1.93's A$ to the Pound!!!
Nov 12th 2009, 12:29 pm
#918
Banned
Joined: May 2007
Location: Sydney
Posts: 564
Re: 1.93's A$ to the Pound!!!
Shouldn't the correct wording be, the Government reduce the tax payable by investors to the amount of $5.5 billion (? not checked) every year.
After all, if those investors don't pay tax on something else, then they get no tax back on their investment property losses.
However, after a few years, the properties tend to become profitable, and they then begin to pay tax on their investment profits. How much does the government collect in tax paid by all these investors ? That little item hasn't been mentioned ?
After all, if those investors don't pay tax on something else, then they get no tax back on their investment property losses.
However, after a few years, the properties tend to become profitable, and they then begin to pay tax on their investment profits. How much does the government collect in tax paid by all these investors ? That little item hasn't been mentioned ?
Basically it is $5.5 billion less that the treasury has to spend.
I'm sure you will be able to provide some stats re tax paid on housing by investors?
Nov 12th 2009, 12:33 pm
#919
Account Closed
Joined: Apr 2007
Posts: 495
Re: 1.93's A$ to the Pound!!!
Yes, it does reduce the amount payable to the Treasury by $5.5 billion which is why the majority of people who negative gear are in the top tax bracket to make it more beneficial to them which is my gripe with this.
Basically it is $5.5 billion less that the treasury has to spend.
I'm sure you will be able to provide some stats re tax paid on housing by investors?
Basically it is $5.5 billion less that the treasury has to spend.
I'm sure you will be able to provide some stats re tax paid on housing by investors?
chill a bit dude,you can have a uniform too
Nov 12th 2009, 9:16 pm
#922
Guest
Posts: n/a
Re: 1.93's A$ to the Pound!!!
Yes, it does reduce the amount payable to the Treasury by $5.5 billion which is why the majority of people who negative gear are in the top tax bracket to make it more beneficial to them which is my gripe with this.
Basically it is $5.5 billion less that the treasury has to spend.
I'm sure you will be able to provide some stats re tax paid on housing by investors?
Basically it is $5.5 billion less that the treasury has to spend.
I'm sure you will be able to provide some stats re tax paid on housing by investors?
If property investing was made less attractive, and investors left the market, then rentals would be in short supply, and either the government would have have to spend out to rectify this, or rents would rise, and so may the rent assistance paid out by the government.
Either way someone else would pay for it.
This was investigated by Keating who was also dead against it, like you, but being the treasurer at the time, was actually able to abolish it.
Unfortunately, for him, he soon realised the truth, and re-instated it.
- July 1985 Treasurer Keating moved to "quarantine" losses from negative gearing by stopping them from being deducted against other income.
- September 1987 - Treasurer Keating restored the old rules.
But... It actually would not save the government much. All that negative gearing does is bring forward the tax deduction. It does not, and cannot, remove the tax deduction.
- The system with negative gearing allows any losses to be offset against other income that the person has in that tax year.
- The system without Negative Gearing would delay offsetting that loss until the investors property portfolio is producing its own profits.
So that $5.5b will still be paid to the government, but maybe a few years later. The only actual cost is the delay in receiving it.
Nov 12th 2009, 9:32 pm
#923
Account Closed
Joined: Jun 2005
Posts: 9,316
Re: 1.93's A$ to the Pound!!!
Another thing to remember is that the tax deduction is not the whole of the loss. So if we assume a 40% tax deduction then if the government was to supply that housing for the tax saved then they would only be supplying 40% of the housing.
Also you have to look at a bigger picture. A lot of Australians use properties as an alternatives to pensions. If you take that investment choice away then the government (or rather the tax payer) will have to pay out more in pensions. As I said before and ABC expanded, negative equity keeps rents low not high. If the rents go up (on removal of the tax break) then rent assistance will also go up again destroying a big chunk of the money "saved".
Why stop at housing? Why not do the same for other businesses? By removing tax deductions for businesses the government could use that money to pay unemployment. Not sure you'd have many businesses left after that. Maybe the government could set up it's own businesses to provide employment. On the other hand maybe we should leave communism in the past as a failed experiment.
I'll agree that we don't need negative gearing on foreign properties. Not sure why the Aus tax payer has to subsidise UK (or other) rents.
Also you have to look at a bigger picture. A lot of Australians use properties as an alternatives to pensions. If you take that investment choice away then the government (or rather the tax payer) will have to pay out more in pensions. As I said before and ABC expanded, negative equity keeps rents low not high. If the rents go up (on removal of the tax break) then rent assistance will also go up again destroying a big chunk of the money "saved".
Why stop at housing? Why not do the same for other businesses? By removing tax deductions for businesses the government could use that money to pay unemployment. Not sure you'd have many businesses left after that. Maybe the government could set up it's own businesses to provide employment. On the other hand maybe we should leave communism in the past as a failed experiment.
I'll agree that we don't need negative gearing on foreign properties. Not sure why the Aus tax payer has to subsidise UK (or other) rents.
Last edited by MartinLuther; Nov 12th 2009 at 9:35 pm.
Nov 12th 2009, 10:10 pm
#924
Banned
Joined: May 2007
Location: Sydney
Posts: 564
Re: 1.93's A$ to the Pound!!!
An underlying cause of the problem amongst others is a tax system which artificially inflates prices by providing excessive tax rates at the top end of the market. People in the in the middle of the market don't get unreasonable breaks. In fact, in many ways they suffer from the inflation caused by richer people and they suffer from stamp duties being too high.
We've got an upside down and back-to-front tax system. It's more generous to rich people and others and it hurts you when you're trying to get into the market and young and likely to have children and then doesn't expect you to contribute in the way that you could, especially when you enjoy windfall gains.
The RBA identifies the tax concession as a big contributor to Australia's overheated real estate market.The RBA says other countries are not so generous. Some restrict the size of losses that can be claimed in any one year. Others peg the income level of claimants. Some insist that losses from rental properties be offset only by income from other rental properties - or at least some other passive investment. Other countries impose restrictions on how long deductions can be claimed. (In contrast, the RBA calculates that a $400,000 home unit bought in Australia today on a 15 per cent deposit, for example, might well lose money for as long as 34 years.) Some countries also restrict - or simply don't allow - depreciation of buildings.
Importantly, the RBA also notes that while the tax deductions on a negatively geared property are worth almost 50 per cent, there is only a 25 per cent tax on any capital gain when the property comes to be sold.
The only investors who actually add to the supply of accommodation are those who build new accommodation. Therefore, if negative gearing deductibility were really intended to maximize the supply of accommodation, it would be allowed only for new construction — not for future purchases of established properties. But in fact the negative gearing rules fail to distinguish between new and established properties, giving no incentive to build rather than buy. So the supply of accommodation is lower than it could be, and rents and prices are consequently higher than they could be. That’s good for current owners of rental properties, but bad for renters and first home buyers.
Negative gearing deductibility could help renters and first home buyers if it were done properly. But it isn’t. It’s done so that established property investors get a tax break at the expense of other taxpayers plus higher rents and prices at the expense of renters and first home buyers.
We've got an upside down and back-to-front tax system. It's more generous to rich people and others and it hurts you when you're trying to get into the market and young and likely to have children and then doesn't expect you to contribute in the way that you could, especially when you enjoy windfall gains.
The RBA identifies the tax concession as a big contributor to Australia's overheated real estate market.The RBA says other countries are not so generous. Some restrict the size of losses that can be claimed in any one year. Others peg the income level of claimants. Some insist that losses from rental properties be offset only by income from other rental properties - or at least some other passive investment. Other countries impose restrictions on how long deductions can be claimed. (In contrast, the RBA calculates that a $400,000 home unit bought in Australia today on a 15 per cent deposit, for example, might well lose money for as long as 34 years.) Some countries also restrict - or simply don't allow - depreciation of buildings.
Importantly, the RBA also notes that while the tax deductions on a negatively geared property are worth almost 50 per cent, there is only a 25 per cent tax on any capital gain when the property comes to be sold.
The only investors who actually add to the supply of accommodation are those who build new accommodation. Therefore, if negative gearing deductibility were really intended to maximize the supply of accommodation, it would be allowed only for new construction — not for future purchases of established properties. But in fact the negative gearing rules fail to distinguish between new and established properties, giving no incentive to build rather than buy. So the supply of accommodation is lower than it could be, and rents and prices are consequently higher than they could be. That’s good for current owners of rental properties, but bad for renters and first home buyers.
Negative gearing deductibility could help renters and first home buyers if it were done properly. But it isn’t. It’s done so that established property investors get a tax break at the expense of other taxpayers plus higher rents and prices at the expense of renters and first home buyers.
Nov 12th 2009, 10:42 pm
#925
Account Closed
Joined: Jun 2005
Posts: 9,316
Re: 1.93's A$ to the Pound!!!
An underlying cause of the problem amongst others is a tax system which artificially inflates prices by providing excessive tax rates at the top end of the market. People in the in the middle of the market don't get unreasonable breaks. In fact, in many ways they suffer from the inflation caused by richer people and they suffer from stamp duties being too high.
We've got an upside down and back-to-front tax system. It's more generous to rich people and others and it hurts you when you're trying to get into the market and young and likely to have children and then doesn't expect you to contribute in the way that you could, especially when you enjoy windfall gains.
The RBA identifies the tax concession as a big contributor to Australia's overheated real estate market.The RBA says other countries are not so generous. Some restrict the size of losses that can be claimed in any one year. Others peg the income level of claimants. Some insist that losses from rental properties be offset only by income from other rental properties - or at least some other passive investment. Other countries impose restrictions on how long deductions can be claimed. (In contrast, the RBA calculates that a $400,000 home unit bought in Australia today on a 15 per cent deposit, for example, might well lose money for as long as 34 years.) Some countries also restrict - or simply don't allow - depreciation of buildings.
Importantly, the RBA also notes that while the tax deductions on a negatively geared property are worth almost 50 per cent, there is only a 25 per cent tax on any capital gain when the property comes to be sold.
The only investors who actually add to the supply of accommodation are those who build new accommodation. Therefore, if negative gearing deductibility were really intended to maximize the supply of accommodation, it would be allowed only for new construction — not for future purchases of established properties. But in fact the negative gearing rules fail to distinguish between new and established properties, giving no incentive to build rather than buy. So the supply of accommodation is lower than it could be, and rents and prices are consequently higher than they could be. That’s good for current owners of rental properties, but bad for renters and first home buyers.
Negative gearing deductibility could help renters and first home buyers if it were done properly. But it isn’t. It’s done so that established property investors get a tax break at the expense of other taxpayers plus higher rents and prices at the expense of renters and first home buyers.
We've got an upside down and back-to-front tax system. It's more generous to rich people and others and it hurts you when you're trying to get into the market and young and likely to have children and then doesn't expect you to contribute in the way that you could, especially when you enjoy windfall gains.
The RBA identifies the tax concession as a big contributor to Australia's overheated real estate market.The RBA says other countries are not so generous. Some restrict the size of losses that can be claimed in any one year. Others peg the income level of claimants. Some insist that losses from rental properties be offset only by income from other rental properties - or at least some other passive investment. Other countries impose restrictions on how long deductions can be claimed. (In contrast, the RBA calculates that a $400,000 home unit bought in Australia today on a 15 per cent deposit, for example, might well lose money for as long as 34 years.) Some countries also restrict - or simply don't allow - depreciation of buildings.
Importantly, the RBA also notes that while the tax deductions on a negatively geared property are worth almost 50 per cent, there is only a 25 per cent tax on any capital gain when the property comes to be sold.
The only investors who actually add to the supply of accommodation are those who build new accommodation. Therefore, if negative gearing deductibility were really intended to maximize the supply of accommodation, it would be allowed only for new construction — not for future purchases of established properties. But in fact the negative gearing rules fail to distinguish between new and established properties, giving no incentive to build rather than buy. So the supply of accommodation is lower than it could be, and rents and prices are consequently higher than they could be. That’s good for current owners of rental properties, but bad for renters and first home buyers.
Negative gearing deductibility could help renters and first home buyers if it were done properly. But it isn’t. It’s done so that established property investors get a tax break at the expense of other taxpayers plus higher rents and prices at the expense of renters and first home buyers.
The mention of stamp duty is interesting. I think a high stamp keeps property prices lower than they would be if the stamp was low. It creates drag on rising property prices by taking money out of the system.
I can see your point about the tax savings now compared to CGT later. I made the same point in an earlier post. I think the figures are probably lower than 40% and 20% nowadays. However I think the government makes up for this shortfall in other areas. Reduced pension payments being the obvious one. If the government owned the housing then they would have to fund the 40% (60%-20%) difference or they would have to reduce the rental stocks by 40%. If the government owned the housing they wouldn't be making stamp duty on those properties. They would also be paying the rates. That's before the nepotism starts.
As I said before, there is a bigger picture here and the knock on effects are greater than moving the (tax) money from the individual to the government. You have to remember than in most tax systems it is used for more than raising revenue. It can also be used to direct investment (as is the case in negative gearing or forestry), in place of regulation, or to control the use of a resource. Tax systems are much more complicated than moving money from one pocket to another.
Nov 13th 2009, 1:35 am
#926
Banned
Joined: May 2007
Location: Sydney
Posts: 564
Re: 1.93's A$ to the Pound!!!
The bottom line is that more tax is paid by investors than is refunded.
If property investing was made less attractive, and investors left the market, then rentals would be in short supply, and either the government would have have to spend out to rectify this, or rents would rise, and so may the rent assistance paid out by the government.
Either way someone else would pay for it.
This was investigated by Keating who was also dead against it, like you, but being the treasurer at the time, was actually able to abolish it.
Unfortunately, for him, he soon realised the truth, and re-instated it.
But... It actually would not save the government much. All that negative gearing does is bring forward the tax deduction. It does not, and cannot, remove the tax deduction.
So that $5.5b will still be paid to the government, but maybe a few years later. The only actual cost is the delay in receiving it.
If property investing was made less attractive, and investors left the market, then rentals would be in short supply, and either the government would have have to spend out to rectify this, or rents would rise, and so may the rent assistance paid out by the government.
Either way someone else would pay for it.
This was investigated by Keating who was also dead against it, like you, but being the treasurer at the time, was actually able to abolish it.
Unfortunately, for him, he soon realised the truth, and re-instated it.
- July 1985 Treasurer Keating moved to "quarantine" losses from negative gearing by stopping them from being deducted against other income.
- September 1987 - Treasurer Keating restored the old rules.
But... It actually would not save the government much. All that negative gearing does is bring forward the tax deduction. It does not, and cannot, remove the tax deduction.
- The system with negative gearing allows any losses to be offset against other income that the person has in that tax year.
- The system without Negative Gearing would delay offsetting that loss until the investors property portfolio is producing its own profits.
So that $5.5b will still be paid to the government, but maybe a few years later. The only actual cost is the delay in receiving it.
http://www.smh.com.au/articles/2003/...663676588.html
Nov 13th 2009, 3:38 am
#927
Guest
Posts: n/a
Re: 1.93's A$ to the Pound!!!
I am not sure about his actual reasons, but I am aware that without Negative gearing, many small investors would not get involved in the first place.
Some economists say one thing about the reasons, other say different. The fact is that Keating gave us Negative Gearing back after a 2 year trial without it.
The larger investors often have other profits that would normally allow the offset anyway, so may not get as much benefit as smaller investors.
Nov 13th 2009, 9:52 am
#928
Banned
Joined: May 2007
Location: Sydney
Posts: 564
Re: 1.93's A$ to the Pound!!!
[QUOTE=ABCDiamond;8095844]It mentioned that the only State affected by increased rents etc was NSW, with the largest population, or as someone recently said, the Bulk of the Australian population.
/QUOTE]
Actually states Sydney and I stated it was Sydney and Melbourne where the bulk of the population live ,meaning they were the biggest cities
/QUOTE]
Actually states Sydney and I stated it was Sydney and Melbourne where the bulk of the population live ,meaning they were the biggest cities
Nov 13th 2009, 1:17 pm
#929
BE Forum Addict
Joined: Oct 2006
Location: Nowhere - I'm a travelling (wo)man!
Posts: 2,362
Re: 1.93's A$ to the Pound!!!
But... It actually would not save the government much. All that negative gearing does is bring forward the tax deduction. It does not, and cannot, remove the tax deduction.
So that $5.5b will still be paid to the government, but maybe a few years later. The only actual cost is the delay in receiving it.
- The system with negative gearing allows any losses to be offset against other income that the person has in that tax year.
- The system without Negative Gearing would delay offsetting that loss until the investors property portfolio is producing its own profits.
So that $5.5b will still be paid to the government, but maybe a few years later. The only actual cost is the delay in receiving it.
Nov 13th 2009, 9:03 pm
#930
Account Closed
Joined: Jun 2005
Posts: 9,316
Re: 1.93's A$ to the Pound!!!
I'm not sure. The second system described by ABC is what's used in the UK and bailing when the property starts making a profit is not a pattern I've seen. Especially as the investor would need another property to make use of the accumulated losses.
Last edited by MartinLuther; Nov 13th 2009 at 9:05 pm.
