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A Question for the Group on Negative Gearing
Topic Started: 25 Sep 2014, 08:35 AM (2,573 Views)
peter fraser
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zaph
25 Sep 2014, 09:38 AM
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.


.
The discussion I refer to is here. http://www.macrobusiness.com.au/2014/09/saul-eslake-slams-hia-on-negative-gearing/#comments
Saul Eslake of course was a complete gentleman in the discussion.

Saul confirmed that he preferred a grandfathering approach, but I was more concerned with the way commenters are convinced that cancelling NG would magically reduce house prices and save $8 B in the budget.

In fact neither would occur although there would obviously be an effect. I was quite happy to make these points but after three lengthy posts were deleted I gave up.

The choice of an $80,000 to base the tax calculation comes from many posts that clearly state that most investors earn less than $80K pa such as this one - http://www.abc.net.au/news/2014-09-24/janda-the-myth-of-mum-and-dad-negative-gearers/5766724


Quote:
 
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.


Precisely, but almost no one understands that.

My other point is that no one asks what will happen to the excess deductions - they seem to think they will magically disappear.

Quote:
 
Probably on the other site PF is referring to - if you want to have the discussion here, you will need to post here


Sorry Chris I don't know what you post under at MB and frankly I don't need to know - that's your business not mine.

PS Paul you pointy finger attempts yesterday were childish and disgraceful.
Chris
25 Sep 2014, 10:58 AM
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.
Sorry Chris, you are wrong. The interest cost isn't "lost" to the economy it's just redistributed to depositors who earn interest and shareholders as dividends.

You really need to get into some robust discussions on the banking system and how money operates in our modern system to understand the mechanics of the system. I know that it's difficult, but force yourself, you will learn from it.

Edited by peter fraser, 25 Sep 2014, 11:13 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Foxy
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Zero is coming...

one by one you will realise that you the "investor" are subsidising someone else's life style.

You then like me will leave the house rental market.

It is a business of fools for fools.

You just need to work it out for yourselves, one by one.

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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Sydneyite
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Chris
25 Sep 2014, 10:58 AM
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.
Peter's numbers are correct, and I know exactly what I am talking about. They are from official ATO data - the deductions claimed include all the things you mention. Whether people choose to vary their PAYG tax garnished from wages/salaries on weekly/monthly or whatever basis (via submitting a PAYE tax witholding variation to the ATO each year), or wait until their tax return is lodged to get a tax refund, makes no difference to the data being discussed., or the amounts being claimed as deductions.

Quote:
 
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.
You misunderstand those numbers. In FY 11/12, the total net aggregate tax deduction claimed by rental property owning tax-payers against "other" non-rental income was $8B, which equates to roughbly $3B of actual tax revenue "forgone" to the government as a result (based on a 38.5% average marginal tax rate). These numbers are available from the ATO here: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-statistics/Taxation-statistics-2011-12/ and have been referenced / mentioned / analysed in numerous articles available online.

I don't know why you seem to think that "costs to run/maintain" their properties, depreciation, etc, are somehow different to the "accumulated costs" claimed as a tax deduction? They are all the same thing - deductible rental property costs that taxpayers claim against their total income. The figures you quote are total cost figures, which are first deducted against the rental income received - only the left over amount (ie the amount costs exceed rental income by) represents the "negatively geared" deduction portion that would be "saved" if NG were not allowed. Even if negative gearing were removed - all PIs would still be entitled to claim their costs against their rental income! So you cannot count those amounts as "revenue foregone". :re:

Once again, the bottom line is that in aggregate, the amount of "negative gearing" tax deduction for all PIs in FY12 was $8b, equating to a total tax refund / saving of $3B. These are the numbers. If NG was removed, that $3B is the only thing that would change. And even then, it would just be quaranteened and claimed back in the future either against rental income or capital gains tax liability on disposal, so the only "saving" to the government would be the time value of that $3B.
Edited by Sydneyite, 25 Sep 2014, 04:38 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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ThePauk
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Saul Eslake slams HIA on negative gearing

https://www.youtube.com/watch?v=K2I80WEVKE4&feature=youtu.be&list=UUi3WZlKputf4Kv6AFDiLYVg
Edited by ThePauk, 25 Sep 2014, 11:38 AM.
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peter fraser
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Sydneyite
25 Sep 2014, 11:16 AM
Peter's numbers are correct, and I know exactly what I am talking about. They are from official ATO data - the deductions claimed include all the things you mention. Whether people choose to vary their PAYG tax garnished from wages/salaries on weekly/monthly or whatever basis (via submitting a PAYE tax witholding variation to the ATO each year), or wait until their tax return is lodged to get a tax refund, makes no difference to the data being discussed., or the amounts being claimed as deductions.


You misunderstand those numbers. In FY 11/12, the total net aggregrate tax deduction claimed by rental property owning tax-payers against "other" non-rental income was $8B, which equates to roughbly $3B of actual tax revenue "forgone" to the government as a result (based on a 38.5% average marginal tax rate). These numbers are available from the ATO here: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-statistics/Taxation-statistics-2011-12/ and have been referenced / mentioned / analysed in numerous articles available online.

I don't know why you seem to think that "costs to run/maintain" their properties, depreciation, etc, are somehow different to the "accumulated costs" claimed as a tax deduction? They are all the same thing - deductible rental property costs that taxpayers claim against their total income. The figures you quote are total cost figures, which are first deducted against the rental income received - only the left over amount (ie the amount costs exceed rental income by) represents the "negatively geared" deduction portion that would be "saved" if NG were not allowed. Even if negative gearing were removed - all PIs would still be entitled to claim their costs against their rental income! So you cannot count those amounts as "revenue foregone". :re:

Once again, the bottom line is that in aggregate, the amount of "negative gearing" tax deduction for all PIs in FY12 was $8b, equating to a total tax refund / saving of $3B. These are the numbers. If NG was removed, that $3B is the only thing that would change. And even then, it would just be quaranteened and claimed back in the future either against rental income or capital gains tax liability on disposal, so the only "saving" to the government would be the time value of that $3B.
Thanks Sydneyite you explained it much better than I could have.

I'm more than willing to have an intelligent discussion about the long term effects of NG removal, but first this emotional drivel about the removal saving the budget or collapsing home prices needs to be put in perspective to allow that debate to occur.

To constantly lead people astray by not highlighting the actual real dollar effects when it's obvious that the majority of bloggers/commenters don't grasp these fundamentals is IMHO doing them a great injustice.

PS Gunna - very sorry to hear that you are still suffering terribly from "Portnoy's Complaint" at your age. You are always in our thoughts. Best of luck.

Any expressed market opinion is my own and is not to be taken as financial advice
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ThePauk
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Sydneyite
25 Sep 2014, 10:58 AM
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:
And why do you think that might be?
Could it be the APF has the reputation for trolls?
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Sydneyite
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ThePauk
25 Sep 2014, 12:27 PM
Sydneyite
25 Sep 2014, 10:58 AM
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:
And why do you think that might be?
Could it be the APF has the reputation for trolls?
Well you of all people should know the answer to that Pauk! Especially as you are one of only a handful of people to ever be banned from *this* very open and non-censored site, for repeated, awesomely trollish behaviour! :re:

But I suspect that's not the reason why MB does not allow the mere mention of APF - the reason is that the MB bloggers are self-opinionated hypocriytes who can't stand to have certain "scared cow" views questioned or debated, or worse still, proven to have been wrong.... Or to have their duplicitous positions and hypocracy pointed out or debated. It upsets the circle jerking bear-porn lapping audience that they are trying so hard to cultivate (and rip-off in many cases based on the debacles over auto-renewed subscription fees, lack of refunds for defunct services etc).... and APF is a place where their deficiencies are often openly discussed and exposed. They don't like this forum for those reasons I think. :dry:
Edited by Sydneyite, 25 Sep 2014, 08:01 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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peter fraser
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ThePauk
25 Sep 2014, 11:31 AM
Well good for Saul. He has every right to voice his opinion as do the rest of us.

Now that we have understood and accepted some basic facts about what would happen on the tax issue, we should probably look at what the removal of NG would do to:-

1. House Prices
2. Investor demand
3. Future rents
4. Housing supply
5. the "new" type of housing investor that may emerge if NG was removed.


My thoughts are that initially house prices would fall although there would need to be other factors in the market than just the removal of NG to initiate more than modest falls. The fall would be as a result of falling investor demand. I see no reason why rents would fall.

The second phase would be a fall in new supply as demand and importantly prices fell. That would increase yields which would attract interest from investors who could adapt to the new tax regime. Rents would then rise further as the new more sophisticated investor looked for bargains and under rented dwellings that offered the potential for higher returns.

Mum and Dad investors would gradually be replaced in the market. It might allow more PPOR buyers into the market.

Housing supply would bottom forcing prices up again.

Edited by peter fraser, 25 Sep 2014, 02:36 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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GloomBoomDoom
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It should be removed completely and every cent that has been claimed since NG became available paid back within the calendar year or result in lengthy jail time.
MSE
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zaph
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Chris
25 Sep 2014, 10:58 AM
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.
English please?
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