduce it to the 1st IP only and any subsequent property there is no negative gearing at all. The government should make owning more than about 2 or 3 at most investment properties as unattractive as they can just to stop arseholes like the guy in the news a few days ago skiteing about how he just bought his 100th property at age 33. I want to see the housing market crash just to eat up arsehole like this…
People buying up and hoarding houses is no different to the arseholes buying up PS5 Pro consoles and then selling them back at inflated prices. It's the same principal. Buy up all the houses, create low supply and then sell back at a massive profit. Hoarding houses is nothing more than just pure scalping.
Raise the shit out of things like stamp duty to the point where stamp duty is literally more than the cost of the house if you are up to your 10th house. PPOR should be almost no stampduty, up to 3 or 4 houses and you are already at 50%, more properties than that and it just ramps up exponentially. at 10 houses, it should be 120% stamp duty. At 100, like the arsehole in the example above, it should be 1,500% on the 100th house.
There is absolutely NO reason any one person should own any more houses than required to live in. Anything above about 2, is nothing more than greed.
And added to this law should be that corporations of ANY kind cannot own residential properties. Ever. They should only be allowed to own commercial and industrial type properties.
Look I agree here. I have one property that is negatively geared (apartment) and a property that I bought with my partner (apartment) on the condition we rent it out as social housing.
I would be happy with negatively gearing for 1 property but I would also be open to negative gearing only being for new properties or properties let out for social housing at a discounted rate.
The government should make owning more than about 2 or 3 at most investment properties as unattractive as they can just to stop arseholes like the guy in the news a few days ago skiteing about how he just bought his 100th property at age 33. I want to see the housing market crash just to eat up arsehole like this…
bingo, without sounding like i have tall poppy syndrome basic things like shelter should not be hoarded.
You can't prevent it. What you can do is influence is get the government to release more land.
There's the argument that landlords are giving people a place to live/rent. What do you think about that?
I'm not a landlord for reference, but this is what I hear from people I know.
There's the argument that landlords are giving people a place to live/rent. What do you think about that?
I think it's a horse shit thing that land lords circlejerk about with other land lords so they can better sleep at night, when what they are actually doing is buying up ALL the houses and then leaving people with no other choice but to rent. They certainly are not doing it out of the goodness of their hearts…
While I agree that there does need to be houses for rent, it doesn't need to be at the rates we are seeing now where it is forcing people who want to buy into renting because the market is monopolised by housing scalpers.
If they were building new home in new areas, then yes, I could see some merit to it, but they are buying up old houses in old parts of areas and forcing anyone that needs or wants to live there to rent and not be able to buy.
So no, they are not giving people a "place to live" like they are some benevolent altruistic saviour of humanity. They are dirty, grubby, greedy misey merchants that derive a profit from others suffering.
"when what they are actually doing is buying up ALL the houses and then leaving people with no other choice but to rent. "
Yes, and?
Life isn't kindergarten and you're not guaranteed a participation prize. You gotta risk it for the biscuit. That's my tip to anyone who requires a benevolent altruistic saviour.
Also, when I was working to earn my first deposit, I didn't see that as suffering. I saw it as necessary sacrifice to develop skills and get a good job.
@justworld: How many IPs do you own? Because if it is less than 2 you are bullshitting yourself.
The quality of life in Australia is declining rapidly. Your bootstraps nonsense isn't that profound. Your children will be poorer than you. Your position appears to be F you I got mine.
The home ownership rate of 30–34-year-olds was 64% in 1971, decreasing 14 percentage points to 50% in 2021 (Unpublished, AIHW analysis of Census data). For Australians aged 25–29, the decrease was similar – 50% in 1971, compared with 36% in 2021.
https://www.aihw.gov.au/reports/australias-welfare/home-owne…
@greatlamp: My partner and I own 3 properties between us - 2 PPOR and one IP. All three fully paid off (or fully offset).
My children will be completely fine because they're not idiots.
You'd have to be an idiot to struggle in this country. It's so easy here.
@greatlamp: On your stats, it's 14 percentage points over 50 years - i.e. 2 generations. So 7 percentage points per generation. Where'd you get the 30% figure?
@justworld: You can't compare changes in percentages directly. Think of a change from 50,000 people to 36,000 people.
The change from 50% to 36% is calculated as 50-36 / 50
It's not a 14% decrease. It's a 28% decrease.
@greatlamp: "Think of a change from 50,000 people to 36,000 people."
Except this is among a total population of 100,000 people. It's 7% of the population being affected per generation.
Doesn't seem too bad to me.
@justworld: If you refuse to see how a 14% decrease in home ownership per generation isn't significant then you are being intentionally obtuse.
Your argument has been that people complaining are lazy and it is easy to get ahead with hard work - there isn't a real problem.
Now that I prove to you that there is a problem you decide it still doesn't exist. What would it take to change your mind?
You've made it clear you only care about yourself. So when the majority of the population cannot hope to afford housing what do you think will happen to all the houses and investments you worked so hard for? Look at the opinion on negative gearing. Inheritance and wealth taxes, higher income taxes.
@greatlamp: "What would it take to change your mind?"
If someone with say top 10% intelligence can't get into a good enough job to afford a modest home on her own then I would accept there's a significant problem.
"You've made it clear you only care about yourself."
No - I care about me and people like me.
"So when the majority of the population cannot hope to afford housing what do you think will happen to all the houses and investments you worked so hard for?"
Sounds like I'll have a steady stream of tenants.
"Look at the opinion on negative gearing. Inheritance and wealth taxes, higher income taxes."
Don't care about negative gearing as practically speaking my properties are almost never negatively geared. I have no issue with inheritance taxes as I think inheriting assets is strictly cheating. Would be happy to have a 90% inheritance tax - as long as it applied across the board. As for income taxes, given I pay 47% on the majority of my income I hardly think it could get much worse.
If someone with say top 10% intelligence can't get into a good enough job to afford a modest home on her own then I would accept there's a significant problem.
The proportion of people with high intelligence is the same over time. If less people can afford a home that means less intelligent people have the opportunity to afford a home.
You seem to assume that intelligent people will find a way to the top. That sounds logical but it isn't supported by any evidence. The more that wealth inequality increases, the more important wealth becomes instead of intelligence.
The insight which you are refusing to appreciate is that opportunity for success is decreasing - because something is wrong with the economy.
Don't care about negative gearing
That isn't the point. The point is that populists will take over politics and unravel taxes that benefit high income earners.
Would be happy to have a 90% inheritance tax - as long as it applied across the board
There will be a minimum threshold. A figure I have seen is $5 million in assets. The working poor won't be affected, it will be designed to target the mega wealthy but it might capture people like you too.
Your children won't be poor because you will be gifting them your wealth to buy their first home, but they will be poorer than you. They won't have the opportunity to grow wealth as you did, and neither will other children who work as hard as you did.
Do you not believe this is happening or do you just not care?
@greatlamp: "Your children won't be poor because you will be gifting them your wealth to buy their first home, "
Actually, my children won't be poor because they will be smart and informed and well-parented and well-educated.
I don't plan on gifting them wealth. I consider inheritances to be cheating, as if that wasn't clear from my earlier post.
I also seriously doubt my kids will be poorer than me. Making money in this world is trivially easy.
"They won't have the opportunity to grow wealth as you did, and neither will other children who work as hard as you did."
Why not? If anything, in my experience high paying job streams like quant, IB, PE, surgery and big law pay better now than they paid a couple of decades ago.
As for 'growing wealth as I did', my wealth grows through income. My rental income is about 1/12 my wage income so hardly a significant source of growth and I don't count capital gains as wealth as I never plan to sell property. I think my kids will have no trouble replicating my situation.
You'd have to be an idiot to struggle in this country. It's so easy here.
Or just be born post 2000…
I want to see the housing market crash just to eat up arsehole like this…
When the prices drop it will be cheaper for him to buy even more.
The thing is, people like that dont own shit. The bank owns all of this. He is hedging that prices for these houses will always go up so that one day he can cash them out and pay the bank off and keep the rest. He is just a middle man between home owners and the banks, scraping off the cream…
If the market shits the bed and all these prices fall, it will eat these over leveraged arseholes for breakfast. His rentals will be worth less than what is owed on them and he wont be able to just "buy up more cheap houses" because the banks are going to be freaking out about how much he already owes and how much less his portfolio is compared to his outstanding debt.
He doesn't own shit, therefore, he would have (fropanity) all in the way of any "liquid" assets he could go out and buy more cheap houses with. If the property market is in freefall, the banks are not going to be as freely open to just chucking "house" money on depreciating assets…
So, no, I cant see a guy like him, or anyone similar just going out and buying in a collapsing market. If anything, I can see him paper-handing his portfolio the moment there is a downward trend in the housing market.
Someone who owns a 100 houses is not negative gearing. You think he's also working a 9-to-5 ??
He will have tens of millions in equity already, with massive cash flow.
25% of investment property own by 1% population. If we abolish the NG or reduce it to 1 property, it will mostly affect the wealthy, not the average people.
https://www.theguardian.com/australia-news/2023/jun/04/a-qua…
Exactly, it's ridiculous that people can brag about owning 5-10 properties and that they don't need to work any more. It's creates a completely unfair upper class of rich people who live of the back of their poor rent slave's hard work until they are 67+. Everyone knows that this is where all capitalist societies end up which result in civil war as the poor severely outnumber the rich. This is why government invention and social security is so important to keep a society functioning, everything in life requires a balance.
I think the capital gains discount needs to be abolished more. This incentivised people wanting houses to continually appreciate.
This incentivised people wanting houses to continually appreciate.
I logged in just to say even if it was abolished, people will still want what they own to be worth more.
There is no tax on my car, but heck I wish it was worth more every year I hold it. I earn income, even though I pay tax, I still wish my boss paid me more. Noting
, tax wise, changes this.
There is no tax on my car, but heck I wish it was worth more every year I hold it
It would be if they weren't building enough cars to meet demand.
As NG stands now, you make a loss on the rent and reduce overall taxable income. This is bad. Should change to income from that property. Also, remove the discount on CGT for houses and treat it like any other investment. Prices will drop pretty quickly.
And what about the percentage of the population who don't want the prices to drop?
And what about the percentage of the population who don't want the prices to drop?
They're part of the problem. Houses are for living, not traded around like pokemon cards.
Treat it like any other investment? OK, guess we won't have to pay land tax any more.
Negative gearing is the most misunderstood concept around, and the impact is grossly exaggerated. It is a convenient scapegoat
Hysterical people and the mass media seem to think it is a license to print money for the wealthy
Cool, so it can go then… I agree.
Yep, spot on.
It needs reform ASAP, but it is no silver bullet.
The Greens love it because they get to whack Labor over the head with it - they know it will be political suicide to abolish CGT/NG, but they don't care in the slightest what it cost Labor to even get into government.
It's political suicide for conservatives. Housing issues affect far more ppl than "losing my nice little NG and CGT perks". It's math.
It's math.
It's Maths
It's political suicide for conservatives. Housing issues affect far more ppl than "losing my nice little NG and CGT perks".
Absolutely, mate. But Australians are stupid and are easily spooked to vote against their own interests!
@ThithLord: I think you are right. If the govt brought in the death penalty for stupid voters, guess what?.
The reality is, once negative gearing is abolished, people will find another scapegoat. They will always have a reason to justify why they couldn't achieve what others did. People love making excuses for their own failures.
The people wanting it gone will never accept that the system is substantially fair; otherwise, to do so would be to accept that the people getting shafted deserve their fate, and that's a bridge too far for some people to accept. They need an excuse, if not on their own behalves then on others'.
TLDR ^ Greed is good.
Up you Jack I'm alright
Anyone with work ethic and brains will do just fine in life; the others, however, will never have difficulty coming up with excuses, rationalisations and whinges.
@Protractor: In that case, if both smart people and stupid lazy people can succeed, what's anyone's excuse for not doing so?
@netjock
"Negative gearing wasn't meant to be used in this way. It is just there to simplify the calculations because you don't have to carry the loss forward (nowhere in the tax code does money just disappear)."
WRONG WRONG WRONG WRONG WRONG!
Negative gearing simply allows one to offset expenses over and above the income for that investment against other income such as salary in the same tax year.
Thats all there is to it.
Income tax law allows you to deduct the costs of an income earning investment anyway.
So the only benefit to the tax payer has with negative gearing is CASH FLOW !!!!
The investor is allowed to claim all thier legitimate tax deductions today instead of tomorrow.
There is NO MAGIC and NO ADDITIONAL TAX DEDUCTIONS.
And NO. the other tax payers and the tax office are NOT SUBSIDISING property investments.
These claims are all rubbish and display a complete ignorance of Australian tax law.
They arguments are also used by property spruikers to sell Gold Coast investment properties and others
Removing negative gearing simply means that part of the expenses incurred in any one tax year, over and above the income for that investment in that tax year must be rolled over into the next tax year.
So over time investors start acuumulating losses (for unclaimed tax deductions) on thier tax statement
Hence the investor accumulates such losses until such time as thier investment income exceeds thier costs in any one tax year. At which time the accumulated losses can be used to reduce thier tax for that tax year.
In other words investors must wait to claim thier "excess" tax deductions until tomorrow.
Its really NET ZERO tax effect.
The tax office simply gets more tax money today but LESS tax money tomorrow !!!!!
Like I said Negative gearing is all about CASH FLOW. Nothing more.
The beauty of negative gearing is that it makes it more affordable for investors to purchase an investment property and put it on the market as rental accomodation.
Surely this is a win for everyone!
The downside of negative gearing is that anything that makes property more affordable also helps to push property prices up.
Furthermore negative gearing could encourage poor investment decisions which could ultimately hurt the investor.