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Good News: Treasury pushing remodel of Negative Gearing for only new homes!; Corrupt and vested real estate interest run for cover!
Topic Started: 14 Aug 2014, 09:26 PM (33,896 Views)
Shadow
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Evil Mouzealot Specufestor

piccolo
19 Aug 2014, 10:57 AM
Most businesses have to pass one of three criteria that property simply does not have to pass.
If the rules for property investors were exactly the same as for other businesses, then the 'other assets' test would be unfair to property investors...

'the value of assets (excluding real property, cars, motor cycles and similar vehicles) you used on a continuing basis in carrying on the business was at least $100,000'

The rule excludes the primary asset used by property investors. As it stands, the rule requires property investors to jump over an extra hurdle that does not apply to investors in shares or other businesses - i.e. property investors don't get the benefit of the 'other assets' test.

So to even the playing field, property investors can effectively ignore the 'excluding real property' part of that rule, and since nearly all property in Australia is worth more than $100K, the outcome is that property investors end up with the same ability to claim losses as other individual businesses and investors.

At the end of the day, pretty much anyone who conducts business as an individual (property investors, share investors, and sole traders) can claim losses against personal income. And why not? It's all personal income. If you conduct business as an individual then why shouldn't you be able to pool your income and expenses together and calculate tax payable on the net amount? The intent of the rules is to allow the majority of people who conduct business as an individual to be able to do so.
Edited by Shadow, 19 Aug 2014, 11:59 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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van
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Bugger that Shadow, why do businesses even get these breaks, I should be able to just go out and buy a car and then claim it as a tax expense against my income and then tax loss every year after that.

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Shadow
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Evil Mouzealot Specufestor

van
19 Aug 2014, 11:58 AM
Bugger that Shadow, why do businesses even get these breaks, I should be able to just go out and buy a car and then claim it as a tax expense against my income and then tax loss every year after that.

You already can claim vehicle expenses if the vehicle is used in the course of performing your job...

https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Vehicle-and-travel-expenses/Car-expenses/When-you-can-claim-car-expenses/
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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piccolo
Unregistered

Shadow
19 Aug 2014, 11:50 AM
If the rules for property investors were exactly the same as for other businesses, then the 'other assets' test would be unfair to property investors...

'the value of assets (excluding real property, cars, motor cycles and similar vehicles) you used on a continuing basis in carrying on the business was at least $100,000'

The rule excludes the primary asset used by property investors. As it stands, the rule requires property investors to jump over an extra hurdle that does not apply to investors in shares or other businesses - i.e. property investors don't get the benefit of the 'other assets' test.

So to even the playing field, property investors can effectively ignore the 'excluding real property' part of that rule, and since nearly all property in Australia is worth more than $100K, the outcome is that property investors end up with the same ability to claim losses as other individual businesses and investors.

At the end of the day, pretty much anyone who conducts business as an individual (property investors, share investors, and sole traders) can claim losses against personal income. And why not? It's all personal income. If you conduct business as an individual then why shouldn't you be able to pool your income and expenses together and calculate tax payable on the net amount? The intent of the rules is to allow the majority of people who conduct business as an individual to be able to do so.
Why would that be unfair? It is simply one of the four options for normal businesses to be able to claim losses. Property doesn't have to pass any of the four tests. The flipside of your argument property is that property has an advantage as the value of the asset or 'real property' has an advantage compared to most small businesses that the asset is approximately half the time worth $500k or more so by default half of the properties pass the test, where most new small businesses would have to qualify through other avenues (like $20k revenue).

Why not have the same criteria for property that applies to other businesses? I don't really mind what the criteria are but it should be consistent, i.e. property shouldn't get favourable treatment. Although I think allowing negative gearing has encouraged a lot of dumb money into property which has pushed prices up higher than they would otherwise be.
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piccolo
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Shadow
19 Aug 2014, 12:02 PM
But not driving between your home and workplace which rules out 90%+ of people in normal jobs being able to claim. Another tax perk for property investors.
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Trojan
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Shadow
19 Aug 2014, 12:02 PM
And if it was not used in the course of doing your job, then it would be equivalent of a person buying a house to live in .... neither losses would be allowed to deducted from their income.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Veritas
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Shadow
19 Aug 2014, 11:50 AM
If the rules for property investors were exactly the same as for other businesses, then the 'other assets' test would be unfair to property investors...

'the value of assets (excluding real property, cars, motor cycles and similar vehicles) you used on a continuing basis in carrying on the business was at least $100,000'

The rule excludes the primary asset used by property investors. As it stands, the rule requires property investors to jump over an extra hurdle that does not apply to investors in shares or other businesses - i.e. property investors don't get the benefit of the 'other assets' test.

So to even the playing field, property investors can effectively ignore the 'excluding real property' part of that rule, and since nearly all property in Australia is worth more than $100K, the outcome is that property investors end up with the same ability to claim losses as other individual businesses and investors.

At the end of the day, pretty much anyone who conducts business as an individual (property investors, share investors, and sole traders) can claim losses against personal income. And why not? It's all personal income. If you conduct business as an individual then why shouldn't you be able to pool your income and expenses together and calculate tax payable on the net amount? The intent of the rules is to allow the majority of people who conduct business as an individual to be able to do so.
Who cares?

The point is it creates a damaging inequity in the housing market.

The rest is fluff and obfuscation.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Shadow
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Evil Mouzealot Specufestor

piccolo
19 Aug 2014, 12:07 PM
Why not have the same criteria for property that applies to other businesses?
I agree. They should remove the clause 'excluding real property' from the assets test, so that property investing is treated the same as other businesses.

Why should investors in shares and other businesses be allowed to pass the assets test just because their assets are valued at over $100K, but not property investors?
piccolo
19 Aug 2014, 12:10 PM
But not driving between your home and workplace which rules out 90%+ of people in normal jobs being able to claim. Another tax perk for property investors.
You are not at work while driving to work. You begin work when you get there. Your company doesn't pay you for the time you spend driving to work. Driving to work is done on your own personal time. It is a personal expense.
Edited by Shadow, 19 Aug 2014, 01:12 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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piccolo
Unregistered

Shadow
19 Aug 2014, 01:09 PM
I agree. They should remove the clause 'excluding real property' from the assets test, so that property investing is treated the same as other businesses.

Why should investors in shares and other businesses be allowed to pass the assets test just because their assets are valued at over $100K, but not property investors?

You are not at work while driving to work. You begin work when you get there. Your company doesn't pay you for the time you spend driving to work. Driving to work is done on your own personal time. It is a personal expense.
Your argument has just become a bit overly twisted.

One set of criteria for all would be fairest. You would like to change the existing criteria for businesses so that your favoured investment would pass if it was subject to the tests, obviously due to self interest. In addition to the criteria mentioned there is an upper limit of income of $250,000 for individuals to be able to claim losses for normal businesses (once again this does not apply to property). I'd imagine that limit would also rule out a few on this forum?

You are not at your investment property while driving to it. You begin checking your investment property when you get there. Your property doesn't pay you for the time you spend driving to it. Driving to your property is done on your personal time. It is a personal expense. While I'm being facetious here, do you not see how silly your argument re: driving to/from work is? Driving to and from work is necessary to earn the income from the job. And yet it is not claimable. On the flip side, it is rarely necessary to drive to your investment property, and yet property investors claim more in motor vehicle expenses than those working in an office full time racking up much more in motor vehicle expenses do.
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Shadow
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Evil Mouzealot Specufestor

piccolo
19 Aug 2014, 02:18 PM
One set of criteria for all would be fairest. You would like to change the existing criteria for businesses so that your favoured investment would pass
One set of criteria for all would only be fairest if that set of criteria did not put in place specific hurdles for certain types of business.

If instead of saying 'excluding real property', the clause instead said 'excluding plumbing tools' or 'excluding gardening equipment', do you think that would be fair?

As it stands, the 'assets test' specifically excludes a particular type of business - i.e. property investing.

Quote:
 
Driving to and from work is necessary to earn the income from the job.
No it's not. You could take the train or the bus, or walk. You could choose to move closer to your place of work, or choose to work somewhere closer to your home. Businesses don't pay employees for the time spent traveling to the office. If they did, people would move hundreds of miles from their place of work and get paid just to drive a car all day. They wouldn't get any work done. Driving to the office is done on personal time.

Quote:
 
You are not at your investment property while driving to it.
You are earning income from your investment property while driving to it.

You are not earning income from your employer while driving to work.

In order for an expense to be deductible, the expense must be incurred in the process of earning income.

If employers paid employees for their time spent driving to work, then there would be a case for making travel expense to the office deductible.

Note that you can't claim travel expenses for time spent looking for property to buy, since the property is not yet producing any income.
Edited by Shadow, 19 Aug 2014, 02:35 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
Profile "REPLY WITH QUOTE" Go to top
 
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