Care to sell us on the benefits of the National Rental Affordability Scheme (NRAS) and the Commonwealth Rent Assistance (CRA) program ?

Or are these schemes just so government can meddle further, while saving themselves expenditures they should be making ?

The National Rental Affordability Scheme (NRAS) promotes purchases to receive ~$9,981 implied as tax free incentives, every year for 10 years, from government corporate entities, for new dwellings on condition they rented to low- and moderate-income households at 20% below market rates.

http://en.wikipedia.org/wiki/National_Rental_Affordability_Scheme

"... Dwellings will be rented to ‘eligible tenants’. Dwellings will be rented for a period of 10 years. Dwellings will be rented at a rate that is at least 20% below market rate. Dwellings must either: not have been lived in as a residence or not have been lived in as a residence since having been made fit for occupancy where otherwise the dwelling was recognised as being uninhabitable or if it has been converted to create additional residences, then a part of the dwelling or building that is capable of being lived in as a separate residence must not have been lived in as a separate residence. Dwellings will comply with State, Territory and Local Government planning and building codes and requirements..."

This is government reducing their commitments for public housing as landlords, to house mostly semi-government employees.

Landlord investors risk dealing with governments, who change the rules wherever, whenever it suits them.

Pay more attention to our corporate landowners permitted by Commonwealth's ALR(NT) to ignore tenancy laws, refuse leases to tenants and residents so remain dependent upon public funds to construct housing, as no leases means no private investments.

Whether through income tax or capital gains tax all investment cost deductions are ultimately allowed and realized. Gov't can not escape this so why remove annualized NG?

Why remove NG on housing while it is maintained for other investment classes, such as a share portfolio bought from borrowings?

On another matter, why is state stamp duty on selling shares nil but on a property purchase it's absolutely massive? Removing the GST from food was a smokescreen for this state skullduggery.

Concur completely with the Author.
Rents are governed by demand and little else. i.e., we just completed a family reunion/holiday, in an average family/pet friendly, 5 Brm, 3 Bthrm, seaside home.
Around 3.5 hours north, given the further away from a major area, we seemed to go, the less the rent was!
Even so, the $2,000.00 a week, wasn't exactly cheap!
However, divided between 8 adults and a couple of, [are we there yet,] juveniles, not too bad, and beat the hell out of charge like wounded bulls, hotels or motels!
Jettisoning negative gearing, [welfare for very rich coalition voters,] would add as much as 10 billion to the budget bottom line, and perhaps even create a sizable surplus.
And indeed, add immensely to Labour's growing worldwide reputation, as much better economic managers, without harming them one whit, in the only poll that actually counts!
And one trending towards a very closely run race!
Where economic credentials, could decide, who we trust with our economy?
Say what you will; [gossip, rumour, sleaze, muck rake,] at the end of the day, its still the hip pocket, or the economy stupid, that ultimately decide election outcomes!
If lay-a-bout lazy Landlords want to write of some of their tax liability, then schemes like NRAS still beckon; or indeed, purpose built seaside holiday homes.
Lets see, block of elevated land, 50-70 grand, really nice house built from the ground up, replete with pool, a bore and solar system, 150-170 grand. Only a fool with money burning a hole in a pocket would pay more, for land that could be inundated, before it's inherited!?
50-70% occupancy, times $2,000.00. Around 50-70 grand a year!
And an exponentially increasing return, over the life of the property, which could still appreciate by around 4% per?
Seen the way places like Hervey Bay are growing?
Who needs negative gearing?
Rhrosty.

In my last post, last paragraph I meant share purchases, not sales, sorry.

Rhrosty: "If lay-a-bout lazy Landlords want to write of some of their tax liability....."

You refer to myself, who is employed full-time or I'd have no income to negatively gear against.

As I pointed out in my last post, Whether it is via income tax deductions or capital gains tax deductions, all holding costs, including interest paid, must ultimately be allowed so Gov't will not gain any of the billions you imagine. NG simply allows interest deductions to be annualized. Nobody wins, it's an illusion.

Housing is a dirty, hands on investment (ever had a bad tenant?). Making it even less attractive would leave Gov't to pick up the ugly pieces, as Paul Keating had the sense to understand when reinstating NG.

Your holiday house experience is irrelevant as owners simply have less to negatively gear or shift into profit taxable at their marginal income tax rate. In a competitive market they charge what gives them optimal custom/return.

Hay Phil, tell me more about this $45 billion tax benefit extended to owner occupiers. I've been one of them for years & never seen a cent. Where do I apply?

Otherwise mate, I must say if this is an example of your comparative analysis, you might have to wait a bit for that doctorate. Of course that is if it requires more than an application, with 3 corn flakes packet tops enclosed to qualify.

Mostly all I can find is appeals to authority, & a pile of figures, apparently plucked from thin air. Do you really expect any thinking person to take as gospel a study commissioned by the Brotherhood of St Laurence.

I'm afraid all I can find here is a political rant, of little value. You'll have to do a lot better, with some convincing facts if you want to be taken seriously.

Incidental, I don't, & never ever would, own a domestic rental property. I am not masochist enough for that.

you have missed out on the mentality of the investor.

when Tom Uren as minister in the ACT brought in no rent rise for one year .a lot of investors sold out the rest had to factor in the possibility of interest rise and geared their rents accordingly . the shortage and cost of rent-able properties took 3 years to over come after he left

as an owner i am willing to pay capital gain when i sell.but consider neg.gearing makes it worth while to get into this market .take it away .and i will shift my capital

ben

I have a vague recollection that many years ago a government removed
offsetting interest payments on an investment property against other
income. The result was many rental properties went up for sale and
tennants were asked to leave.
Rents got so high the government had to remove that legislation.

There is a high amount of churn of property investors because the risks are high, the returns low and there is constant regulation change.

It is aspirational mum and dad investors who prop up the rental market. Most are sold into it by clever hard-sell scams of the white shoe brigade.

It is foolish to believe that the constant government shedding of its responsibility for welfare housing to private investors (read as mums and dads who know precious little about investment) and the regular re-jigging for more State control of rental housing without accountability will not some day result in a run by investors away from rental housing. The only surprise is that it hasn't happened already. Next time the small investors who provide the lion's share of housing and make considerable sacrifices to their own quality of life for the pleasure, might run and never come back.

my only investment property was a poor choice. It started by the would be Government homes tennant wrecking it. The cost and chances of recovery made it not worthwhile to pursue. For ten years now I have been providing cheap rent to another low income tennant. Though the property is negative geared I will still have made zilch from it. What puzzles me is the fact that if negative gearing was stopped thousands of people would be out of homes. The Government can't afford to house the ever growing numbers of generational unemployed and low income workers. No doubt their are those who have cashed in on the short term I suspect many negative gearers are simply everyday people to society a favour.

It's the standard pollie-speak, pea-and-thimble trick in operation here, Hasbeen.

>>Hay Phil, tell me more about this $45 billion tax benefit extended to owner occupiers. I've been one of them for years & never seen a cent. Where do I apply?<<

This is how that $45 billion "benefit" is calculated:

"$29.8 billion from the capital gains exemption of the family home".

Pure Alice-in-Wonderland logic.

Applying capital gains tax to sale of the family home would be a singular iniquity, so passing off exemption from it as a benefit is simply mendacious.

"$6.9b from the non-taxation of imputed rent"

Ah. More public-servant logic.

I don't earn any rent on my owner-occupied property, so I am permitted the indulgence of not being taxed on the rent that I don't receive. Classic.

"$4.8b from the exemption of imputed rent from the GST"

Even better. I am permitted not to pay GST on the rent that I don't get. Gee, thanks guys.

"$3.5b in exemption from state-based land taxes"

Yet another "exemption" from a tax that, in the context of an owner-occupied house, should not even be contemplated.

There you have it. $45b in "indirect assistance to owner-occupiers", every dollar of which is pure illusion, and doesn't actually require the taxpayer to put his hand in his pocket for one single zac.

Staggering.

Negative gearing is on par with investment so far as the evil nature of greed is concerned.
A handful rake in what should be distributed to stimulate the economy.

"A handful rake in what should be distributed to stimulate the economy"

That wouldn't be the mums and dads investors in residential real estate.

You only have to go along to a meeting of any of the property owners associations to find out the obvious, that the people attending are very ordinary, dressed no better than shoppers at an IGA in a cheaper suburb. Their cars parked outside are Korean four bangers and years past new.

These are the eternally optimistic, aspirational low income earners who do not have the wherewithal to take advantage of the advice and options available to salaried professionals and the like. They distrust other investment options, mainly due to lack of familiarity and a need to see their actual investment in front of them.

While it may be that the astute who live by their wits might occasionally make money from residential real estate, they are very few in number, take very high risks and have no inclination to hold property to lease out as a business.

Who then 'rakes in' $$ from property? Too easy for any who are interested in facts and have maths at secondary school level: it is YOUR government. All layers of government see property as a milch cow for taxes. As well, all layers of government are continually dabbling in policy affecting land development and housing. All levels of government are forever trying to pass their responsibilities for welfare housing to private owners. The results of the fiddling is always disruption and a costly shambles.

Government decisions in other areas as well, a prime example being the decades of record breaking migrant numbers for a 'Big Australia', have overstretched infrastructure and led to even higher taxes on property.

If we want to talk about what drives up rents, look no further than government policy and government taxes. Those mythical well-off landlords simply don't exist, except in the feverish imaginings of rusted-on Marxist dinosaurs and governments who regularly return to snip just a few dollars more from the very ordinary and likely very foolish mums and dads 'investors' in housing.

There is no reason to treat property investment any different to any
other business.
Every business is entitled to offset its interest payments and other
operating expenses against its income.
To deny that to one form of business would just cause an exit from that business.

In Perth rents have risen enormously as demand has outstripped supply due to people moving there in large numbers to enjoy WA's stronger economy.

Given what others and I have written about illusory resources that can be put towards building public housing to replace private investment, it's pretty clear that the theory of rents not being affected by removing negative gearing has a big hole in it as demand would outstrip supply before long.

Bazz, is correct in his last post. Would the author suggest that negative gearing on ALL investment classes be removed? If that happened, would people risk investment as much? If not, this would have major economic consequences. Would the author care to think this through and perhaps join in this thread to counter points made against his thesis?

The author should

and i will shift my capital
ben gershon,
that is the kind of challenge I'd like to see people actually take up. It would sort the market alright. It's like the much used argument of the brain=drain. Let people take it on & see how their managing capabilities shine rather than simply exploiting loopholes.
By a lot of people having less many could have more. That would stimulate the economy a lot more & for longer than those money wasting idiotic packages.

Individual: "By a lot of people having less many could have more"

Abolition of NG will not ultimately provide money to the public coffer because interest paid can be written off against capital gain if it can't be written off against income. Furthermore, capital losses can be carried forward and written off against future capital gains.

If you want to legislate that income or capital losses cannot be written off for housing investment alone, either within a tax year or by carrying them forward, watch as new construction grinds down almost to owner-occupier dwellings only, population grows, and competition for rentals increases causing rents to rise. Rising rents may entice a few more investors back but not enough to stop Gov't being forced to provide more rental subsidies or provide more public housing.

Any legislation to be fair should only affect new investors, as was the quarantining of interest deduction from 1985-7. This legislation allowed undeductible interest losses in a tax year to be deducted from future taxable income, so a return to this would not ultimately see the public purse gaining from the exercise.

If you want to legislate that income or capital losses cannot be deducted on any class of investment, either within a tax year or by carrying them forward, fewer will invest as much as they do now as they will not borrow as much, for housing or any other investment. This will lead to a large reduction in new construction with consequent higher rents as housing demand outgrows supply.

Regardless of whether interest deductions can be carried forward or not, rents would rise and the billions claimed to be raised for Gov't investment in public housing would not eventuate.

as new construction grinds down almost to owner-occupier dwellings only,
Luciferase,
That doesn't actually sound too bad to me. It would be one way to curb the excessive excesses in our society which are of course the cause of much of the pollution & economic difficulties. In plain English it would mean living within your means without owing 20 times the total value of your country plus our descendants would have a life to look forward too also.
renting accommodation in my opinion should only be down to motel/hotel rooms. The present housing retail circus doesn't at all contribute to bettering the economy when everything is borrowed. We in fact have only a negative economy because hardly anyone owns anything. I'd hazard a guess that Australia owes more than it owns.

yes i will shift my capital .as i have the ability to look after myself and my family .so then i can help others that might need a hand.government can only do so much .

ben

as i have the ability to look after myself and my family
ben gershon,
I envy you having that ability. Being self employed without having to resort to exploit tax loopholes is indeed rare.

Indy: "....without having to resort to exploit tax loopholes..."

Negative gearing is no more a "loophole" than is not reaching the base threshold income to pay tax.

As Bazz points out, owning a rental property is a business and all businesses are entitled to deduct expenses, including interest paid to own investments.

By the time the house is sold, the owner has come out ahead or behind based on capital value gained or lost and income earned or lost after taking all deductions into account, including interest.

Why shouldn't interest deductions come into the calculation and why is this some dirty (implied) exploitation of a "loophole"? A loophole is unintended by legislators. Legislation permits negative gearing.

You seem envious of something you don't to bother to understand, Indy.

businesses are entitled to deduct expenses, including interest paid to own investments.
Luciferase,
Believe me I do understand, I just don't happen to like it, too many loopholes for the dishonest to exploit. It was after all designed by the greedy for the greedy & it's gradually coming up to the proverbial brick wall.
There wouldn't be half the wealthy if a fair system were in place and, the planet would be less polluted.
All this financial crises thing & fiscal cliff waffle has sfa to do with providing services but everything with manipulation to favour the greedy ?

If your concern is wealthy people it would only be the high risk developers who rely on change of land use who stand to make a better than average profit. However many developers have gone to the wall trying to leap through bureaucratic hoops for years, or from relying on firm ministerial promises for rail, roads and so on.

Many of the stories about windfall profits from residential property are decades old and when run down were likely myths back then. Residential property tracks behind inflation for years, sometimes over-corrects for a short time and then returns to the doldrums for years. Like shares some think they can outsmart the market and a few do, but many more go away with a sad and costly experience.

If you look into claimed large profits from holding property for many years it is very unusual for a residential block to do better than inflation and the owner has rarely factored in all of the costs. Then 50% of the 'profit' is taxed. It is a form of compulsory saving but one that guarantees lesser returns than other less worrying and more liquid options.

Hold the property long enough and the government will require you to sell it to pay for your nursing home.

The present government continues to flirt with applying capital gains tax to the principle place of residence.

'principal' not 'principle'

Hold the property long enough and the government will require you to sell it to pay for your nursing home.
onthebeach,
isn't that what accumulating wealth is all about, so you got enough for the rest of your life instead of everyone else having to pay for you ?

Indy, you're inconsistent. You support wealth creation but not through investment in residential real estate, which you want to see nobbled through abolition of negative gearing.

Would you see a world of owner-occupiers with the rest in private rentals (in diminished supply once the current negative-gearers sell up) and public rentals, with some given rental subsidies?

This would require high taxation to support the level of public housing purchasing and construction made necessary. How will owner-occupiers and unsubsidized renters go with that? Quite a socialist's position, yet I've read you previously as a conservative.

Actually, current negative gearers would not sell up assuming abolition was not made retrospective. However, as only positive-gearers might thereafter invest, the rate of growth of private rentals would be lower than the rate of demand growth. The outcome is the same, public housing must make up the rental shortfall.

"current negative gearers would not sell up assuming abolition was not made retrospective"

I disagree because many of the investors are on relatively low incomes. For many the second spousal/partner income qualified for the loan/s (that second income could easily change), their employment is often casual or temporary, and they are finely balanced, almost insolvent. Some money back each year from ATO is what made the investment possible and it part covers the replacement of those expensive items the motivational speakers and books didn't tell them about, eg carpets, HWS and so on. However without these 'investors', for whom there is possibly a lot of churn, there wouldn't be nearly as much renovated and new rental stock available.

Would the properties they invest in be built or saved from demolition otherwise? Probably not.

That is why I believe that a run of mums and dads investors from investment property market is easily possible. It is a wonder it hasn't happened already. The reality of the present downturn is sinking into the consciousness of smaller investors and many must be waiting to sell, but are in too deep to let go at present.

slightly off the topic but the idea of Government building more and more homes is laughable. Having elderly in laws who have had to wait long periods of time to get into care while detention centres catering for thousands of illegals are built overnight.

slightly off the topic but the idea of Government building more and more homes is laughable. runner,
Builders should build houses. Governments should ensure that its citizens have a quality of life (aren't we such a great country after all ?) which makes it possible for them to have a home built. To by a block of land, do absolutely nothing to it for several years & then sell it for three or four times or more than the original price may be called investment. In my view it's extortion. As I stated earlier the investment fiasco is heading for that brick wall. Then they'll be crying poor again. They don't cry poor when they overcharge a young, start-up family. I know this is how it has been working for a long time but that doesn't make it fair.
I say do away with all these loopholes , bring on a flat Tax & see who the real economic experts are. I believe Gerard Depardieu went to Russia because the Tax rate is a maximum 13 % there. Just you wait & see where Russia will stand in 10 years & where the rest of the world will be with it's shifty system.

Crikey, Indy, did I have you pegged wrong as a conservative!

A young family can do well if prepared to move to where housing can be afforded and find employment. It's a free market and everyone has to start somewhere.

Are you suggesting Gov't (i.e. all of us) should build a home for everybody? Who gets to live on the harbour and who in the western suburbs? I know, we'll draw straws to settle it!

Russians don't seem to be really enjoying their economic system

Are you suggesting Gov't (i.e. all of us) should build a home for everybody?
Luciferase,
If you read my remarks again you'll find I said exactly the opposite.

Again I say read. I said in ten years time, Gawd!
Russians don't seem to be really enjoying their economic system.

If you take the leeches out of the equation people will to a large extent be able to live & work where they choose instead of being dictated too by mindless bureaucrats in the pockets of developers. Sell available properties to individuals instead of handing the lot to developers whose only effort really is to treble the prices.

"Negative gearing is no more a "loophole" than is not reaching the base threshold income to pay tax."

What other "business" activity allows you to offset your income from one activity against the income of another activity ? eg if I own shares in a business and it loses money, I don't get to offset that loss against my wage income but if it gives me dividend (profit), I get to pay tax on it at my marginal rate.

Valley Guy you miss the whole point, I presume unintentionally.

If you have borrowed money to buy those shares, the interest on that borrowing is tax deductible. Weather the business makes or looses money is immaterial. If you receive a dividend that is taxable.

In the same way, the interest on a rental home is tax deductible.

If your shares loose value, that shows your bad choice in investment, & you are not compensated.

Likewise, if your rental property looses value, that also shows your bad choice in investment, & is not compensated.

Capital gains [or losses] on your shares, or rental property, are treated in the same way, regardless of the investment vehicle.

" if I own shares in a business and it loses money, I don't get to offset that loss against my wage income "

Yes you do.

Normal application of negative gearing and capital gains tax applies equally to all asset classes, including shares portfolios paying dividends while appreciating or depreciating.

Rule: Don't base an investment decision on negative gearing but on the quality of the investment. The attraction of negative gearing is illusory.

base an investment decision on negative gearing
Luciferase,
But isn't that what's happening ? Isn't that the crux of our economic woes ?

The more money borrowed as a proportion of the cost of buying an asset, the more highly the asset is geared.

Gearing helps those with some capital to punch above their weight and magnify their gain if the basic investment is sound, and to magnify their loss if it is not.

It is a way that those with a little capital can gain a lot more, or lose it all. You, Indy, would prefer to see a world where the have-nots are locked into remaining so by limiting their gearing capacity through the abolition of negative-gearing.

NG is not a loophole but an entirely fair and reasonable way to invest. It is not the crux of economic woes, that goes to bad investment decisions, not to how investments are geared.

Amazing that there is always someone who does not understand that if negative gearing is taken away then there will not be enough rental properties. Investors cannot afford to keep their rental properties without the tax decuctions and even then the investors still fork out a lot of money each year as the tax deductions do not cover all the expenses. Without negative gearing the Government would need to provide the rental properties and this would cost them much more than the tax deductions they provide to the investor.

The other issue here is what then happens to all the properties that flood the market when negative gearing is abolished. Where would all the renters go? There will investors who cannot afford the properties anymore(and that would be a great majority of the investors). What if the investors cannot sell the proeperty? This could ruin quite a few people financially.

So we would have rental shortages, increased rent prices from the new investors who pruchased the properties(as there are now no tax deductions) and some investors goin bust.

And then of course there are the investors who are buying these properties to eventually fund their retirement.