There has been an interesting study done, the link should be on the abc somewhere. I heard the discussion yesterday on Drive (Perth) Apparently over sixty percent of the people who negative gear have a taxable income of less than 80,000 a year. A significant proportion of them have an income below zero for tax purposes. Doesn't that suggest there is something wrong with the system? Zero income, and you have an investment property!

In olden times the heaviest users of negative gearing were government employee who worked outside the metro areas. Living in subsidised housing, there were able to rent out their city homes and pay off their mortgage. True, many of them still pretended to the bank they were living in the house to get the rate reduction, but that was in the days before data sharing.

Rhrosty you obviously have not done the math mate.

In SE Queensland you would be very lucky to net $12,000 on a rented $400,000 house. The interest bill on such a house will be $24,000. Now even with negative gearing many investors will be putting in some thousands a year, for the life of the investment.

If they are lucky they may pick the bottom of the market & actually get some capital gain, but only if they bought wisely.

Many of these people buy into large estates, which go on for years. These keep the piece of new homes pretty static, meaning no or small capital gain.

Very often, when the cost of buying & selling is included, a simple interest bearing deposit would have been much more profitable.

The only ones I know who have made any money, rather than paper profits, are ones who buy commercial property, not residential. This rarely has the bad tenant problem, & is a business proposition, not a get rich quick scheme.

$12,000 on a rented $400,000 house.
Hasbeen,
Up here in very far NQ the average rent is at $650/wk because the Govt bureau rats do not question any prices asked. It's in fact the State Govt which sets those insane prices.
I'm at a loss how the Newman Govt has allowed this Labor trend to continue. I was led to believe they were going to stamp out rorting but it looks like there are still way too many Labor cronies in our Departments.

Yuyutsu, are you aware that a business owner is not allowed to claim his/her travel from home to work either? Unless they have an office at home, or, they use their home as a portion of their business as well, which then has CGT implications. It's a rule that is only really challenged when audited.

To the author, yes, bring on a transaction/expenditure tax I say, and we could even have different rates. Say 2% on most every day transactions, down to as low as 0.2% for the likes of trades etc where the volumes are huge with very small margins. It would even tax all monies sent off shore and, the best part is it would eliminate income tax putting billions each week into the economy as additional spendings.

I have often thought it should be trialed in situations like disaster relief on a very small amount. At least then we could test the water, have every one contribute and won't break anyone's bank.

As for NG, I'm a fan myself but if we do need to change, then perhaps we should look at a time frame, or a dollar value whereby an asset must be self supporting within say ten years. This would put a stop to the main cause of housing unafordabillity, that being those who continually use gained equity to prop up further purchases whereby some own dozens of properties, all leveraged at the maximum 80%. They then often rent their place of residence, claiming a portion for business.

Continued.

Continued
I have even challenged Mr Eastlake on the subject, asking where renters will live if investors stop investing in homes. Nobody will answer that question.

The fact is I don't believe we have a housing affordability issue in that I think we have more of a spending cricis, as most young ones today earn a grand a week, or more, yet can't afford a house at 4%.

A simple drive by through any eat street will tell you why so many can't afford a house, yet happily shell out $45 per lite for milk in the form of a late, or $120 per kilo for a slice of steak. If we ever fimd a way to spend money more than once, then they will be able to have their cake, and eat it, but for now, that's just not possible, so choices have to be made, and all too often it's the wrong choices.

Of cause the other issue is that while many say the can't afford 'the house' they can afford 'A' house, and there in lies a problem.

Yes rehctub, not many of todays kids would live in my first house, a one & a half bedroom ex farm laborers cottage, with a chip bath heater in the laundry/bathroom to serve both.

It wasn't much, but cost only 2 years net income, & it was mine at 21.

Today all my kids live/own/are paying off better houses than the one they were raised in. Still it does me OK. When I am at the computer, or in the shed playing with my toys, I don't give a damn whether my kitchen has the latest stainless steel appliances or bench tops.

I guess we all have to develop our own priorities.