I wasn't saying that only rich people have properties and they are abusing the system - not at all - in fact, what i was saying is that negative gearing is just one of many ways that a lot of high wealth tax payers are excessively minimising their tax. I know it's not illegal, I'm a tax professional and deal with this every single day. It's my job to help such people minimise their tax but I can't help feeling that there is something morally wrong with the tax law. The truth is, a LOT of high income earners get a far greater tax benefit out of our extremely problematic tax system, than middle & low income earners. Negative gearing is not the cause and getting rid of it is not the solution.
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17-02-2016 10:10 #11
17-02-2016 10:34 #12
a middle of the road salary earner pays tax on their gross salary of $85k. they're not property investors as they don't have the extra cash to do so and they're not entitled to many deductions beyond the standard work-related bits and bobs.
compare to a high net wealth individual who is trading out of a discretionary trust. the trust net income is able to be distributed in the most tax effective manner as determined by the accountant each year. say out of the trust's net taxable income of $400k, he received $100k. because he has more wealth, he has a negatively geared investment property which reduces his taxable income by $15k. so he's down to paying tax on $85k. because he also has excess cash to throw into super, he makes a $30k concessional super contribution for himself, reducing his taxable income to $55k. so mr moneybags, instead of paying tax on $400k, pays tax on $55k and the middle of the road salary earner is paying tax on $85k.
but there also need to be incentives for the wealthy to keep our economy going. it seems reasonable to me that there are deductions and concessions available for those with more money. these concessions are accessible by everyone so long as they fit the criteria.
most low income earners probably pay next to no tax, the first $18.2k is tax free, plus they get the low income tax offset, Medicare levy exemption under a certain threshold etc etc. I don't think the low income earners are being hard done by by any stretch of the imagination.
the middle income earners do cop it a bit I agree.
17-02-2016 10:52 #13
Change to Negative Gearing tax breaks
I have plenty of clients who earn around $85k and own investment properties. In fact, anyone can own an investment property if they have certain lifestyle choices that enable that decision.
I was referring to a lot (not all) high income earners who buy multiple investment properties, and use the negative gearing to bring their taxable income right down to the tax free threshold. It's not illegal, they are absolutely entitled to do it - but is it ethical to have a system that allows this? I don't think it is.
Edit: and as I said a couple of times above, this is only one of the ways that tax is excessively minimised. I can think of a hundred other ways which I have seen and even given advice on.
Last edited by witherwings; 17-02-2016 at 10:55.
17-02-2016 10:56 #14
not looking to argue either, I agree with your points.
I don't know if there is ever such thing as a totally fair system. someone will always look at someone else and think hey that's not fair!
and of course an investment property is possible on $85k salary, I was heavily generalizing
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