I can see where you are coming from here Sydneyite however there is a difference.
....
Ok I see your point of view as well, however I still don't agree. Local government spending seems "closer" to you because it's *local*. That's all. And as others have pointed out a PI pays rates for houses they don't even live in, and may live in a completely different council area - that makes those rates they pay a "tax" I think even from your point of view? What's more, if it was just a payment for services, then it should be optional, not compulsory, plus you should have a choice of "service providers" - not the case with council rates and what they choose to spend the money on. instead it's compulsory (ie a "tax") and we elect the representatives on the council as our way of having a say on local government spending and priorities.
State governments and the Commonwealth are restricted as well both in terms of how they raise revenue and how they can spend it based on the constitution. All levels of government have restrictions. But bottom line, any "compulsory" payment that must be made to a government of any level is IMO a tax. That's the broadest (and most correct) definition in my books.
Would we class rent assistance as a subsidy paid by the government to the property investor? You know, because the government don't want to pay for public housing.
Wrong. I've audited councils and the vast majority of the money they receive is used on rubbish collection and road maintenance i.e. it doesn't get passed on to state or federal level (though a small amount can occasionally). A lot of councils are running at a loss. These are services provided to the house which contribute to the amount of rent you as a property investor can collect from the house. In addition you claim it as a deduction where OO can't.
And it doesn't benefit the property owner ... it benefits the local community. The tenant gets the use of the library, parks and even the garbage removal - not the property owner.
Stop trying to muddy the waters. No one is claiming the rates get passed on to state or federal governments. But it doesn't change the fact rates go to local council's consolidated revenue.
State and Federal governments also run at a loss when taxation revenue exceeds costs to provide benefits and services .... Does that mean income tax is not a tax? Because you seem to suggest that just because the money a government takes and uses to benefit the people who it collects it from should be excluded ....
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
CGT, i am lead to believe this can be minimised and even reduced through things like SMSF, trusts etc but lets say that CGT is a large contributor to revenue and that all investors are paying their share, highly unlikely but lets entertain the idea.
What you are saying is that if NG didn't exist then then CGT on these properties would never be realised. This is wrong, investor would still pay (dumb investors anyway) full CGT once they sell the asset for a capital gain.
And the net concession value of $3b needs to be explained, what you know the tax withheld to be, the total deductions per year and for your arguments sake the about of CGT paid in that 2011-12 period.
Huh? You seem to me making up a question then answering it. I am not suggesting that NG and CGT are linked.
It benefits the property owner. If your rubbish weren't collected, the OO or renter would have to use their own time and money to remove the waste. This in turn would reduce the amount of disposable income that renters have and market rents would adjust downwards. The maintenance of roads in the area also benefits the property investor by making the area your property is in more appealing. Just imagine an area without a council and roads were all run down, the houses in that area would in turn rent for less. Do you ever see nearby parks advertised in rentals i.e. close to parks? I've seen a lot of it, don't you think that adds to the value of your rental. The council rates are effectively a fee for service to maintain your area, and doesn't generally end up in either state or federal consolidated revenue.
And you don't think federal and state taxes doesn't benefit the person who pays? So Mr taxpayer doesn't need to pay for his own police force?
propertymogul
21 Aug 2014, 03:26 PM
Defence force, national highways, welfare payments etc come out of either state or federal consolidated revenue, i.e. your rates don't pay for them. Your rates only pay for your house's rubbish collection and maintenance of local roads etc which you or your tenant benefit (and hence you in the form of increased rents) from.
We don't pay defense forces, national highways, or welfare payments? I thought these came out of income taxes (which I pay). Don't try to muddy the waters again by saying rates don't pay for federal and state provided benefits ... we all know that. Rates is a local government tax.
Only if you then add back in an equivalent amount of additional income tax that is incurred in that particular year as a result of tax deferred previously. Remember the tax is not foregone, just deferred. The $4B not paid this year will be paid later. The $4B not paid in earlier years will be paid this year.
Stinkbug's link is the same one Mike and I posted yesterday. It says $36 billion in 2012/2013, but that doesn't include Capital Gains Tax, tax on rental income, or GST...
The overall loss is AFTER the payment of over $20 billion in tax. So as a result of that overall loss, we get to defer payment of $4 billion until later.
The $4B benefit includes PIs that have held properties for many years and are profitable, so indicates that on an ongoing basis the government foregoes $4b approx. in tax each year. Perhaps this is because most PIs will never turn a profit on their rental properties, whatever the reason, this $4B tax foregone is happening every year so needs to be deducted from any tax paid by PIs. Whatever way you try to spin it, the losses from PIs outweigh the profits from PIs and is costing the taxpayer each year. This shows that without any doubt that, on average, when an investment property is sold, that PI has received a net tax benefit to subside their loss their loss that will never be recovered by the taxpayer. The average amount in negative gearing losses foregone each year by the ATO is the average amount that will never be recovered. The whole "deferral" argument is bunkum because each year on average the losses from newer entrants exceed the profits from older entrants. And, on average, the PI must not achieve positive gearing because otherwise there would be a net positive tax from PIs.
Rates should be excluded because it is essentially fee for service that directly increases the amount of rent PIs can charge. Also the payment of rates and land tax reduces the tax they pay on other income so needs to be discounted by as much to get the net PI contribution (lets say 30%). So the calculations above still stand, being generous PIs contribute a net tax take of approx. $5B on assets worth trillions a miniscule percentage.
In addition PI get a discount on the benefit they receive from rates because it is tax deductible. OO generally pay the full amount with no tax deduction.
PI get no discount. I pay exactly the same rates regardless of whether I live in that property or not. If you think tax deductible is a discount, I guess you also think we PI get discounts from banks (interest is tax deductible), insurance companies (building insurance is tax deductible), solicitors (conveyancing is tax deductible), plumbers/electricians/carpenters (all tax deductible), etc None of which is tax deductible because the OO doesn't pay any tax because they don't earn an income from the property
By your crazy logic, renters get tax benefits because the landlord pays for waste removals at the discounted tax deductible rates which the renters don't have to pay from their own after tax dollars. Or OO get massive tax benefits by not paying capital gains tax when they sell their home!
propertymogul
21 Aug 2014, 03:38 PM
You're not making sense here Trojan. I've simply explained the mechanics of how the GST works, if you don't understand you should do some research.
No. What you are doing is splitting hairs. At the end of the day, the consumer of the end product pays for all taxes (and profits, ROE, etc)
propertymogul
21 Aug 2014, 03:54 PM
I can see where you are coming from here Sydneyite however there is a difference.
Rates go to local councils and they are restricted on how they can spend it to that area that the rate is being paid, and the homeowner directly benefits from it. They get their rubbish collected, their local roads maintained, and their local parks maintained. It is essentially fee for service. In my view it is actually one of the fairest taxes, each property in the area contributes to that areas services on an equitable basis. If I have a larger block I may pay a little more than the house next to me in a smaller block, but not much difference and we both get our rubbish collected, our local roads maintained etc i.e. we both get a direct benefit and the money can't be spent on anything but our areas services. It is a user pays system.
State and federal taxes go into consolidated revenue that then gets distributed in a manner that the state and federal governments decide, and may bear no direct relationship. That is, you could pay $100,000 in federal taxes and $50,000 goes to welfare recipients, $5,000 goes to funding negative gearing losses for PIs etc. On your $100,000 you may get very little benefit, lets say $20,000 indirect benefit. On the flipside, a negatively geared investor who pays $10,000 in tax after their losses may also be receiving $20,000 in indirect benefits out of consolidated revenue, i.e. they are receiving more in benefits than they are contributing. It is not a user pays system.
User pays? So if I don't use the library or park, then I can pay less council rates? Charging an entrance fee to the library or park is a user pay system.
It is one thing to read a taxation book it is quite another to understand how the tax works in practice. You clearly have no development experience. You are completely outta touch with the real estate market thinking people added GST to new house prices that is a joke.
New houses get sold in the exact same was as existing, the market sets the price.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
The difference is in the restrictions - local council rates are paid by local properties on a user pays basis and that money can only be spent on services that benefit the council area. State and federal taxes go into consolidated revenue and can get spent on all sorts of different things which may or may not benefit you.
Lol. Local council taxes get used to benefit local council population. State taxes get used to benefit state population. Federal taxes get used to benefit national population.
Funny that.
propertymogul
21 Aug 2014, 04:05 PM
You could do that however rents would adjust downwards to reflect the reduced disposable income of renters. It would work out about the same. It benefits the PI by being able to charge a rent that includes those services.
You mean like car companies don't pay any company tax because the government uses company tax to pay for roads. Otherwise, its customers would have to build their own roads ... You do have funny logic.
Whatever way you try to spin it, the losses from PIs outweigh the profits from PIs and is costing the taxpayer each year.
It's not costing the taxpayer anything. Property investors contribute over $20 billion annually to tax revenue, and NG lets them defer the contribution of a few billion until later.
Imagine you go to the shop today, pay the shopkeeper $20 for some groceries, and tell him you want to defer payment of $4 until tomorrow.
You're a good customer so the shopkeeper says that's fine.
Your deferred $4 is not costing other shoppers any money.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy