One of the comments in response to that article:
Negative gearing is a vehicle for me to save money for my retirement. Because I'll be a 'rich investor', I won't be able to collect a pension when I retire and so the taxpayer wins. When I eventually sell the property the government will tax me on the profits, the government wins again. I'm currently supplying a rental property to the market, renters win.
So there's another side to the story, it's not all black and white.
The journalistic quality of the ABC is in slow decline, Britney Spears tells me so.
He makes a good point!
I actually dont agree with negative gearing.
I do think expenses relating to a property should be able to be deducted against income from property - and losses carried forward to be used against future property income, or capital gains from the sale of property - but I dont think you should be able to offset property losses against other types of income.
It is just basically unfair and unjust.
I dont think that phasing out negative gearing would have a long term major effect on our housing market. Yes there would be a transition period, but overall the percentage of investors who would NOT invest because they could not negative gear is relatively small.
The issue being solved by phasing out negative gearing is not rental supply - changing the tax is not going to fix that. The issue being addressed is tax. Its revenue for the government - and correcting the rules on negative gearing would close a loophole that allows people to reduce their tax.
I do think the CGT discount is a problem. It costs the government a lot of money - but reducing it or phasing it out WOULD cause a lot more problems. People would rush to sell assets before it changed, and therefore it would have a huge impact on the share market, the housing market, managed investment trusts, super funds and all kinds of other funds. I dont see that being addressed by any government any time soon.
(for the record - I do have investment properties)
As far as capital gains are concerned, I don't think it's fair to not allow any discount whatsoever. Imagine you deposit $100 in your account in 1980. And let's say for example that for that $100 you could have bought groceries for an entire household for a fortnight. If you withdraw it today you could maybe buy groceries for an entire household for 2 days. This is why you can't expect taxpayers to pay tax on 100% of their capital gains. It's actually unfair, extremely unfair. The indexation method made sense because of increased the cost value of the property in line with inflation. So you bought a property for $200,000 in 2006 and sold it today for $400,000 - but in 10 years let's say inflation was around 4% per year. So the present value is therefore $296049 and the profit is actually $103951. Assuming no other costs, this would be the taxable capital gain. It's not as good as it would be under a 50% discount method but certainly fairer.
I don't agree with getting rid of negative gearing but I am also not opposed to changes to make it "fairer".
And I have investment properties too but they are all positively geared.
Negative gearing pushes first home buyers out of the market, or they pay a premium for it.
So arguing that investment properties are providing rental property are probably the reason tenants are renting in the first place.
Pregnant for the first-time?
Not sure where to start? We can help!