Abolishing negative gearing could mean soaring rents, and housing industry collapse an industy vital to the economy , that kind of response comes from a greedy landlord,
A ten year study of greed and hatred in our society came up with answers the greedy will not want to hear, collecting rent and interest is a parasitical activity, the majority of people in governments and the systems of permission[justice ] are involved in collecting rent/ interest , so it would be fair to say their gravy train will not be derailed, negative gearing and rental subsidy are indirect payments to landlords by landlords/moneylenders, if they were to get a 100% handout from the government, property prices/costs would quadruple overnight ,along with rents and interest, rents are never based on"the quality of life/comforts one gets from living under someone elses roof, the rent paid more than often pays the morgage[interest to another collector] plus all expences, I have often wondered, what would happen if , collecting rent and interest was banned/outlawed, then I realise we would have to clean out the systems of "government and permission" of collectors. we would have a revolution on our hands because the greedy take from the needy, they can make a new law anytime they like. John Howards grant of $14,000 to boost housing created tens of billions of dollars for the collectors of rent and interest , even the government made tens of billions of dollars, where did all the money come from , it was invented/created out of thin air, because it never existed untill greed took control, there is talk of another $14000 grant, if this happens the Aussie Dollar will pay a high price. lets have no more handouts to the greedy .

Hawke and Keating tried this back in the 80s. Unmitigated disaster, except for the bargain hunting property investors who could bottom feed to their hearts content. Hmmm, sounds like a good way to engineer the property buying opportunity of the century. Bring it on, l'll get the cheque book ready and go see mr other-people's-money bags for a cheap loan.

Slasher – what a political disaster you would make.

Not only do you do half the job (allowing 50% of anything) and thereby complicating the process beyond necessity but you justify doing half the job with reasons which are nonsense.

In the mid 1980s Keating abolished NGI. With the sweep of the same pen he used to write the “Tax cuts into law” (which never happened), he caused the single biggest rental housing crisis and rental cost increase ever seen.

It is all about “cause and effect”. If some piece of bad legislation causes a change to tax payments, it will have an effect across the industry which is taxed.

Keating was beating the same political drum which you are beating now. Change the NGI tax environment and you will cause a significant disruption to the supply of property and the cost of that property for one good reason

If you negatively change the tax system which flows onto change expected return on investment from an enterprise, you will change the attractiveness and risk of the enterprise.

If you change the risk and attractiveness of an enterprise, you can guarantee you will change
1 the numbers of investors who take up opportunity to participate and invest in that enterprise.
2 put existing investors under pressure to seek to restabilise their investment return – increase rental rates.

Changes in 1 and 2 will bring about a significant market adjustment as was seem in the mid 1980s and the damage of which was only stabilised by reversing the legislation 18 months later.

I note you justify this with your statement “This would remove the distortion and create a fairer system.”

Do you have a statistical model which proves that hypothesis?

I doubt it because you are Wrong

All it would do is create a more complicated system (= more cost) and burden rental tenants (the end-of-line consumer) with higher rental costs as they compete for few rental properties (because marginal investors have fled the NGI market to place their investment funds into other opportunities = supply and demand for investment funds)

I believe that the negative gearing rental market effects in 1985 is mostly myth and little fact. I once saw a graph of average Sydney rental prices, so I looked at the 1985 period expecting to see a giant spike and I could see no visible increases in rent at that time.
I believe the rental market problems are a myth propogated by people who benefit from negative gearing and want it to continue.
Can anyone show me evidence that contradicts me?

col rogue,

the policy is designed to change investor behaviour. no apologies.
owner/occupiers are being priced out of the market by speculator/investors subsidised by the public. Under the current system nominal capital gain is reduced by 50%. Full cost of expense is deductible but capital gain tax is not taxed on the full capital gain it is discounted.

Why should any investment that does not generate a positive income be subsidised fully by the tax payer yet the capital gain is only taxed at 50%.

Why should we have a tax system that favours debt based investment not only in property but all forms of investment. It is bad economics. I don't ask single mothers, the unemployed, old age pensioners to subsidise my wealth creation. I am not a bludger. I work, make investments in assets that generate a positive income stream and have a capital gain.

We have tax system that does not favour savings and as such we are lagging behind as a nation. Whilst we continue to support the welfare bludgers who think they have a right to create their wealth assets whilst being subsidised we will continue to be a second rate nation.

Slasher – why not?

Other investments are treated on their return merits (be that positive or negative) and any investment might shift between positive and negative over time.

I would note, most commercial undertakings have an element of debt finance so why should property investment be treated as different to owning shares in a joint stock company when that company conducts itself as a “debt based investment”.
Your suggestion would imply that an company with an overdraft or other commercial loan with a prescribed interest rate would not be allowed to treat that interest as a tax expense (or only half or it).

As I said, you have made a proposal which merely complicates what is already a process heavily burdened by extensive calculation. The last thing anyone needs or wants is an even more complex system.

The contradiction of your comments lies in the fact that many small investors use NGI property as a form of savings and a hedge risk against putting all their savings into just shares and mutual funds etc.

If you have, as you imply, a stream of positive geared investments, maybe you should be out there selling your investing skills, plenty of NGI owners would be happy to substitute the outflow for an inflow from PGI.

As for “bludgers” that is a weak attempt at vilification of people making their own decisions and comes across as a bit of the “green eye of envy”.

Your original post referred to only allowing income to be offset against other income in the same asset class. This is like the UK system (or as it used to be). Such segregated treatment was unnecessarily burdensome and complicated. Cross-aggregated tax accounting is certainly a better and more effective process for assessment.

btw I note you have misspelled “Rouge”, I will assume it was an accident of typing, no one would be so asinine as to think there was even a hint of “wit” or humour in it being deliberate.

Claw – your view was not shared by Keating, Hawke and the Labor party, who did the 180 degree “back-flip”.