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A Question for the Group on Negative Gearing
Topic Started: 25 Sep 2014, 08:35 AM (2,569 Views)
peter fraser
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After a robust discussion on NG elsewhere I note the following points.

1. as at 30/06/2012 there were 2,641,855 investment property owners claiming deductions on 2,714,430 properties.

2. The aggregate rental income was $33.22 B

3 The aggregate interest cost was $24.1 B

4 The aggregate claims for tax deductions exceeded income by $8 B


My questions are if the tax rules are changed and all tax deductions are quarantined:-

a. Will the excess tax losses be lost to investors or will the simply be carried forward until they can be claimed against a positive cash flow.


b. Is the tax loss of $8 B a loss of $8 B to the tax payer or is the loss a lower amount calculated on the marginal tax rate that might apply to these investors - ie if they earn $80K pa as often claimed then the loss to the tax payers would be 37% of $8 B = $2.96 B


Any expressed market opinion is my own and is not to be taken as financial advice
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Investor888
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peter fraser
25 Sep 2014, 08:35 AM

My questions are if the tax rules are changed and all tax deductions are quarantined:-

a. Will the excess tax losses be lost to investors or will the simply be carried forward until they can be claimed against a positive cash flow.


b. Is the tax loss of $8 B a loss of $8 B to the tax payer or is the loss a lower amount calculated on the marginal tax rate that might apply to these investors - ie if they earn $80K pa as often claimed then the loss to the tax payers would be 37% of $8 B = $2.96 B


A) Of course the tax losses would NOT be lost. They would be carried forward and quarantined against future positive income from the property. Not much difference really. Just means that you pay less tax later on positive cashflow from property as the carried forward losses are used first to offset the positive cashflow.

B) the answer is 37% of 8b =2.96b. Just like any other dedection, including work deductions. You only get back 37% of what you claim. The is one thing the anti-negative gearing mob dont understand. Claims of 8b by investors actually cost the government 3b in tax revenue. But they probably make a lot of the back with all the taxes we pay in all the holding costs in property.
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Chris
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peter fraser
25 Sep 2014, 08:35 AM
After a robust discussion on NG elsewhere I note the following points.

1. as at 30/06/2012 there were 2,641,855 investment property owners claiming deductions on 2,714,430 properties.

2. The aggregate rental income was $33.22 B

3 The aggregate interest cost was $24.1 B

4 The aggregate claims for tax deductions exceeded income by $8 B


My questions are if the tax rules are changed and all tax deductions are quarantined:-

a. Will the excess tax losses be lost to investors or will the simply be carried forward until they can be claimed against a positive cash flow.


b. Is the tax loss of $8 B a loss of $8 B to the tax payer or is the loss a lower amount calculated on the marginal tax rate that might apply to these investors - ie if they earn $80K pa as often claimed then the loss to the tax payers would be 37% of $8 B = $2.96 B


Smoke and mirrors bullshit Peter, and I have discussed at length why.

Interest is not the sole cost to the tax payer with NG so you are really trying to calculate A cost to the taxpayer, painting up to be THE cost to the taxpayer and suggesting its relatively cheap, sustainable and productive.

It's also bullshit because it is assuming revenue steams from these IP's would never be realised as they would not be sold in any form be that IP or PPOR if it wasn't for NG, therefore sitting idle or empty as an alternative?!

Complete rubbish Peter, I would expect better really!!
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zaph
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peter fraser
25 Sep 2014, 08:35 AM
After a robust discussion on NG elsewhere I note the following points.

1. as at 30/06/2012 there were 2,641,855 investment property owners claiming deductions on 2,714,430 properties.

2. The aggregate rental income was $33.22 B

3 The aggregate interest cost was $24.1 B

4 The aggregate claims for tax deductions exceeded income by $8 B


My questions are if the tax rules are changed and all tax deductions are quarantined:-

a. Will the excess tax losses be lost to investors or will the simply be carried forward until they can be claimed against a positive cash flow.

b. Is the tax loss of $8 B a loss of $8 B to the tax payer or is the loss a lower amount calculated on the marginal tax rate that might apply to these investors - ie if they earn $80K pa as often claimed then the loss to the tax payers would be 37% of $8 B = $2.96 B



Quote:
 
a. Will the excess tax losses be lost to investors or will the simply be carried forward until they can be claimed against a positive cash flow.


Anything is possible. The most likely scenario would be a repeat of Keating's removal of NG.

They would be carried forward (quarantined). Since the internet was only 'papyrus to node' at the time, I'm not sure whether they were quarantined against an individual investment, or the entire portfolio. If the investment is disposed of before the losses could 'be used', it's likely the cost base for CGT would reflect accumulated losses.

Keating's removal of NG also 'grandfathered' NG - meaning anyone making, and claiming deductions for losses could continue to do so on property held before the change.

Quote:
 
b. Is the tax loss of $8 B a loss of $8 B to the tax payer or is the loss a lower amount calculated on the marginal tax rate that might apply to these investors - ie if they earn $80K pa as often claimed then the loss to the tax payers would be 37% of $8 B = $2.96 B


Do you have a link to docs/links that form part of the discussion?

If I make a $1 loss on my IP then that forms a net deduction in my taxable income. If I had a wage at the highest tax level, then I effectively get 45% + tip (Medicare levy etc.) back. On an aggregate level it may be safe to assume that the 'loss' to the tax payer would be 37%.

I just don't see how deductions are a 'loss' to the system - they're just allowable, and justifiable tax deductions.




Chris
25 Sep 2014, 09:35 AM
Smoke and mirrors bullshit Peter, and I have discussed at length why.

Probably on the other site PF is referring to - if you want to have the discussion here, you will need to post here.
Edited by zaph, 25 Sep 2014, 09:43 AM.
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Sydneyite
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Chris
25 Sep 2014, 09:35 AM
Interest is not the sole cost to the tax payer with NG so you are really trying to calculate A cost to the taxpayer, painting up to be THE cost to the taxpayer and suggesting its relatively cheap, sustainable and productive
I'm not sure what you have discussed with Peter elsewhere, but this comment suggests a major mis-understanding of Peter's posted data on your part. He is not claiming interest is the "only" cost incurred - far from it. If you look at the numbers, if only interest was counted, in aggregrate PIs would pay tax on about $9.1B of net income. The $8K net aggregate "loss" from rental properties is from official ATO data and includes all costs claimed by PIs as tax deductions. This is the *actual* number. If there was no NG and no ability to carry forward losses etc (the later being unlikely to ever happen is it's completely against all underlying principles of Australian taxation law), then the government would recieve about an extra $3B in tax each year., assuming an average marginal tax rate of 37% for PIs.

Bottom line is that all that data and figures in Peter's post is 100% correct as per 2011/2012 FY tax office data.
Edited by Sydneyite, 25 Sep 2014, 10:09 AM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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stinkbug
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Investor888
25 Sep 2014, 09:33 AM
A) Of course the tax losses would NOT be lost. They would be carried forward and quarantined against future positive income from the property. Not much difference really. Just means that you pay less tax later on positive cashflow from property as the carried forward losses are used first to offset the positive cashflow.

B) the answer is 37% of 8b =2.96b. Just like any other dedection, including work deductions. You only get back 37% of what you claim. The is one thing the anti-negative gearing mob dont understand. Claims of 8b by investors actually cost the government 3b in tax revenue. But they probably make a lot of the back with all the taxes we pay in all the holding costs in property.
Agree with this.


Chris
25 Sep 2014, 09:35 AM
Smoke and mirrors bullshit Peter, and I have discussed at length why.<br /><br />Interest is not the sole cost to the tax payer with NG so you are really trying to calculate A cost to the taxpayer, painting up to be THE cost to the taxpayer and suggesting its relatively cheap, sustainable and productive.<br /><br />It's also bullshit because it is assuming revenue steams from these IP's would never be realised as they would not be sold in any form be that IP or PPOR if it wasn't for NG, therefore sitting idle or empty as an alternative?!<br /><br />Complete rubbish Peter, I would expect better really!!
Disagree with this. What are you smoking?
Edited by stinkbug, 25 Sep 2014, 10:29 AM.
---------------------------------------------------------------

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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Foxy
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Zero is coming...

peter fraser
25 Sep 2014, 08:35 AM
After a robust discussion on NG elsewhere I note the following points.

1. as at 30/06/2012 there were 2,641,855 investment property owners claiming deductions on 2,714,430 properties.

2. The aggregate rental income was $33.22 B

3 The aggregate interest cost was $24.1 B

4 The aggregate claims for tax deductions exceeded income by $8 B


My questions are if the tax rules are changed and all tax deductions are quarantined:-

a. Will the excess tax losses be lost to investors or will the simply be carried forward until they can be claimed against a positive cash flow.


b. Is the tax loss of $8 B a loss of $8 B to the tax payer or is the loss a lower amount calculated on the marginal tax rate that might apply to these investors - ie if they earn $80K pa as often claimed then the loss to the tax payers would be 37% of $8 B = $2.96 B


Ok,
This is a simple question but the true answer is one step away from the plausible answer.

You must understand 2 things

1) A government worker could not get a fuck in a brothel.

2) No one in their right mind would spend their money housing another human.

So in summary sufficient bait must be put on the hook to entice the "investor" to go through the grief of renting house to people at a loss.

Now please try to work out what i just said to you.

Peter
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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ThePauk
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lol, no one mention here by any poster that 'the discussion' is on Macrobusiness, a site that Pter and other here bag and yet he posts on...

http://www.macrobusiness.com.au/2014/09/saul-eslake-slams-hia-on-negative-gearing/
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Sydneyite
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ThePauk
25 Sep 2014, 10:44 AM
lol, no one mention here by any poster that 'the discussion' is on Macrobusiness, a site that Pter and other here bag and yet he posts on...

http://www.macrobusiness.com.au/2014/09/saul-eslake-slams-hia-on-negative-gearing/
You know you if you so much as mention *this* site on MB your post will be immediately deleted and you will probably be banned??? Let alone post a link like you just did. :re:
Edited by Sydneyite, 25 Sep 2014, 10:59 AM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Chris
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Sydneyite
25 Sep 2014, 10:06 AM
Bottom line is that all that data and figures in Peter's post is 100% correct as per 2011/2012 FY tax office data.
They are not 100% correct at all, you are the one who has no idea. You're comments suggest you do not know how the majority of NG IP are maintained by most investors on the first 5-10yrs, or you are in the fun house with peter running the smoke machine for him.

Interest payments are predominantly compensated through a reduction in an individual's PAYG tax, ie reduce of the amount of tax the pay when their wages are furnished be that either weekly, fortnightly, monthly, whatever. That amount is a TRUE loss to our economy and money that will never be realised due to NG. That has an accumlative cost estimated to be around $12,000 per investor pa. Then there is the cost to run/maintain the property each year including rates, body corp and the oxymoron that is depreciation. This is a separate claim (tax payer) cost that we have already established affords the average IP owner anywhere from $3-8k extra pa, a cost gifted by the taxpayer.

And the discussion over this topic was on APF.
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