What negative gearing changes could mean to you

What negative gearing changes could mean to you

Everyone’s wondering about the proposed changes to negative gearing.

Should property investors be running for the hills, or should potential investors buy before the changes?

Watch this 6 minute market commentary video where Kevin asks Michael Yardney his thoughts about negative gearing and what the proposed changes could mean for you.

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Kevin Turner
kevin@realestatetalk.com.au
9 Comments
  • Joe
    Posted at 11:56h, 28 February Reply

    Guys,

    Negative Gearing – the term should be abolished.

    It refers to is ‘a legitimate claim, against the losses incurred, in the process of earning an income which in turn is taxed’.

    It is compensation for losses against income earned and is equally applied to business vehicles, tools of trade, self education, uniform maintenance and the list goes on.

    Why should property be singled out?

    • Doug
      Posted at 17:21h, 07 March Reply

      Joe,

      How is it that individuals can claim unlimited negative gearing deductions for property investments into perpetuity, but if they invest in a productive side business, they must meet all kinds of criteria in order to claim losses against their wage/salary earnings, including showing a profit in three out of five years?

  • Ian Rose
    Posted at 14:49h, 28 February Reply

    Michael/Kevin, why don’t the politians/public realise that neg gearing was abolished in 1985 under the Hawke/Keating era. The result was a chronic shortage of rental properties, resulting in the re-introduction 2 years later with depreciation benefits to get investors back in the market.

    If they do it again it will have the same consequences.

    The definition of insanity is doing the same thing over again and expecting a different result.

    Shouildn’t there be representation from an investor group to remind governments and oppositions what history already knows to be factual, concerning neg gearing.

    • Doug
      Posted at 17:08h, 07 March Reply

      Ian,

      Historical data clearly shows there was no effect on rents nationally during this period. In fact the highest ever real rental growth was recorded in the late 2000s when both negative gearing and the CGT discount were in effect.

      Without NG for existing dwellings there would be less “investment” (read transfer of ownership), but those homes would not magically disappear from the supply-demand equation. Rather, those homes would be purchased by an owner-occupier, thus reducing demand for rental properties by the same proportion as the fall in rental supply.

  • Kevin Wilson
    Posted at 11:00h, 05 March Reply

    The Wilson TAX System

    Australia, Re: OUR Tax system

    The best and only way I see to fix our tax system is drop all income taxes on earnings/wages etc., so there is NO tax reductions as you no longer have a taxable income and increase age pensions by 10% to offset this.
    Increase super up to 18% as they no longer have to pay any income tax.

    Just use a Transaction/Consumables Tax at just 15% NOT a GST of 10 – 15%.

    Sounds silly I know but please let me explain, this way all buyers are treated in the same way.
    e.g., 2% when $$’s go’s into the bank + 13% when you buy anything = total of only 15%.
    Regardless of how much you earn you can only spend it once, so the maxim Transaction/Consumables Tax would = 15%
    The ATO can keep the special tax on Prestige & Luxury motor vehicles, alcoholic drinks & tobacco tax etc.

    Also overcome the problem we have with the HFT in Australia!

    Anything grown, mined or produce within Australia must be sold in Australia at the current wholesale price and the 15% tax paid on it.
    A Transaction/Consumables Tax (TCT) on all money with NO EXEMPTIONS.
    Charge just 13% (TCT) on every sale/invoice & 2% on all bank deposit.
    Don’t allow any BAS claim backs at all.

    All money moved offshore has 20% tax plus the TCT = 35%

    Our yearly $$ turnover in Australia is over 20 Trillion Dollars as this would give the ATO a tax income of well over $ 500 billion per year.

    The only fair way is to make every purchaser pay (TCT) on every purchase with NO EXEMPTION, every thing from a loaf of bread to a jet plane.

    And undoubtedly the winner will be the ATO, our Federal & local Governments.

    Kevin Wilson
    13 Sand Street
    Kingscliff NSW 2487
    0407 230 395
    kevin@wilsonsrealestate.com.au

    • Kevin Turner
      Posted at 17:29h, 05 March Reply

      Wow – that is out there Kevin. I will get some comment on your suggestion.

  • Kelvin
    Posted at 23:46h, 05 March Reply

    Thanks guys – that’s a great summary of the situation and a good explanation from Michael of some points I hadn’t considered.
    keep up those great videos

  • Luke
    Posted at 22:45h, 06 March Reply

    Is it really accurate to say “a vast majority of investors do not buy new properties” ?

    If so, it would be more credible to share the exact statistic you’re working from and of course, the source of that claim. Because this is a pivotal point in relation to the effect that the proposed Labour changes will have on the market.

  • Luke
    Posted at 23:08h, 06 March Reply

    Saying that you’re no longer able to sell your investment property to other investors (i.e. because they wont want a second hand property that they can’t negatively gear) means that your property is now worth less = is quite an assumption.

    This impact would hinge on the ratio of investors in the market for that type of property. If we’re in a dominatly owner occupier market…then i believe this impact would be minimal.

    I agree that it may have an impact…but really – as investors, aren’t we hoping to sell our stock to owner occupiers ideally given that they will have more of an emotional connection with the property and therefore probably pay a little bit more for it, rather than an investor who is hoping to get it at the lowest possible price…in order to turn a profit.

    Again, I think some numbers indicating the ratio of owner occupiers vs investors would help solidify this point…

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