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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 (33,856 Views)
Shadow
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Evil Mouzealot Specufestor

Some more data which may help the debate...

The proportion of taxpayers with an IP was about 20%, and the proportion of investors who are negatively geared was about 65% in 2011-2012.

I expect the proportion negatively geared would be lower now due to the fall in rates. Note the dips in 2008 and 2009 when rates fell.

http://www.propertyobserver.com.au/forward-planning/investment-strategy/market-trends/31158-slight-fall-in-number-of-negatively-geared-property-investors.html

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Edited by Shadow, 29 Aug 2014, 01:37 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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propertymogul
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Shadow
29 Aug 2014, 01:33 PM
Some more data which may help the debate...

The proportion of taxpayers with an IP was about 20%, and the proportion of investors who are negatively geared was about 65% in 2011-2012.

I expect the proportion negatively geared would be lower now due to the fall in rates. Note the dips in 2008 and 2009 when rates fell.

http://www.propertyobserver.com.au/forward-planning/investment-strategy/market-trends/31158-slight-fall-in-number-of-negatively-geared-property-investors.html

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Some more data:

A quick google this is a bit old but good data
http://blog.rpdata.com/2013/05/there-were-1213595-individuals-with-a-negatively-geared-property-over-the-201011-financial-year/

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zaph
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propertymogul
29 Aug 2014, 12:18 PM
According to the ATO website, there is no deductibility for home office for rental property as a side business.

Can you provide a link for this, I've never heard of this exclusion? Fair enough if I'm wrong, my memory is that you can claim a portion of costs like electricity, depreciation on home office equipment like furniture, fittings for the home office. You can't however claim a portion of interest, rent or rates unless your home is your place of business. A quick look at the ATO website seems to concur https://www.ato.gov.au/Business/Deductions-for-business/Home-office-expenses/

You've argued that PI-ing is not a business, which it generally isn't. Your link refers to carrying on a business so does not apply to the average PI. This would be a more appropriate link, but certainly far from perfect.

"my memory is that you can claim a portion of costs like electricity, depreciation on home office equipment like furniture, fittings for the home office."

One probably, technically, could, but the deduction would be bugger all and if one got audited I'd bet one would fail substantiation.
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IngoreMining
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I notice you guys ignore any of the mining threads on this forum

Why is that?
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Shadow
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IngoreMining
29 Aug 2014, 01:47 PM
I notice you guys ignore any of the mining threads on this forum

Why is that?
I have zero interest in mining.
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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propertymogul
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Shadow
29 Aug 2014, 01:23 PM
1. The article talks about investors, not investment properties (as Trojan has pointed out).

2. The article is a second hand account of somebody else's survey that the article says was conducted 'a few years ago' (from the date of writing the article, which is also unknown). We really know nothing about this survey. It also seems very 'convenient' that it comes out with nice round numbers like 25% and 50%. I wonder if there were only four respondents to the survey?

I think the article about the survey can be safely ignored. We need better data.

We just need to assume that if losses had to be quarantined then investors would simply hold the property for long enough to offset all the losses, even if that's not what the average investor is doing currently (which we don't know for sure). The forced quarantining of loses would drive a change in behavior - investors would hold for longer if necessary to deduct their losses. There would ultimately be no increase in tax revenue for the government. There might even be a loss of revenue if fewer investors entered the market as a result of the change, or if prices fell, leading to a reduction in stamp duty and land tax revenue.
"We just need to assume that if losses had to be quarantined then investors would simply hold the property for long enough to offset all the losses, even if that's not what the average investor is doing currently (which we don't know for sure). "

I'll bow out of this debate now (due to boredom) but will put out there the following concessions which I think you and Trojan have either made or would not dispute:

1. A significant percentage of investment properties are sold before making a rental profit. This may be around 65% as around 65% of PIs are negatively geared. Out of those that are negatively geared they are more likely to sell in any given year as, on average, they are the less savvy PIs.
2. An even higher percentage of investment properties are sold before making an accumulated rental profit i.e. when accumulated rental profits exceed accumulated rental losses.
3. When the investment property with an accumulated rental loss is sold the negative gearing benefit they have obtained can only be recovered through capital gains which receives a 50% discount and is therefore not recovered on a like for like basis. This means that $50B in net accumulated rental losses since 2001 claimed by PIs absorbs approximately $100B of capital gains.
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Shadow
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propertymogul
29 Aug 2014, 01:52 PM
3. When the investment property with an accumulated rental loss is sold the negative gearing benefit they have obtained...
They haven't obtained a benefit. They have been taxed appropriately given that they made an overall loss. Why should they pay tax on income they didn't receive?

Under Australian tax laws, individuals pay tax on the sum of their individual income minus the sum of their individual losses. The investor has paid the correct amount of tax.
Edited by Shadow, 29 Aug 2014, 01:56 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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Trojan
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propertymogul
29 Aug 2014, 01:52 PM
I'll bow out of this debate now (due to boredom) but will put out there the following concessions which I think you and Trojan have either made or would not dispute:It
When I do dispute something it goes around in circles
eg
"25% of PI sell within a year"
"Wait up, I never said 25% of investment properties aren't sold in 1 year because only 500,000 properties are sold every year"

A couple of posts later.
"Since we have now concluded 50% of IP are sold within 5 years of purchase"

So after a few pages later, you are still switching between a percentage of PI vs a percentage of investment properties.
If a few pages can't sort that out, its going to take a long time to dispute all the conclusions/extrapolations you have jumped to.

But it certainly doesn't make it true just because we haven't got around to it yet.
Edited by Trojan, 29 Aug 2014, 02:49 PM.
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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stinkbug
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IngoreMining
29 Aug 2014, 01:47 PM
I notice you guys ignore any of the mining threads on this forum

Why is that?
For most property investors there's not much to add. Mining went through a construction boom, and that is now starting to slow down.

East coast property won't be hugely affected by mining in isolation of other factors. I don't own property in Perth, and probably never will.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Trojan
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Shadow
29 Aug 2014, 01:52 PM
I have zero interest in mining.
And I have non registered users on ignore.
If they can't spend 1 minute registering an account, I highly doubt they are interested in a mature debate.
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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