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A Question for the Group on Negative Gearing
Topic Started: 25 Sep 2014, 08:35 AM (2,572 Views)
stinkbug
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ThePauk
25 Sep 2014, 12:27 PM
And why do you think that might be?
Could it be the APF has the reputation for trolls?
MB sells subscriptions for telling people what they want to hear, it's a complete conflict of interest, whereas APF is free and uncensored.
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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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propertymogul
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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


Some of it will be lost. For all of the negatively geared investors that have a net rental loss by the time they sell the property, it would never be recovered unless they then in the future bought another investment property and held it for long enough to offset the accumulated rental losses on both the old property and new property. Many amateurs would have net rental losses that would never be offset against rental gains (due to selling prior to turning a rental profit), so those tax deductions would be lost to those investors.
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Sydneyite
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propertymogul
25 Sep 2014, 03:41 PM
Some of it will be lost. For all of the negatively geared investors that have a net rental loss by the time they sell the property, it would never be recovered unless they then in the future bought another investment property and held it for long enough to offset the accumulated rental losses on both the old property and new property. Many amateurs would have net rental losses that would never be offset against rental gains (due to selling prior to turning a rental profit), so those tax deductions would be lost to those investors.
Saul Estlakes proposal is that the accumulated losses could also be added to the cost base when calculating CGT upon sale of the asset.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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peter fraser
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propertymogul
25 Sep 2014, 03:41 PM
Some of it will be lost. For all of the negatively geared investors that have a net rental loss by the time they sell the property, it would never be recovered unless they then in the future bought another investment property and held it for long enough to offset the accumulated rental losses on both the old property and new property. Many amateurs would have net rental losses that would never be offset against rental gains (due to selling prior to turning a rental profit), so those tax deductions would be lost to those investors.
We all hear stories about people selling at a loss but the reality is most make a profit on sale. Any investor who sold would then be allowed to claim any unclaimed tax deductions from the sale profits. If there were still unused loss forwards they would be carried forward until they bought again.

Because tax is only levied on 50% of the profits there would be a 50% loss. To lose it all they would need to sell at a loss and never buy an IP again. That set of circumstances wouldn't happen very often.

Any expressed market opinion is my own and is not to be taken as financial advice
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Chris
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peter fraser
25 Sep 2014, 11:08 AM



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.
That's a pretty poor assertion Pete, you claim that the overall economy benefits from NG property investment and that is obscenely biased and unquantifiable wrong.

I think you are saying the general public ultimately win because the banks profits are higher, then a flow on being dividends are higher (or should be), through things like super shares in banks (which almost all funds have and almost everyone has super) we all ultimately get richer???!!

Wow, sounds like an amazing flawless system!!

Again everything you assert is with a single minded determination that without NG the system we see before us wouldn't exist and it's just plain wrong. I would explain it to you but your ability to think objectively about anything on this topic appears fairly compromised. I will reiterate for the millionth time, I am not against anyone using NG, I am against the fact that it exists.

I am also against anyone who attempts to, primarily through deception and misinformation, attempt to show NG as an asset/a cost efficient tax scheme and what we should consider a blessing. You and others assert new homes wouldn't be built, builders wouldn't gave jobs, banks would collapse and tax revenues (stamps, rates GST etc) would evaporate if NG was abolished and it is WRONG.
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peter fraser
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Chris
25 Sep 2014, 04:50 PM
That's a pretty poor assertion Pete, you claim that the overall economy benefits from NG property investment and that is obscenely biased and unquantifiable wrong.

I think you are saying the general public ultimately win because the banks profits are higher, then a flow on being dividends are higher (or should be), through things like super shares in banks (which almost all funds have and almost everyone has super) we all ultimately get richer???!!

Wow, sounds like an amazing flawless system!!

Again everything you assert is with a single minded determination that without NG the system we see before us wouldn't exist and it's just plain wrong. I would explain it to you but your ability to think objectively about anything on this topic appears fairly compromised. I will reiterate for the millionth time, I am not against anyone using NG, I am against the fact that it exists.

I am also against anyone who attempts to, primarily through deception and misinformation, attempt to show NG as an asset/a cost efficient tax scheme and what we should consider a blessing. You and others assert new homes wouldn't be built, builders wouldn't gave jobs, banks would collapse and tax revenues (stamps, rates GST etc) would evaporate if NG was abolished and it is WRONG.
Chris you had this to say -
Quote:
 
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!!


Perhaps I misunderstood - I thought that you meant the interest cost was lost forever in the system and so it was a drain on the economy, so I explained that it wasn't so.

I offered no comment on NG from a moral point of view.

Truly I don't understand your points, although I do see that you think that IP owners can leave them idle and still claim the costs off their tax. They will get away with that for a time if the property is genuinely on the rental market but hasn't found a tenant, but they won't get away with it for long. Others with a better knowledge of the tax laws might add more detail to that. As a property owner I always wanted a tenant as quickly as possible. I doubt that many would have a different view.

I haven't said the world will come to an end if NG is removed. I think that it's better to start from a point where everyone has an understanding of the actual tax implications and then tackle the more difficult predictions of what may result from any change.
Any expressed market opinion is my own and is not to be taken as financial advice
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zaph
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I am Chris - hear me roar.
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miw
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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.
You really are in denial. Those numbers come straight out of the spreadsheet on the ATO website.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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Drgonzo
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The problem is speculative demand in existing dwellings. What we want is investment in new dwellings because it benefits the economy on multiple levels. I am a fan of allowing negative gearing on new builds but not existing. Also the problem is that banks encourage investment in existing stock because they make it much harder to obtain construction loans.
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miw
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Sydneyite
25 Sep 2014, 04:03 PM
Saul Estlakes proposal is that the accumulated losses could also be added to the cost base when calculating CGT upon sale of the asset.
Turn an ordinary income loss into negative capital gain? That does not sound fair to me.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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