The only one playing games here is you. Be a man and admit you $36B figure was complete bullshit. Here's what you originally claimed:
That claim is WRONG. You mis-read, mis-remembered the data. You used a figure which was the total of all property related tax deductions, but forgot all about the rental income side.
The actual amount that NG "costs" was $4B in 2011/2012, (ie the total aggregrate amount the income tax paid by property investors was reduced by due to NG - what you are calling "PAYG" tax in your quote) . It will likely be lower in the following years due to significantly lower interest rates. That's a LOT less than $36B! Yuo were even hoisted on your own pertard trying to defend this stupid claim by posting articles that actually confirmed what Shadow was saying!
So with respect to your question "Is tax withheld reduced or nullified for individuals that negatively gear, yes or no" - the answer ias actually yes and no, based on how you phrased your question. Tax withheld (individually) may not change at all - it would depend if a NG'd investor bothered to apply to the ATO for a PAYG variation to get their weekly/monthly tax withheld amounts reduced or not. But regardless of this it is correct that a NG'd PI will pay less tax than they otherwise would have due to the deduction they get for the amount that their PI costs exceed it's income - I think this is what actually meant to ask, in which case the answer is "yes" - and the total amount of this deduction, by your own article, in 2011/2012 was $4B.
And remember this is all in the context of a thread where we have shown that property owners in aggregarate actually pay $40B/year net in taxes to all levels of governments! And PIs pay at least half this amount. And remember if NG were removed most of that $4B would just be deferred to a later time, but still claimed anyway.
So a question for you - do you still believe that NG "costs" $36B in lost/reduced taxation income for the government??? Yes/No answer please.
Ok, diatribes aside let's get out if the grey and into the black and white shall we?!
You are being deliberately deceptive when you say $40b is raised by property owners, this is a total accumulative of all properties sold not just IP's. At best IP's would make up 50% of that so we are now talking $20b as revenue raised. This revenue is states based, it goes to the respective state in which the property is located. Any ongoing tax e.g. rates go to the respective council so a part from GST and tax withheld (which would be minimal for anyone with IP's) the federal government are receiving FA.
And that's who pays for NG, the federal government through taxation so the entity responsible for wearing the cost for NG IP is the same entity that tax's me and everyone else who is not NG through tax withheld and GST. If you want a thank you from anyone go see your state premier or your local council member, both i'm sure would be happy to suck you off with the right amount of gratitude for your "services" to the community.
Now, lets look at your claim that NG only costs the nation $4b only, mmmmmm. Interesting. Figures for the exact amount of IP owners who claim NG vary but lets say we take the lesser amount of 1.7 million recorded by most media outlets for the 2011-12 FY. What you are stating is that each investor only claimed losses and deductions totalling around $2,350 per year on each property. Have you got rocks in your head??
And your suggestion that the losses this year will be less this FY because of lower interest rates then you are stupider than you appear. The idea behind NG in this day and age is to reduce your tax, not for all but for most and they buy more assists as required to ensure this is maximised. Property buying has increased significantly since 2012 and so has property prices. This means more investors and these investors are paying more for the same properties (not many new ones are being NG you know), the only kicker, rents haven't kept up so therefore the losses are going to be as high if not higher than previous tax years.
Then there's you suggestion that tax withheld is not big deal because investors can defer the losses and claim them in the next FY or at another time. This is fucking ridiculous, you know the statistics you are well aware that the majority of NG IP owners earn around $80k so to suggest these people can wear massive shortfalls for a year or years at a time (and probably do) is just wrong, deceptive and just wrong.
So my figure of $36 billion, if i recall the article correctly, was based on the writer calculating the tax withheld from NG property investors annually which was reported to be around $250pw per investor. Thats about $22b pa just in lost tax withholding, but your the expert you tell me how much tax NG investors are having removed from there tax withholding per week. Depending on what you earn you've, your mate shadow and others have probably saved a lot more than that from your PAYG every week i'm sure.
The other $14b was in deductions and claims made at the end of the FY, these claims include body corp fees, maintenance and the kicker, depreciation.
They DO NOT include tax revenue raised from the transaction of property because as i have stated earlier those figures are irrelevant. NG is a federal government cost worn by the whole country, or the ones that pay tax (which most NG IP owners pay FA or none in tax withheld) the majority of revenue from IP is realised only by individual states and councils so any argument needs to be in that vein.
Now i can't find the article at the moment but will keep hunting but it suggested that average investor claimed around $15-20k pa, as a combination of tax withheld weekly and deductions claimed at the EOFY. this seems more realistic to me than your claims that the 1.7m NG IP owners only claim an average of $2,350 pa which is laughable really.
Australia’s negative gearing laws, combined with the halving of capital gains tax in 1999, has caused an explosion of property investment, both in absolute number and as a proportion of the population.
Rubbish.
Negative gearing has been around for almost 100 years, and capital gains tax was changed because indexing of the cost base to CPI was removed.
The only one playing games here is you. Be a man and admit you $36B figure was complete bullshit. Here's what you originally claimed:
That claim is WRONG. You mis-read, mis-remembered the data. You used a figure which was the total of all property related tax deductions, but forgot all about the rental income side.
The actual amount that NG "costs" was $4B in 2011/2012, (ie the total aggregrate amount the income tax paid by property investors was reduced by due to NG - what you are calling "PAYG" tax in your quote) . It will likely be lower in the following years due to significantly lower interest rates. That's a LOT less than $36B! Yuo were even hoisted on your own pertard trying to defend this stupid claim by posting articles that actually confirmed what Shadow was saying!
So with respect to your question "Is tax withheld reduced or nullified for individuals that negatively gear, yes or no" - the answer ias actually yes and no, based on how you phrased your question. Tax withheld (individually) may not change at all - it would depend if a NG'd investor bothered to apply to the ATO for a PAYG variation to get their weekly/monthly tax withheld amounts reduced or not. But regardless of this it is correct that a NG'd PI will pay less tax than they otherwise would have due to the deduction they get for the amount that their PI costs exceed it's income - I think this is what actually meant to ask, in which case the answer is "yes" - and the total amount of this deduction, by your own article, in 2011/2012 was $4B.
And remember this is all in the context of a thread where we have shown that property owners in aggregarate actually pay $40B/year net in taxes to all levels of governments! And PIs pay at least half this amount. And remember if NG were removed most of that $4B would just be deferred to a later time, but still claimed anyway.
So a question for you - do you still believe that NG "costs" $36B in lost/reduced taxation income for the government??? Yes/No answer please.
And remember this is all in the context of a thread where we have shown that property owners in aggregarate actually pay $40B/year net in taxes to all levels of governments! And PIs pay at least half this amount. And remember if NG were removed most of that $4B would just be deferred to a later time, but still claimed anyway.
How did you get to the conclusion that PI pay at least half of the $40B/year net in taxes. Wasn't the amount $36B. Per Shadow's breakdown, $9B of that was rates. Rates is a direct fee for service that the property owner benefits from with rubbish collection and road maintenance in the area. It doesn't go into consolidated revenue. So lets exclude that shall we. Down to $27B. Shadow said $15B was from construction taxes and $6B was GST (the GST would be from construction as well). New builds are mostly bought by OO, can't remember the percentage but lets say 80% OO and 20% PI, gives PI $4.2B out of that $21B. The $6B in land taxes lets say is completely PI, brings PI to $10.2B out of the $36B? Then we'd need to offset the rental losses claimed by PIs (did Shadow say approx. $4b tax benefit for PI). There may be some other calculations to consider but on assets worth trillions PIs seem to be paying bugger all tax.
skamy
20 Aug 2014, 09:11 PM
No it is you who does not understand. However the tax is supposed to work it is paid by the developer. The Purchaser buys a house at the market price. The developer cannot then say I am adding GST to that price.
Prior to the GST a house sold with my previous figures ie built for $500K and sold for $600K the developer makes $100K.
After the GST the house still cost $500k minus build GSTwhich would be about $25K on a 50/50 land /build split. The house will still only sell for $600K as that is the market rate. Therefore the net GST cost of $60 with 25 K claimed back would be $45K. So now the developer only makes $55K.
So the GST is ultimately paid for by the developer.
Clearly you have not developed land since the GST was introduced or you would know this. GST on new build has affected small spec builders enormously and since 2003 when the tax was fully implemented.
GST is paid by the consumer. GST is not revenue or expenditure for any business registered for GST, they simply act as collection agencies to pass on the GST paid by the consumer to the government.
The way it works is like this skamy (it seems you genuinely don't understand). As an example a developer builds 50 units at an average cost of $250,000 per unit + GST. They then sell the units for $265,000 + GST to the end purchaser. They make their margin of $15k per unit which is their profit. The GST they've paid during construction they claim back from the ATO, and the GST they collect on sale (which is paid by the purchaser!) they pass on to the ATO.
The GST is paid for by the purchaser. Do some more research, and try again.
miw
20 Aug 2014, 07:23 PM
What negative gearing benefit? In these cases it would seem that all NG has done is allowed them to lose more money. You do know that you can't get a deduction and also spend that same money on yourself, right? Seems to me the benefit in this case is all to the tenants and the eventual buyer.
Do you have anything to backup your assertion about 10-30% of investment properties being sold at a loss or did you just make it up?
Agree with this. What the govt "loses" is purely the interest on the deferred tax.
In any business, there is only one place that money comes from. The customer. All costs associated with the own-to-rent business along with all profits realised by the operators of the business are ultimately borne by tenants. As many bears are very fond of pointing out, nobody is making out like a bandit in this business, so if you add cost to the equation, it will come out of the pockets of tenants eventually. There is nowhere else for it to come from. To the extent that quarantining losses from rental properties would make a difference (not much in my view), the difference will be felt by tenants.
What do you mean what negative gearing benefit? The benefit that they claim their loss against other income and hence get a tax benefit. NG allows them to reduce their loss by the amount of the tax rate applicable to that taxpayer.
How many PIs do you reckon sell at a loss? I remember seeing an article for it a while back and though it was around 15-20% from memory which is why I went with that range. Remember it was definitely higher than I expected. Whatever the percentage is (someone could provide it) it is negative gearing losses funded by the taxpayer that will never be recovered.
All costs associated with the own-to-rent business along with all profits realised by the operators of the business are ultimately borne by tenants.
I disagree. PI's negative gearing losses are borne by all taxpayers and the PI (split). Taxpayers tenancy status is irrelevant to the consolidated tax revenue pool that negative gearing losses come out of. Profits from the investment are also divided between the PI and the taxpayer. So they take a risk on their investment, get a tax break on the capital gain when they sell (compared to PAYG), but expect the taxpayer to partially fund the rental loss in the meantime.
Now i can't find the article at the moment but will keep hunting but it suggested that average investor claimed around $15-20k pa, as a combination of tax withheld weekly and deductions claimed at the EOFY. this seems more realistic to me than your claims that the 1.7m NG IP owners only claim an average of $2,350 pa which is laughable really.
im not sure about the article you are specifically referring to .. but here is one from RPData which is circa $10k at 2010/2011.
Quote:
Of the 1,811,174 individuals that reported to the ATO as having an investment property, 1,213,595 of these individuals, or two out of every three investors, were recording a loss on their rental income. The total value of these losses over the year was $13.285 billion. Obviously negative gearing of investment properties allows owners to claim a tax deduction on these costs. The average annual loss for these property investors with negatively geared properties was $10,947 or $210.50/week.
Thanks Massive, now it appears we're getting somewhere.
I'm not being a smart arse here but is this figure a totalitarian amount? What i mean is this just the tax withheld, or the EFOY deductions or a total of both.
The data doesn't seem to explain this just refers to 'losses' which suggests to me it is referring to tax withheld only and not the EOFY deduction claims which themselves can be just as match $5-8kpa.
Thanks for getting this though, its good to have some legit figure rather than cherry picked charts we keep getting.
Even the council rates are claimed as a tax deduction so there's no contribution to the overall tax take. It's incredible that 2/3rds of investors are negatively geared. We keep hearing about investors becoming positively geared after a few years and how they will then start contributing to overall tax through their rental income. The reality appears to be quite different.
Now, lets look at your claim that NG only costs the nation $4b only, mmmmmm. Interesting. Figures for the exact amount of IP owners who claim NG vary but lets say we take the lesser amount of 1.7 million recorded by most media outlets for the 2011-12 FY. What you are stating is that each investor only claimed losses and deductions totalling around $2,350 per year on each property. Have you got rocks in your head??
You are extremely confused. You have so many things mixed up it's hard to know where to start, but lets get to the basics by starting with this point.
As per the article you posted, the quote Massive posted, and ATO 2011/2012 stats that are publically available and repeated in numerous articles, about 1.2M ( 1,213,595) of the 1.8M (1,811,174) tax payers who declared rental income are negatively geared in FY12. You need to understand that number first - got that one??? Not ALL PIs are negatively geared.
Of those, as per the data Massive just quoted as well, "The total value of these losses over the year was $13.285 billion. Obviously negative gearing of investment properties allows owners to claim a tax deduction on these costs. The average annual loss for these property investors with negatively geared properties was $10,947 or $210.50/week.".
Now do you know what these numbers mean? They mean that of the 1.2M or so NG investors, the average tax deduction (ie loss from the investment) was $10,947. This deduction is NOT that amount of tax they save - it's the DEDUCTION they can claim against their TOTAL income. Have you got that? If you don't understand yet, read that paragragh again, as it's an important point for the next bit.
Now, the average marginal tax rate for PIs is 30%, so the actual tax refund received by the above 1.2M NGers is about $3.3k/pa. Do you still think I have rocks in my head???? You realise that this is the equivelant to your $2350 figure if you use the correct number of actual negatively geared PIs (1.2M) vs the total number of PIs claiming rental income (1.8M). And $3.3k times 1.2M people = ~$4B.
Why can't you just admit you were wrong??? Shadow's $4B figure for the "cost" of NG in FY12 is/was correct. The data posted by YOURSELF, Massive, everybody proves it. Your claim that NG "costs" $36B is made up crap.
QED.
When you actually understand the above numbers, the terms being used etc, then you will realise what a load of rubbish the rest of your last post was. But we may at least then have a proper basis for a follow-on discussion re how the "cost" of NG stacks up against the much larger amount of additional taxation revenue that housing in general and housing owned by investors/developers specifically contributes back into the system.
Thanks Massive, now it appears we're getting somewhere.
I'm not being a smart arse here but is this figure a totalitarian amount? What i mean is this just the tax withheld, or the EFOY deductions or a total of both.
The data doesn't seem to explain this just refers to 'losses' which suggests to me it is referring to tax withheld only and not the EOFY deduction claims which themselves can be just as match $5-8kpa.
Thanks for getting this though, its good to have some legit figure rather than cherry picked charts we keep getting.
If you go back 15 to 20 pages in this thread you will see the figure of $13 billion was already talked about by Shadow and others.
Well done, helps of you read the entire thread prior to posting. So do we have to repeat everything for every dummy who can't read what people posted earlier in the debate.
A simple search of the ATO or ABS would have found the same data, it is easily located if you bothered to look in official sources. It is common knowledge that the average negatively geared property costs about $10,000 per year and that there was 1.2 million negatively geared properties in 2010 when interest rates where much higher. Come on do some research prior to making yourself look like a halfwit, this is basic stuff.
How did you get to the conclusion that PI pay at least half of the $40B/year net in taxes. Wasn't the amount $36B.
The $36 billion was from a couple of years ago, it would be higher now due to the rise in prices since 2012.
Plus the $36 billion doesn't include Capital Gains Tax or tax on rental income which is exclusively paid by investors, or GST on new dwellings.
The components of the $36 billion were
Land tax = 6 billion Rates = 14 billion Stamp duty = 13 billion Other = 3 billion
A third of Australia's housing stock is owned by investors, so that's $4.7b in rates plus $4.3b in stamp duty, maybe a bit more since many FHBs don't have to pay stamp duty.
Land tax ($6b) is only paid by investors.
So that's $15 billion so far.
Then add 100% of capital gains tax and 100% of tax on rental income. Plus GST.
Then add another 10% due to the rise in house prices since 2012.
Whatever the figure, whether it's only $20 billion or more than that, it's on top of all the normal non-property related taxes that PIs and everyone else pay.
Renters pay much less tax than investors. We're subsiding you.
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