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Government inquiry sounds warning on Negative Gearing; One of the most destructive and inefficient policies in Australia's history hopefully on the way out
Topic Started: 21 Jul 2014, 10:58 PM (1,963 Views)
peter fraser
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Timo
23 Jul 2014, 01:04 PM
More then that, the people of Australia in general. The speculation in housing it has created has resulted in the greatest vulnerability and asset bubble in history.
Timo it's a beat up. London is booming but there is no negative gearing. USA crashed and all homeowners can claim the interest off their tax.

A tax deduction is a tax deduction. Claim it this year, next year, the year after, who cares it still gets claimed.

Every country has small differences in their tax system, but they all allow costs including interest to be claimed even if it's not all claimed immediately.
Any expressed market opinion is my own and is not to be taken as financial advice
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The clock is ticking on negative gearing

Robert Gottliebsen

Those planning to negatively gear an investment dwelling should consider taking action sooner rather than later. There is no certainty that the taxation treatment will be altered, but the supporters of change to the dwelling investment rules are being led by the Reserve Bank.

With Joe Hockey now admitting that May’s federal budget was based on global scenarios that were too optimistic, (Budget facing offshore hit: Hockey, October 7) it is certain that negative gearing of housing will be high on the government’s potential attack list.

Although there is always a risk, it is highly unlikely that any changes will be backdated.

Australian first home buyers have been priced out of the market partly because they do not get a tax deduction on their interest payments. By contrast, investors are able to claim housing tax deductions that exceed rental income against their salaried and other income and therefore can afford to bid up prices.

It’s true there is no capital gains tax on residential homes, but that’s not much help to first home buyers.

The government will be nervous about changing the rules because currently investor buying is leading the dwelling building boom that is holding the domestic economy together (Canberra must tread carefully with negative gearing, October 2).

Nevertheless, longer-term taxation of income would be boosted if we followed the US pattern that allowed tax deductions on investor dwelling interest and other costs to be claimed only against the rental income itself. Any losses could be carried forward but could not be offset against salary or non-investment income.

The US allows the deduction of interest for homeowners but that is not likely to be considered here, given the budgetary constraints.

What might be looked at is Daryl Dixon’s suggestion in the Weekend Australian (Oct 4-5) that a portion of the funds held in superannuation accounts -- say a limit of $200,000 for an individual or $300,000 for a family -- be designated for a residential home deposit. The sum could still not be accessed until the age of 60 or 65.

Presumably the controversial gearing of superannuation funds to buy investor houses would be abandoned at the same time, thereby further swinging demand away from investment.

No doubt there will be other ideas as the government tries to boost taxation income but maintain building activity by shifting demand away from negatively-geared investors to first homeowners.

My guess is that any major curbs to negative gearing -- even if they were replaced by incentives for first home buyers -- would dampen house prices, particularly if they were accompanied by banking lending ratio clamps. On the other hand, the strong Chinese and Asian buying would not be affected.

So those looking to take advantage of the existing rules need to take a possible weakening in dwelling prices into account before plunging into the negative gearing arena. Similarly, those planning to build apartments to sell to the negatively-geared investor market need to make sure that they have firm sales contracts before they start building.

Read more: http://www.businessspectator.com.au/article/2014/10/7/property/clock-ticking-negative-gearing
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Chris
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Timo
21 Jul 2014, 10:58 PM
Timo,

They can write as many articles as they like, have enquiries or even a referendum and it will not change. Do you know whats more powerful than government? Corporate Australia!!!

You know who sits at the top of corporate Australia and who has the greatest control of policy in this country? The big 4 banks!!

The banks would never allow this policy to removed or modified under any circumstances and they have more sway than all voters combined and if you think i'm wrong then let's sit back and see. Any noise that the government would consider this would illicit a billion dollar response from the banks with TV, paper, letter box, Internet advertising etc, it would mimic the mining campaign that told everyone that it was bad for the nation and we swallowed it whole, no evidence just great manipulative advertising.

Then there's the massive campaign about the carbon tax, the tax that sent our energy bills to the moon, or did it? I can tell you now that the cost of energy will not reduce in time, scrapping the tax will make FA difference other than greater profits for these commercial entities.

The country is essentially ungovernable now as both parties are heavily indebted to corporate Australia, there is a charade in politics that most don't see or understand. The government want to win votes but it's an inconvenience, they court the public but once in power they deal only with corporate Australia. Gillard was different, the NBN, NDIS, media regulation and the financial regulatory change were all great social endeavours but corporate Australia told you the policies were crap and so is she and we lapped it up like a dog on a soft serve.
Timo, just because there is lots of talk out there don't expect it to amount to change unless that change benefits those who have the control. I might sound like a capitalist hating socialist looney but I'd rather consider myself a realist.
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