chaval

Hi - Having been looking round for somewhere to buy recently and finding that
everything even relatively decent around around the north brisbane area is 450k+ i thought i would ignite the property question again...and have a rant.

As i understand it on the buy to let market if the property is running negatively geared then that can
be offset against other taxable income streams or schedules.

Therefore if u say buy a BTL where the finance is costing 600$ per week and you only make 400per week
rent then the 200 short fall can be ofset against your taxable income?

So...and heres the crux of my question...if the majority of people offset BTL losses againt income
and therefore in real terms pay no income tax...what is the fed/state gov using to run the country...and
isnt it somewhat unsustainable? as in sooner or later someone will wake up and ...hang on the is wrong and its
inlfated the property prices so much that they have to do something?

Take the redcliffe area....the reason the prices have got up to such prices for such a bogan place defies belief.
It can only be fuelled by investers that are hoping another property has gone up enough to finance the next..but if the
figures dont stack..hey...i'll zero my income tax liability.

Should risk entering into the BTL market be as risk taken by the the punter rather rather being able to have the fiscal
set off which in reality should be used to finance other public issues?

is there that much coal that the feds dont need the income tax...or is ruddy Kev the hood to scared to rock the boat?

anyway rant over lol...and may the bubble get big..and the cleanskins get cheaper

Nige37

I personally think is very clever in the way the tax system stimulates the economy in this way, the building industry is the second biggest in the country keeping a lot of people in jobs, at the same time helping people who want to invest be less reliant on the welfare system in an ageing population and also getting more houses built for the migrant boom.

jad n rich

The scheme is to the govts advantage.

And the tenant, rents in OZ are cheap, the scheme subsidises the rent for the tenant, a half mill house in bris is probably rented for $400 a week a fraction of the mortage, rates, costs, maintenence etc etc.

If the scheme was scrapped the govt would have to provide the subsidised housing.

Also the pension in OZ is means tested, Baz and Vera retire with a rental property, the govt does not have to pay them a pension. Gov wins again.

If the scheme didnt advantage the govt it wouldnt be there. It was scrapped once, govt swiftly brought it back in.

anawanahuanana

But you still have to pay lots of income tax, just slightly less than you would if you didn't have the property. The vast majority of people with a BTL also have a job, and they pay tax on their earnings. If someone had an investment property earning them (say) $1600 a month, and the mortgage payments were $2400 a month, that leaves a shortfall of $800. Add to this (for example) $150 a month for rates and $50 for insurance, they are now $1000 out of pocket each month (not including any repair bills or body corp fees the property may generate). If they were earning between $80k and $180k a year, they would be paying 40% income tax. This $1000 out of pocket each month goes against their taxable income for the year, so that falls by $12k for the year. So now they get a rebate for $4,800 (40% of the 12k), meaning their out of pocket expenses end up being $7,200.
So you see that if that investor was earning $120k p.a, they would now be paying tax on only $108k, but they still pay a substantial amount of tax each year (and the $7,200 they are out of pocket) and they also reduce the governments liability for social housing. Negative gearing also keeps rents artificially low, allowing people to rent houses and units in places they could never afford to buy.

As for Redcliffe, I will agree it did used to have a bit of a bogan reputation, but prices are going up there because it is next to the water and the new bridge is coming along which will make it easier to get into and out of the place. Go check out prices in Deception Bay. That place is a hole compared to Redcliffe and yet prices are going up. Why? Because the area is running out of waterfront sites with transport links and already developed infrastructure. Besides, why would the prices in Redcliffe bother you? Surely you wouldn't be looking to buy there as it's such a bogan area...


Disclaimer: My maths may be flawed a little. I'm at work and very busy so typing this as and when I can!

themerlin

Redcliffe was once a Bogan area, but as the city grows people look further out.
Redcliffe is about the same distance to the city as North lakes but has the sea, I know where I would prefer.

The Woodcutter

Some mistake surely.

Just curious how you define a bogan area? Is it the $1m + houses with yaughts at the end of their yard?

The reason prices have gone up in that area does not defy belief. It is quite obvious you have never really visited Redcliffe

RobertC

Perhaps one of the factors in driving up house prices is the investors looking for buy to let properties, this increases demand for entry level houses and keeps the prices up.

I have enough trouble keeping up with the morgage payments on my own family's house (a $470k home in Manly West) so don't really have much sympathy for those wealthy enough to afford more properties.

Sorry, just having a bit of a negative day

ABCDiamond

And yet, according to a report in the AFR, high property prices and tight lending criteria are thwarting the full-scale return of investors.

ABS figures for November indicate approved finance for investors is still 30% below pre-GFC investment.