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  1. #261
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    "However, even here, if you dig into the detail you will find that the lawyers who negatively gear claim an average $2,300 extra in rental losses than their law enforcement and emergency services counterparts, again highlighting how higher income groups tend to have more properties and bigger tax write-offs."

    Speaking of spin.. How exactly does an extra $2300 extra in rental losses claimed by lawyers over police officers "highlight" higher income group getting bigger tax write-offs and owning more properties?

    What does one have to do with the other? Firstly, even if the deductions were identical, higher income earners would naturally get a higher tax write off because they are on a higher tax bracket.

    Secondly, you can own one property and have a $50k loss and own 10 properties and make a profit. The salary you earn has nothing to do with it.

    And can I just point out, an average lawyer salary is around $200k+ give or take? An average police officer or emergency services office salary is around $80k (not including fringe benefits). Saying that the higher income earners claiming an extra $2300 on average are taking advantage of the system is ludicrous. When you're looking at such a huge income discrepancy, what's $2300? Just a stupid comparison that is not even worth considering.

  2. #262
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    Quote Originally Posted by BigRedV View Post
    I don't think you really believe that.
    I don't believe that one group is necessarily smarter at investing than another. No.

    But if you're a taxpayer and you have a positively geared property, you probably made a better investment decision somewhere down the line than the person who is making tens of thousands of dollars of losses every year. Sure you get a tax break, but you're still making a loss. A small detail that a lot of people overlook when they get excited about their huge tax refunds.

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  4. #263
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    Default Negative Gearing - Politics talk

    Quote Originally Posted by witherwings View Post
    I don't believe that one group is necessarily smarter at investing than another. No.

    But if you're a taxpayer and you have a positively geared property, you probably made a better investment decision somewhere down the line than the person who is making tens of thousands of dollars of losses every year. Sure you get a tax break, but you're still making a loss. A small detail that a lot of people overlook when they get excited about their huge tax refunds.
    The loss is about reducing taxable income. So yes, it's a loss but at the end of the day people wouldn't do it if it wasn't serving them a purpose. They expect they will make large capital gains and then only pay tax on half of it. It's not like they're buying property as a community service.

    In 1999 when John Howard introduced the discount, it created a sharp spike in house prices. Why? Because there were more buyers out there.

    In the financial year before the 1999 discount, investors reported a net rental income of $219 million. Yet the next financial year, investors reported almost $.5 billion in losses.

    The cgt is Australia's 6th largest tax expenditure.

    But yep, let's scrap the $400 school kids bonus for disadvantaged families because it's costing the country too much!
    Last edited by BigRedV; 27-04-2016 at 22:17.

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  6. #264
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    Quote Originally Posted by BigRedV View Post
    The loss is about reducing taxable income. So yes, it's a loss but at the end of the day people wouldn't do it if it wasn't serving them a purpose. They expect they will make large capital gains and then only pay tax on half of it. It's not like they're buying property as a community service.
    Yes I get that, but the person with the positively geared investment is also making a capital gain. The difference is that they are not losing money every year.

  7. #265
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    Quote Originally Posted by BigRedV View Post

    In 1999 when John Howard introduced the discount, it created a sharp spike in house prices. Why? Because there were more buyers out there.

    In the financial year before the 1999 discount, investors reported a net rental income of $219 million. Yet the next financial year, investors reported almost $.5 billion in losses.
    All prices went up in 2000 because of the GST.

    I agree that the discount made capital gains more attractive but for a long term investor, it was not going to make much difference if they were otherwise going to use the indexation method.

    As for the huge increase in losses claimed, you need to consider a 10% increase in real estate commission fees, strata levies, repairs and maintenance, travel costs, new assets purchased.. Just between 30th June 1999 and 30th June 2000.

    Plus the standard variable interest rate increased as well. It went from 6.5% in June 1999 to 7.8% in June 2000, a 1.3% increase - this is massive, when you consider around 700,000 investors in 1999 (and in fact, this number went down in 2000, so it wasn't due to a huge number of people getting into the market who weren't there before - it's possible that a bunch of established investors took this opportunity to sell and get a good discount, and were replaced by new investors who had higher mortgages).

    A cash rate increase is to be expected when you have 10% inflation and the RBA wanting to reign this in. So yes, huge increase in losses but there is an explanation for it which has more to do with other factors rather than the CGT discount.

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  9. #266
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    I don't believe housing prices went up in Sydney because of GST, they consistently went up because of the increase in the population , the low interest rates and the lack of new dwellings being built, investors may have slightly increased with tax breaks but the first home buyers grant really pushed our prices up in the area I sell in plus after the GFC people felt safer with property then they did with the stock market

    Since 2000 our local councils population has increased by over 10,000 people and is still climbing, I can guarantee you there has not been 10,000 new homes built

    While I agree limiting negative gearing to 1 or 2 properties is fair the government needs to release new land , lower the stamp duty ( average stamp duty on houses in our suburb is $63,000 and $40,000 on Sydney's average suburb price) and improve our rail/transport systems so there is a quicker commute to the city from the outer suburbs

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  11. #267
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    Quote Originally Posted by witherwings View Post
    All prices went up in 2000 because of the GST.

    I agree that the discount made capital gains more attractive but for a long term investor, it was not going to make much difference if they were otherwise going to use the indexation method.

    As for the huge increase in losses claimed, you need to consider a 10% increase in real estate commission fees, strata levies, repairs and maintenance, travel costs, new assets purchased.. Just between 30th June 1999 and 30th June 2000.

    Plus the standard variable interest rate increased as well. It went from 6.5% in June 1999 to 7.8% in June 2000, a 1.3% increase - this is massive, when you consider around 700,000 investors in 1999 (and in fact, this number went down in 2000, so it wasn't due to a huge number of people getting into the market who weren't there before - it's possible that a bunch of established investors took this opportunity to sell and get a good discount, and were replaced by new investors who had higher mortgages).

    A cash rate increase is to be expected when you have 10% inflation and the RBA wanting to reign this in. So yes, huge increase in losses but there is an explanation for it which has more to do with other factors rather than the CGT discount.
    The gst wasn't introduced until 1st July 2000. So that means in the financial year 1998-1999 investors reported a net rental income of $219 million and the financial year 1999 - 2000 investors recorded a net rental loss of $500 million. That is a difference of $719 million and it had nothing to do with the gst because it hadn't even been introduced.

  12. #268
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    Quote Originally Posted by witherwings View Post
    All prices went up in 2000 because of the GST.
    I would have thought the first home buyers grant introduced around then had more of an effect on house prices than GST. House prices appeared to shoot up overnight when it first came in because people suddenly had a bigger deposit and could consequently borrow more. When the GST was introduced, FTB A increased quite substantially as well, so I guess that also had an effect on the amount people were willing to borrow.

    The GST would have affected the cost to build a new home but I can't imagine it would have affected the price of an already established house.
    Last edited by SSecret Squirrel; 28-04-2016 at 19:06.

  13. #269
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    Quote Originally Posted by BigRedV View Post
    The gst wasn't introduced until 1st July 2000. So that means in the financial year 1998-1999 investors reported a net rental income of $219 million and the financial year 1999 - 2000 investors recorded a net rental loss of $500 million. That is a difference of $719 million and it had nothing to do with the gst because it hadn't even been introduced.
    Sorry! You're right of course. I was confused because the GST act was introduced in 1999.

    What financial year are you referring to when you talk about a "sharp spike" in housing prices? I haven't actually seen a sharp spike in 1999-2000 or 2000-2001. Just the usual annual growth during these periods.

    Furthermore, the net rental income in the 1999 financial year AND 2000 financial year were both positive. It didn't become negative until 2001 financial year. Though it did reduce between 1999 and 2000 financial years, probably due in large part to the increase in variable interest rates that I mentioned before.

    I'm not sure how the introduction of a CGT discount would suddenly increase rental losses.. What is the connection exactly?

    In 1999-2000 financial year, total number of investors according to ATO was 1.281m and total net rental income was $219m.

    In 2000-2001 financial year, total number of investors according to ATO was 1.308m and total net rental income was -$696m.

    The fact that it so significantly reduced in 2001 supports my theory that the GST increased property costs and contributed to the losses. That, combined with rising interest rates. In the 2001 financial year, variable interest rates went above 8%.

    Source - regarding historical variable interest rates: http://www.loansense.com.au/historical-rates.html

    Source - regarding housing prices and rental losses: http://www.propertyobserver.com.au/f...ture-soos.html

    My point is - capital gains discount was not a contributor to a significant housing price increase (there was none!) or rental losses.

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  15. #270
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    Just came across an interesting article today on yahoo finance about housing affordability. There's a graph toward the bottom of the article that shows an inverse correlation in recent years between housing prices and interest rates.

    a27aa5d0-0cf0-11e6-af25-29c7fdbf58b6_graph2.jpg

    https://au.finance.yahoo.com/news/ba...031844626.html
    Last edited by witherwings; 29-04-2016 at 14:01.


 

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