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More than one in five first time buyers are buying an investment property
Topic Started: 21 Aug 2014, 02:52 PM (2,641 Views)
silverman47
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Thats what i tell any friends etc that ask me about buying their first property, i always say if i did it again, i'd buy all my investments first, and leave my own dwelling till last. Your investment income should pay for your own home, whatever it costs.
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Chris
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skamy
22 Aug 2014, 12:23 PM
Young people in a city like Sydney cannot afford to buy in the location they want straight away so rather than buying a home further out they buy an IP, they gain rent and tax relief via negative gearing to help them with the first few years of leasing. They can then use equity in the IP plus income, if it is positively geared, to get the PPOR. Even if they sell they will have capital gains that they did not have before purchasing whether or not it gets taxed.

If the eejits marching in Melbourne get their way this will be one less way available to young people on lower incomes to get on the property ladder.
You are hilarious sometimes Skamy.

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miw
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b_b
22 Aug 2014, 11:30 AM
The most advantageous tax break in housing is for the PPOR. Some of these "first time" buyers are being poorly advised.
It's not just the tax break. It's a lifestyle issue and a size of investment issue as well.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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herbie
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Sydneyite
22 Aug 2014, 11:58 AM
... "The 6 Year Rule" ... I always wondered how this exemption came about, and why 6 years? ...
An ATO dude stated to me once that it was introduced so that government employees such as embassy staff working overseas would not be disadvantaged in any way by their appointment. And that it was extended to everyone, as making a special rule just for them (at that time anyway I guess) wasn't deemed 'politically acceptable'.
Edited by herbie, 22 Aug 2014, 05:38 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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propertymogul
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newjez
22 Aug 2014, 04:20 PM
Is there any caselaw you are aware of?
Not that I'm aware of Newjez (but that doesn't mean there isn't any). However you can be sure that if the ATO has won any such case they would adjust their website to definitely tell people what not to do.
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miw
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propertymogul
22 Aug 2014, 03:53 PM
Yes as an accountant have been through two ATO audits (not personal ones). The companys returns were correct and legitimate so we passed with flying colours, although they did take their sweet time paying us the refund owed.

I have seen cases though where they are right royal ........
I have been personally audited once many years ago. It was done because I tried to do my tax return myself and screwed up a couple of things. In the end I passed because they were good faith mistakes in terminology that did not affect my tax liability. (In fact during the audit we found more deductions and I got more tax back)

It is, however, not an experience I would like to repeat.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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herbie
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b_b
22 Aug 2014, 02:13 PM
It is rarely up to the ATO to show anything. If you have ever been audited, the onus generally lies with the taxpayer.

If you bought a property and lived in it for six months, then rented it out, claimed NG, and 100% CGT relief, all the while not being able to show any reason why you could not live there yourself - you would be fckd in any court IMO. The ATO would not have to go much further than show the link you posted.

Does not stop people from trying i guess.
They'd need to be getting some pretty big red flags to go chasing it - IMO. (Under Part IVA maybe?????)

But it would be SO hard to prove any naughtiness - Hey, the person bought it intending it to be their home. And moved into it as such. Then subsequently changed their mind/found that didn't suit - Potentially for any of a huge number of possible reasons. But figured What the heck; It's bought now; The stamp duty has been paid; It will cost me RE agent fees to sell it; I'll hang onto it and just rent it out.
Edited by herbie, 22 Aug 2014, 05:55 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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skamy
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John Frum
22 Aug 2014, 02:45 PM
Absolute bollocks. Negative gearing favors people like me paying the top rate of tax.

If people earning less than 80k are levered up with property debt because they've been fed the nonsense that it only ever goes up then they're fools, it's not society's responsibility to keep the housing ponzi scheme afloat to save their butts.




The issue is the systemic crisis in the financial sector likely to arise from negative gearing encouraging mass speculation in housing due to aforementioned stupidity.




Unsubstantiated garbage.




So you mean they'll need to direct their capital to more useful and productive activities of benefit to all society?
Boo hoo, my heart bleeds for them.




What, and you think they won't adopt the same strategy? What the hell does that even mean. Take your pills and have a lie down woman!





No, if large companies do it they will benefit from economies of scale and be able to pass those savings on to the renter, illegal collusion/rent-seeking behavior notwithstanding.
Wrong only 4 % of negative gearers are in the top tax bracket.

Check your facts before you get your knickers in a twist





A certain number of rented properties will always be required you assume that people will go on and on buying rentals when vacancy rates keep rising and rents drop. People are not that stupid and there is certainly NO evidence of this in the market.


Australia has run with about 30% of properties being rented out for a long long time. Tell me where are all the vacant properties bought by stupid people.


What you are really saying is that you don't trust Mums and Dads to make good investment decisions, you think that rentals should be provided by whom then, rich business people?


John Frum
22 Aug 2014, 02:45 PM

No, if large companies do it they will benefit from economies of scale and be able to pass those savings on to the renter, illegal collusion/rent-seeking behavior notwithstanding.
Ha ha ha ha

You are naive, big business bringing prices down what nonsense.

Already you can show that during upcycles renters in the properties of Mum and Dad type investors don't get asked for rent increases as much as those in properties run by businesses.

Unfortunately for you Mr Frumpy there are no pills that you can take for stupidity
Chris
22 Aug 2014, 04:42 PM
You are hilarious sometimes Skamy.
No Chris you are being led a merry dance on a promise of a cheap house if you give up your right to negative gearing.

Come on how stupid can people be? to think that removing negative gearing will make a dent in a market like Sydney. It will make not one iota of difference to the price of a house in Double Bay, if it has any effect at all it will be on the cheap homes bought by the 74% of the negative gearers with an income of less that $80k.
Quote:
 
What the ATO Statistics Say
While negative gearing is seen as the playground of the rich, what do the statistics say? According to the ATO, 1,600,000 Australians claimed rental income. Of those 1,600,000, over 1,000,000 of them claimed negative gearing. 74% of those who reported negative gearing earned $80,000 or less. Only 4% of those who reported negative gearing were in the highest tax bracket.
The Case for Negative Gearing
The numbers don’t lie and they say that negative gearing is enabling small, working class investors to afford investment properties they would otherwise be unable to afford. It can be reasonably argued that if the Government removes negative gearing, it will affect the working class by raising rents.


When have you ever seen News.com rabble rouse for changes in taxation to benefit working class people. You have to have rocks in your head to march against negative gearing, you are giving up a benefit used by low income people to break outta poverty. You are campaigning for something that would only ever have a negative effect on the value of working class peoples homes and rents.
Edited by skamy, 22 Aug 2014, 08:06 PM.
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.
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peter fraser
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silverman47
22 Aug 2014, 04:32 PM
Thats what i tell any friends etc that ask me about buying their first property, i always say if i did it again, i'd buy all my investments first, and leave my own dwelling till last. Your investment income should pay for your own home, whatever it costs.
Yep - and buying investment properties does not disqualify people from later claiming the FHOG, another little benefit that can be postponed to a more suitable moment.
Any expressed market opinion is my own and is not to be taken as financial advice
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newjez
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propertymogul
22 Aug 2014, 05:03 PM
Not that I'm aware of Newjez (but that doesn't mean there isn't any). However you can be sure that if the ATO has won any such case they would adjust their website to definitely tell people what not to do.
Reading the website, it seems pretty open. I bet a lot of these are mums and dads buying under their kids names. They probably take first home buyers as well.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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