Welcome Guest [Log In] [Register]


Reply
  • Pages:
  • 1
  • 5
Capital Gains Tax and Negative Gearing; Myths
Topic Started: 9 Feb 2011, 04:18 PM (6,418 Views)
Strindberg
Member Avatar


I'll start with this one, repeated only 2 days ago by Delusional Economics:

http://macrobusiness.com.au/2011/02/trouble-on-the-western-front/

Quote:
 
I guess that it all started in the early 1980s with the introduction of negative gearing.


Negative Gearing has always been around. It was partially removed for 2 years from 1985 to 1987. I say partially because it was only stopped for new transactions. People were still entitled to claim NG for previous purchases. Losses on new transactions could be deferred and used against gains later. In fact when the full NG was restored, in 1987, any losses for transactions between 1985 and 1987 could immediately be set against other income. So NG never really went away.

Another myth is that the CGT 50% discount for holding 12 months is a modern perk for property investors and has pushed up property prices.

The first thing to point out is that before 1985 no one paid CGT. Property investors before 1985 had a great advantage over property investors nowadays. Property investing is penalised now compared to pre-1985.

The second point is that the 50% discount introduction in 1999 was coupled the removal of CPI indexing. This has the effect that for all modest capital gains, up to twice the inflation rate, the tax payable is now greater than it was before 1999, before the discount system came in.
For example, take a one year gain (after cost base allowances etc) of X% on $1m, marginal tax rate of 48% and CPI of 3%:

a) X=1.5%
pre 1999 tax = ZERO,
post 1999 tax = $3,600

b) X=3%
pre 1999 tax = ZERO
post 1999 tax = $7,200

c) X= 4.5%
pre 1999 tax = $7,200
post 1999 tax = $10,800

d) X = 6%
pre 1999 tax = $14,400
post 1999 tax = $14,400
Edited by Strindberg, 11 Feb 2011, 01:24 PM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
Profile "REPLY WITH QUOTE" Go to top
 
raveswei
Default APF Avatar


Quote:
 
The first thing to point out is that before 1985 no one paid CGT. Property investors before 1985 had a great advantage over property investors nowadays. Property investing is penalised now compared to pre-1985.


Not true!

Quote:
 
Capital gains tax
Prior to 1985, Australia had no general tax on capital gains, with most capital gains excluded from the income tax base. Of the capital gains taxes that were in operation, the most important was that applying to gains from property held for less than one year, which was introduced in the early 1970s.

http://www.treasury.gov.au/documents/1156/HTML/docshell.asp?URL=01_Brief_History.asp

This was a kind of a property speculation tax (in most cases taxed at the top marginal rate that was 65-70% in 70s)
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

Profile "REPLY WITH QUOTE" Go to top
 
barns
Member Avatar


Rav. That only applied to property held for less than a year. Who does that? You are seriously an odd little man if you think that is a refutation of strindbergs point.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
Profile "REPLY WITH QUOTE" Go to top
 
Sunder
Default APF Avatar


raveswei
9 Feb 2011, 04:37 PM


Not true!



http://www.treasury.gov.au/documents/1156/HTML/docshell.asp?URL=01_Brief_History.asp

This was a kind of a property speculation tax (in most cases taxed at the top marginal rate that was 65-70% in 70s)
Eh?

Aren't you just confirming what he just said?


Prior to 1985, if you held a property under a year, you paid income tax on it, otherwise paid no tax on it.
After 1985, if you held a property under a year, you paid income tax on it, otherwise you pay capital gains tax on it.

The only change was going from no tax to CGT at half income tax. Ergo, that's a new tax, isn't it?
Property speculation is a type of gambling... But everyone knows that in gambling, the house always wins in the end.
Profile "REPLY WITH QUOTE" Go to top
 
raveswei
Default APF Avatar


barns
9 Feb 2011, 04:46 PM
Rav. You are seriously an odd little man if you think that is a refutation of strindbergs point.
It is refutation of the statement that:

Quote:
 
before 1985 no one paid CGT.


Quote:
 
That only applied to property held for less than a year. Who does that?


Many PI who bought recently will do that. Luckily for them there will be no any capital gains :lol:
Edited by raveswei, 9 Feb 2011, 04:59 PM.
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

Profile "REPLY WITH QUOTE" Go to top
 
Sunder
Default APF Avatar


raveswei
9 Feb 2011, 04:52 PM
It is refutation of the statement that:







Many PI who bought recently will do that. Luckily for them there will be no any capital gains :lol:
Nobody did... They paid income tax on their job of trading houses.

I buy and sell shares on a weekly basis. any gains I make are considered income, because it's considered trading, not investing, and therefore, I am after speculative gains, not capital gains.

Capital gains tax is an ADDITIONAL tax, on top of the income tax you pay for speculating short term in a tradable item.
Property speculation is a type of gambling... But everyone knows that in gambling, the house always wins in the end.
Profile "REPLY WITH QUOTE" Go to top
 
raveswei
Default APF Avatar


Sunder
9 Feb 2011, 05:01 PM
raveswei
9 Feb 2011, 04:52 PM
It is refutation of the statement that:







Many PI who bought recently will do that. Luckily for them there will be no any capital gains :lol:
Nobody did... They paid income tax on their job of trading houses.

I buy and sell shares on a weekly basis. any gains I make are considered income, because it's considered trading, not investing, and therefore, I am after speculative gains, not capital gains.

Capital gains tax is an ADDITIONAL tax, on top of the income tax you pay for speculating short term in a tradable item.
Read again:

Quote:
 
Capital gains tax
Prior to 1985, Australia had no general tax on capital gains, with most capital gains excluded from the income tax base. Of the capital gains taxes that were in operation, the most important was that applying to gains from property held for less than one year, which was introduced in the early 1970s.


Maybe it was not called CGT but it was tax on capital gains, and you didn't need to be trader to be taxed.

By your definition there is no CGT in US, because it is taxed as an income?
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

Profile "REPLY WITH QUOTE" Go to top
 
Sunder
Default APF Avatar


raveswei
9 Feb 2011, 05:12 PM
Read again:




Maybe it was not called CGT but it was tax on capital gains, and you didn't need to be trader to be taxed.

By your definition there is no CGT in US, because it is taxed as an income?
Oh in that case, maybe any shop holding stock for over a year should ask for a CGT discount then? After all, if they bought an item and sold it for more than they bought it for, they don't need to be a trader to be taxed...

US law has no bearing on Australian law. The ATO says people who sell items within a year of acquiring them are traders and the money is taxed as income, not capital gains (else you open up the can of worms I described above). People who hold items for their return and eventually sell them at a gain are investors, and need the inflation component removed from the taxable amount, hence the discount. If that's not a perfect system, nobody said it was. It's just what the ATO decides is most fair (or at least easiest to implement).

Hell, according to the GST bill, the Commission of Taxation has the power to "deem something to have happened that had in fact not happened and to deem something not to have happened that had in fact happened". Hell, these guys have the power to change reality!

Why are there so many myths and misunderstandings about CGT and NG? It's basic, clear, equally applied law, whether you're trading or investing in stocks, precious metals, housing, or anything else.
Property speculation is a type of gambling... But everyone knows that in gambling, the house always wins in the end.
Profile "REPLY WITH QUOTE" Go to top
 
BubbleBoy
Member Avatar


Sunder
9 Feb 2011, 05:50 PM
The ATO says people who sell items within a year of acquiring them are traders and the money is taxed as income, not capital gains (else you open up the can of worms I described above).
It says NO such thing.

Yes, such gains are ineligible for the 50% discount, but that doesn't mean they are treated as an income rather than capital gain.

Yes, proceeds of a trading business are income - but that doesn't mean that items sold within a year are automatically deemed to be proceeds from trading.
Edited by BubbleBoy, 9 Feb 2011, 06:10 PM.
My name is based on a Seinfeld character, not on a belief of a housing bubble.
Profile "REPLY WITH QUOTE" Go to top
 
Rastus2
Member Avatar


BubbleBoy
9 Feb 2011, 06:07 PM
It says NO such thing.

Yes, such gains are ineligible for the 50% discount, but that doesn't mean they are treated as an income rather than capital gain.

Yes, proceeds of a trading business are income - but that doesn't mean that items sold within a year are automatically deemed to be proceeds from trading.



This is correct... it does not matter what the asset, if can be sold within 1 day at a profit/loss and that does not make you a trader.

"Repeated" acts of short term trading make you a trader...

The ATO has it's own ideas of what "repeated" means... however a 1 off short term hold of an asset is not an automatic trigger.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply
  • Pages:
  • 1
  • 5



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy