Labor, despite going to ground on its negative gearing policy is in with a real chance of winning the forthcoming election and, if they do they will try to implement their NG policy.

So if they do win, and they do get their policy through, how do you on this forum think it will effect rents, and why.

Hi Butch,

I don't pretend to understand all the ins and outs of negative gearing, but I should imagine that amongst the consequences of disallowing NG, i.e. deducting some of the expenses of purchasing, maintaining and improving a rental property from one's taxable income, would be either:

* forgoing any major renovations or even much upkeep, hence providing a deteriorating property for tenants at current rents; OR

* going ahead with renovations, repairs, paint-jobs, etc., and raising the rent; OR

* not bothering to buy an investment property until one had a much bigger deposit, and therefore lower mortgage interest payments, hence deferring purchase and dampening down the creation of more housing.

Either way, unless I'm missing something, renters come out of it all much worse off.

I know that it's fun to stick it to the 'wealthy' - bastards ! - but I wonder how this is playing to the more affluent Greens, at least those who are putting their savings into property.

Cheers,

Joe

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Ok, for those who can't remember 1985 when Paul Keating stopped neg gearing (and reintroduced it in 1987 when he realised what a big mistake he had made)

Firstly , if you alter the tax advantages of owning a investment property, it becomes less attractive, so less Mums and Dads will own an investment property, meaning more demand on government housing and rents increasing (demand exceeds supply)

Secondly, 1 in 6 Aussies are employed in the building industry, if neg gearing is altered, less houses are build, meaning higher unemployment, meaning more people renting and rents go up (demand exceeds supply)

Thirdly, if neg gearing is only for new houses, when does a new house become old? 1 year, 5, 10? When you go to sell the house, it has lost value as new investors wont buy it as there are no tax deductions. So, knowing my NEW investment property will be worth less in the future, I wont buy an investment property at all. The only reason you buy an investment property is for capital growth (not for the 4% gross yield)

Fourth, the majority of Australians have a mortgage based on borrowing from a bank at say 80 or 90% LVR, if house prices drop, the banks debts increase and many credit unions and banks would become insolvent. So, unless they get thousands from their customers to reduce their debt exposure, they will make borrowing harder, so first home buyers will have to save a greater deposit than they do now.

So, short term house price drop, higher rents, more unemployed, harder to get a mortgage and still more housing unaffordability.

The simple answer is remove all taxes from building a home (levies rates taxes stamp duty etc) that will reduce house prices by 30%

Not quite right on negative gearing Joe.

You can not get tax deductibility on any of the up front costs of investment. All purchase costs, & any renovations or improvements have to be capitalised into the value of the investment. Any future improvements have capitalised, that is, added to the value of the investment.

These capital costs can then be depreciated, & the depreciation is tax deductible. Repairs & maintenance are also tax deductible, as is interest on any borrowings, & payments to a letting agency rates etc.. It is thus the costs incurred in earning the taxable income, not the cost of establishing your asset that is tax deductible. This is exactly the same in every business.

I see new house prices going ballistic, simply due to fierce competition from investors and first home buyers however many FHB will be locked out due to banks tightening their lending criteria, simply due to the unknown value of the new home once its no longer new. For this reason part of labors policy must include a shift in the grant back to used homes as well.

I see rents skyrocketing simply due to the math.

Eg, say a home valued at $500K today drops by 20% (a recession trigger) to $400K, an investor will want at least an 8% return, otherwise the risk is too high. So the rent for this devalued home will go from 3% of $500K, to 8% 0f $400K, or from $500 p/w to %650 p/w. If it didn't, why would anyone invest! After all, owning a rental has lost a lot of its glam, with increased rights of tenants, decreased rights of owners and increased compliance costs.

In my view this is a bad policy that will backfire however I fear damage has already been done just by the announcement made by Bill Shorten, party due to the fact that they (labor) have stopped talking about it, which means nobody knows enough about it.

Rents will be adversely effected if they let in another 50,000 plus economic invaders like Dudd & Dillard did.

We have to house them at the expense of homeless Australians.

Kirby483,

"Firstly , if you alter the tax advantages of owning a investment property, it becomes less attractive, so less Mums and Dads will own an investment property, meaning more demand on government housing and rents increasing (demand exceeds supply)"

Oh yes!...the "Mums &Dads" thingy is already taking effect.

Just so you know - The top 10% of earners collect almost half the negative gearing deductions.

"The RBA then showed that the average low- and middle-income earner is much less likely to use negative gearing han a higher income taxpayer. And this trend is increasing. About 30 percent of people on over $500,000 negatively gear up from about 20 percent a decade ago. But the share of people on between $25,000 and $100,000 who negatively gear has fallen.

The share of people on under $25,000 has grown which probably reflects people who have other sources such of non-taxable income such as super.

The other point the RBA makes is that while there are some low income people who negatively gear they receive much less benefit on average than richer ones."

"Many high income people have multiple houses and more expensive houses on which they deduct the mortgage costs against their incomes. Low income people might have a single flat. The tax savings go overwhelmingly to higher income earners."

http://www.afr.com/news/politics/negative-gearing-four-graphs-that-show-it-is-mostly-for-the-rich-20160214-gmu2vu#ixzz46xt0k16E

"House prices might drop by about 2 per cent, Grattan Institute chief executive John Daley said. "These changes will make housing more affordable. They will have minimal impact on either rents or the rate of new development."

http://www.afr.com/news/politics/grattan-institute-backs-labors-negative-gearing-policy-20160425-goe2op#ixzz46xtiZArl

Analysis:

http://www.macrobusiness.com.au/2016/04/grattan-demolishes-turnbulls-negative-gearing-lies/

Existing negatively geared investments are fully granfathered. New builds will still be able to be negatively geared. Labor's policy will apply from 1 July, 2017 giving plenty of time for the market to adjust. The only impact on rents would be to reduce them.

yes Philip, it's almost becoming a situation whereby we are still the lucky country, so long as you're not born here.

Surely at some point our lawmakers have to come to the undeniable conclusion that we, as tax payers, can no longer fund the 'wish lists' of our politicians who's decisions are so often made through the persuasion of the do-gooders who seem to give no consideration to the needs of our own.

Like the illegals, refugees and Muslims, not all but most certainly those who quite obviously come here to feed off our generosity, or the indigenous folk who choose to live in remote areas with no prospects of making a better life for themselves, and most certainly their kids.

At some point the tax payers are going to say, enough is enough. As hasbeen said in another thread, give them a tent to live in and three cans of beans a day, and watch them change their ways. We should also forget the earning or learning slogan, because that's all it is.

We have simply allowed ourselves to become a soft target for public purse manipulation, yet, as soon as a Tony Abbott comes along, all hell breaks loose. Well like it or not, a Tony Abbott style leader is all that will dig ourselves out of the hole we have created. But I can't see that happening until we plunge into a deep recession, or perhaps even a depression.

At some point the gloves must come off.

rehctub,

"We have simply allowed ourselves to become a soft target for public purse manipulation..."

Negative gearing is public purse manipulation...you appear to be in favour of that.

"Sales countered with figures from a recent Grattan Institute report that showed the top 10 per cent of income earners received ¾ of taxable capital gains.

"These policies favour most people who are on the highest incomes," she said."

http://www.smh.com.au/federal-politics/political-news/malcolm-turnbull-grilled-on-abcs-730-over-negative-gearing-common-sense-claim-20160426-gofnv9.html

Public purse manipulation at its finest.....

Mums and Dads.
Do you want your kids to own a home.
The lucky ones our community own their own home.In the 1960's it was possible if both worked to pay off a mortgage in ten years.Today a young couple starting out to buy their first home and both working will be lucky to have five years of working life left before they finally pay off the mortgage.
So what has gone wrong.
House prices have risen around the western world at a similar rate as Australia.
There is a difference.UK homes are close to good public transport and mortgage payments are Tax deducted as well as the homes being double storey and double brick.
Compare an Australian home being knocked up today on a timber frame and often described as Dog boxes.
Young couples both have to work and if they do not have a deposit will be forced to pay a negatively geared wealthy landlord who is not paying tax at the same rate as the tenant.Who has to pay between 33 and 37cents in the dollar while the landlord is claiming a deduction of mortgage payments etc.
The lucky Australians who can give their children a deposit and in some cases a home will see their children claiming tax deductions as negatively geared or correctly described as TAX AVOIDERS who start competing to buy cheaper homes for rent.
As much as it hurts me to say the Labor party are correct to stop the rich getting richer on the backs of the poor.
Australia used to ride on the sheeps back.Today many are riding on the back of the poor.
Negative Gearing must stop.One argument is that property prices will
drop.Good, give somebody else a chance.And what is to stop a property owner with a couple of homes selling them and giving the cash to their children then claiming the Full aged pension.
This Tax avoidance wrought must end.

Do wake up Poirot!

Applying the legitimate costs of earning a profit against that profit for tax purpose is a standard business practice.

It shows how little most understand business & taxation that they can refer to the practice as negative gearing, it is not. The Labor party, & the welfare industry have fools believing the slogan has some meaning. This is just another instance of Labor applying the politics of envy to con the fools.

In it's most simple form it is this principal, this allows you to deduct the cost of wages from your income before paying tax on profits.

What they are really referring to is quarantining the loss in one enterprise, domestic rental, from the profits of another "business" in this case earning a wage or other worked for income.

It is no accident that this is not applied to domestic rental. The business is so low in profit that no sane person would invest sufficient capital to fully own property for domestic rental without this sharing of costs between earning activities.

I have a detached granny flat, which of course I own. I know how much it costs to maintain, when it is lived in. I have never rented it out for that reason. I t is bad enough when I've had various of my kids live in it for a while. Renting it out would be a very bad idea.

Poirot, of course the top 10% collected 50% of the neg gearing benefits, because they pay the most tax (49%) and people on $25k should not own a property as they can't afford it, so no wonder these lower income earners are not buying new houses.

We still have 90% of investment property holders claiming tax deductions on investment properties to get ahead. The vast majority don't want to rely on the age pension and would prefer to be self funded retirees. The more self funded the better Australia is. Our social security bill keeps getting bigger and bigger.

If you remove the tax incentives of negative gearing on properties, no one would invest as the yield (rental return) is far too low.

Less private houses equals more demand on public housing which means increased rents.

It does not matter very much what the politicians do.
The banks, as the economist on Lateline explained the banks have been
booby trapping the economy in exactly the same way the US banks did in 2000 to 2008.
They have even gone to the extent of altering client incomes to enable
larger loans and doing anything to get mortgages on their books.
Just to make it worse they have bundled up these sub-prime (remember that phrase)
loans and selling them to investors.

The big difference is our borrowers are deeper in debt than the US
borrowers and have greater debt to gdp ratio by a long way.
Just like in the US, the price of oil is likely to rise around the
end of this year or by mid next year, BOOOMMM !

Will they never learn ?

just a note to the under achievers here, remember, the 'top end' are the SOLE REASON you have a roof over your head and food to eat, because they subsidise your lifestyles. Remember that when you go bagging them.

Brock, I invite you to go for a drive down just about any suburban café strip on a Saturday or sunday and you will see for yourself why so many young people don't own a house.

They claim they cant afford a house, yet willingly pay $45 per litre for warmed milk and $8 for eggs. Not to mention the tens of thousands of dollars painted on their skin. This is why they cant afford a house, its called 'lifestyle choices'.

Porit, im starting to think you believe the rubbish you read. Simply do the math. Abolishing negative gearing will see many lining up at the soup kitchens.

Believe what you will but as an investor with multiple properties myself, I will not invest with after tax dollars to gain a 5% return when I can get the same return by debt reducing my existing portfolio. Great for me but who's going to buy the new homes.

Re Labor's NG changes,Poirot opines "The only impact on rents would be to reduce them"

Geez, even Daley's not claiming that!

Here's how it goes
a) house prices fall, hence % rental return on property value rises, but not enough to interest investors
b) investor house building ceases as the unknown of the resale hangs over the business case due to no NG permitted on the aged asset.
c) demand for housing outstrips supply and rents rise.
d) at some point the business case becomes compelling and building new or buying older houses to rent resumes.

In the transition, losers will be property owners watching their asset value fall, and renters watching rents go up. The winners will be owner-occupiers buying. After that, life will go on.

Won't it be so great tho' that everyone who wants to buy a house will then be able to do so, wherever they want! Ah, the marvel of gov't intervention in the housing market!

Luciferase,

Geez - thanks for that, but the overall picture from Daley is that there would be a minimal affect on rents.

"House prices might drop by about 2 per cent, Grattan Institute chief executive John Daley said. "These changes will make housing more affordable. They will have minimal impact on either rents or the rate of new development."

"The report by the Grattan Institute, whose founding supporters include the Australian government and BHP Billiton, has recommended phasing in a 25 per cent capital gains tax over several years. Similarly, negative gearing restrictions could be phased in, with incremental reductions in the proportion of losses that can be written off against wage and salary income."

http://www.afr.com/news/politics/grattan-institute-backs-labors-negative-gearing-policy-20160425-goe2op#ixzz4742ay1ef

John Daley - "Sorry Malcolm, you are wrong on negative gearing."

http://www.afr.com/opinion/grattans-john-daley-sorry-malcolm-you-are-wrong-on-negative-gearing-20160426-gofptb

"But independent modelling shows there will be "significant" long-term savings from Labor's proposal to quarantine negative gearing to new housing investments from July 2017, eventually raising between $3.5 to $3.9 billion a year.

It also shows Labor's proposal to cut the capital gains tax discount from 50 per cent to 25 per cent would raise about $2 billion a year in the long term.

It shows the vast majority of savings would be at the expense of the top 10 per cent of earners who negatively gear their properties.

It also estimates that by restricting negative gearing to new housing, the policy would "increase the share of investment housing devoted to newly built housing" by 10 to 20 per cent.

It does not say house prices would drop.

"Our modelling shows that negative gearing benefits high-income families with 52.6 per cent of the benefit going to the top 20 per cent of incomes," the paper says.

"Only 5.2 per cent of benefits go to the bottom 20 per cent of incomes. This result is mostly driven by high-income families being more likely to negatively gear, having larger negatively geared deductions, and a progressive tax system that magnifies the gains for higher income persons.

The modelling was done by the Australian National University's Centre for Social Research and Methods.

It was not commissioned by any political party, organisation or individual."

""Most of the benefit of negative gearing clearly goes to the top 10 per cent, and it's the same for the capital gains tax, by a very large margin," Mr Phillips told Fairfax Media."

http://www.smh.com.au/federal-politics/political-news/independent-modelling-backs-labors-negative-gearing-policy-20160219-gmyl8o.html#ixzz474fJmOUK

Poirot, do you seriously think a 2% reduction in house prices ($10,000 on a $500K home) will be the difference between home ownership and no home ownership?

Furthermore, have you considered the impact on values and how the banks will view this. What happens if the banks see the devaluing of housing as a reason to strengthen borrowing criteria?

What if banks decide that home owners are going to have to carry more of the risk, say 25% or 30% as used to be the norm in the 70's/80's. How is this going to assist housing affordability?

What if mortgage insurers decide that their risk is worth more and charge more. How is this going to make home ownership more affordable?

If rents were cheap and houses were in abundance, and more importantly, affordable, then by all means look at NG, but the situation is exactly the op.

I do agree that Ng needs to be looked at, but a smarter approach would be to set limits, not abolish it on used homes, as well as used commercial.

You are welcome to think that rents will drop, I just hope you are not renting as I would not be tasking such a gamble.

Rechtub said;
Great for me but who's going to buy the new homes ?

Errr, it won't be the Chinese.
On the TV & radio last night; the banks are banning making loans to
overseas real estate investors. So far only NAB is holding out.

It seems that the mainly Chinese "investors" were playing the rising
market by putting deposits on units and then selling for the capital gain.
As the capital gain has halted they are trying not to go ahead
when time for settlement comes up. The banks are having trouble
getting money out of the buyers.
It would be interesting to know the mortgage default rate.

While the Grattan institute is nominally independent and non aligned, so supposedly is the Fair Work Commission, that labor set up and stacked with ex union heavies, and the ABC which is left of Labor.

The "report" from the Grattan institute on the issue is by John Daley alone, and while containing some information is not based on modelling at all, and as such is no more than a relatively well informed opinion piece. That in the report it cautions that the report does not reflect the opinion of the Grattan institute is give away.

This should be competently modelled by treasury, and until then the closest we have is the independent BIS report.

If "It does not say house prices would drop", Poirot, what is all this about improving housing affordability? Is this just a screen for the envy driving Labor's policy?

Luciferase,

"If "It does not say house prices would drop", Poirot, what is all this about improving housing affordability? Is this just a screen for the envy driving Labor's policy."

Lol!..the "envy"....it's a "class war" - yep, we've heard it all before.

I expect housing prices would drop minimally - and it may certainly stem housing price rises. We have one of the most expensive real estate markets in the world - zooming up since negative gearing was established.

Have you got a problem with making housing more affordable for...um...well...first homebuyers?

We all know negative gearing has inflated house prices.

And the big winners are the top 10% who gobble up around 50% of the negative gearing dividends.

SM,

What have you got to say about the independent modelling from the ANU?

As far as I can tell, apart from righties, the BIS Schrapnel report was laughed off the table.

Furthermore...

"The report addresses not just negative gearing but also the forgotten child of the housing affordability debate – capital gains tax.

In reality it is changes to capital gains tax in 1999 that really set the fire under the housing market by turning negative gearing from a niche activity to one which the treasurer would suggest is a favourite of nurses and teaches and police officers – the archetypal “mum and dad investors”.

Prior to 1999 capital gains were taxed at a real rate – the nominal return less the inflation rate over the period you owned the investment. The Howard government then changed it to taxing the nominal rate, but only for half the amount.

At the time there was actually debate over whether or not this would lead to people paying more tax."

"Prior to the CGT changes, the number of rental properties that produced a loss were roughly equal with those that made a profit. But as soon as the changes came in, rental losses became much more attractive"

"The reason is the combination of the CGT discount and negative gearing made for a very attractive tax minimisation scheme.

The tax system thus in effect encourages you to engage in “debt-financed and speculative investments” because negative gearing enables you to minimize your current income and the CGT discount enables you to minimize the tax on your profit – because you get to choose when you sell your property."

"The Grattan Institute notes that 54% of the benefits from negative gearing goes towards the top 20% of taxpayers. But importantly, because negative gearing is used to reduce people’s taxable income the report also notes that when you look at peoples’ incomes before taking out the rental losses, the benefits are even more unequally distributed – with 47% going to the top 10% and 68% to the top 20%."

http://www.theguardian.com/business/grogonomics/2016/apr/28/how-negative-gearing-replaced-the-great-australian-dream-and-distorted-the-economy?CMP=share_btn_tw

Poirot,

The BIS modelling is the only 'modelling' that is not a complete joke, no matter how badly labor tries to rubbish it and get caught out lying about it.

There was no ANU modelling, There was the back of the ciggy box modelling done by one man.

The BIS report was done by one of the most respected modelling agencies in Aus, not for any political purposes, but for a major property developer to understand potential changes, and businesses who use to make decisions don't generally fudge the data.

".... and the CGT discount enables you to minimize the tax on your profit – because you get to choose when you sell your property."

So, Poirot, you time the sale of your property to achieve the lowest price possible and, thereby, minimize your tax? Brilliant!

See the CGT thread I started to see how Gov't makes money even when the investor loses money.

Labor's populist, ill-considered policy is to differentiate itself from the LNP and sell, sell ,sell that difference. There are ways of sensibly dealing with the NG and CGT questions which are so different from class warfare Labor has chosen under the cloak of affordable housing for the first home buyer.

If Labor wants police, nurse, and teachers types to stay onside it should not be treating them as class enemies. It should leave that to the Greens, who hate everyone.

Porit, the biggest boost to house prices since the 80's has been the ridiculous first home owners grant. I say ridiculous because it should never have been a free gift, rather, it should have been an interest free loan, repayable after say ten years, or when the equity in the home is realised.

As for negative gearing, this has actually kept rents down as the investor was able to get relief from the NG. As an investor myself for the past 25+ years, I have received rent, capital growth, at least in the last 15 of those and tax relief, all of which add up to a worthwhile investment.

If you remove negative gearing, reduce CGT relief and place uncertainty in values, the end result is obvious.

In fact, we could see the top end grabbing bargains via owners having the sell due to bank orders, then rents skyrocketing due to a downturn in new buildings.

Of cause there is also the question of where is the new land going to come from, but no one wants to go there.

Actually rechtub the biggest boost to house prices was the government
decision to force lending bodies, banks etc to lend on two incomes.

What happens to any market when twice as much money is made available ?

The sisterhood gained a bigger mortgage to pay back and lost the option
to stay home with the kids.
Now they whinge about the cost of child minding.

Economy 101; Borrow on two incomes, pay back on two incomes.
Simple isn't it !

Yes Bazz, I agree.

Another was when the non banking sector came into the mortgage market offering loans with lower deposits, as before this the banks would not talk to you unless you had at least a 30% deposit.

People have this miss conception that negative gearing makes buying a house more affordable, which is simply not true.

To benefit from NG one first has to fund the short fall, then claim the losses back on tax and as with any form of business, without the cash flow you fail.

Of cause the underachievers would have you think it's just a scam for the rich, however, the rich don't receive one cent in welfare, usually pay a small fortune to educate their kids, then pay another small fortune to have them looked after and, MOST IMPORTANTLY, provide housing for the underachievers to live in.

Now the underachievers are wanting the rich to stop investing in houses but fail to realize there will soon be a huge group of underachievers competing for less houses to live in. Talk about shoot ones self in the foot!

As a long term investor myself, and having used negative gearing as well, one thing I have always found comfort in was the fact that there would always be a buyer for one of my properties should I want/need to sell. I think this is the crucial unknown in all of this as nobody knows whether one, the buyers will be there for the used homes, and two, how much they will be willing to pay and this will ONLY EVER be determined by how much rent can be generated because the losses could no longer be claimed.

It is such a black and white issue because unlike now, rental income will pretty much be the deciding factor in a properties value.

This is why this brain fart policy is flawed. It will back fire and hurt those who can least afford it the most, the renters. Not to mention the building industry at large. All when we are about to loose our car industries.

rehctub,

"This is why this brain fart policy is flawed. It will back fire and hurt those who can least afford it the most, the renters. Not to mention the building industry at large. All when we are about to loose our car industries."

The building industry will still be able to build new homes - and people will still be able to negatively gear those homes.

People who currenty have negatively geared investments on already existing homes will still be able to NG those homes because they are grandfathered.

You can still invest in an already existing home if you wish - except you won't be able to claim a tax rort for doing so...nor will the highest 10% be able to continue using NG to claim around 50% of the NG dividends.

Who hurried along the demise of the car industry in order to curry favour for the FTA..and which PM labelled sacked car workers as being "liberated"? (one guess)

Explain this guys...

"House prices cannot rise faster than incomes indefinitely, but that is what they’ve been doing since the capital gains tax levied on the sale of investment properties was halved in 1999.

As economist Callam Pickering has described, that change, combined with long-standing negative gearing laws, began the long run-up in house prices relative to incomes.

Even Mr Turnbull complained in 2005 that our tax system “turns income into capital and, as in the case of negative gearing, allows them to deduct income losses at, say, 48.5 per cent, and then realise gains and pay tax at effectively half that rate”"

"Turning houses into tax minimisation vehicles has distorted prices by creating what some economists call ‘over-demand’ – demand that is no longer related to the utility of living in the dwelling, or even the amount of money the asset can return on the rental market.

And all the while, the finance and real estate industries have beaten the ‘housing shortage’ drum to stop anybody noticing where the real problem lay – in the tax system.

One striking statistic bears this out – the average number of people living in each dwelling.

While house prices climbed steeply from the early 2000s, the number of people per dwelling actually fell.

The chart below covers the NSW market, where prices have risen most in the past 20 years – and even there the number of people per dwelling fell. The same trend is evident across the nation.

The number of bedrooms per dwelling might have increased, but not the number of people."

"It is pointless, and wrong, to criticise people for acting within the law to minimise their tax bills.

However, the material reality that Mr Turnbull’s textbook logic fails to acknowledge is what negative gearing and the capital gains discount have delivered – a housing sector bloated with debt, which imposes huge financial and social strains on younger Australians."

http://thenewdaily.com.au/money/2016/04/28/textbook-turnbulls-housing-logic-wrong/

The same tax system has not seen the share-market do what property has done.

Explain why that is, Poirot? Perhaps the flight to property as a safe haven has something to do with it, or supply and demand, but don't believe every conclusion you read.

Here's my advice to both parties.

1) Bring back full CGT at the marginal tax rate with full indexation for inflation of the cost base.

2) Allow operating losses to be carried forward and written off against capital gain if still in debit at time of sale. Any residual loss thereafter would be carried forward by the taxpayer to apply to any new venture/s.

Bear in mind that investment via a company allows operating losses to be carried forward, so my proposal simply allows individuals to do what companies do. Companies pay no tax when they make a loss.

NG for an individual taxpayer simply allows them to invest without a company structure, with the same ultimate outcome the same as if as if they'd incorporated, both to themselves and the tax man. This underlies Turnbull's "that's beside the point" comment in the interview with Leigh Sales, I believe, not a "let them eat cake" attitude.

Labor's policy is class warfare, and it's palpable.

PS, I'm talking about applying these principles to all asset classes, not just housing.

PSS. Incorporated into my proposal above could be a limited operating loss for the individual taxpayer that can be written against normal income in any financial year, i.e. a cap on NG, with any residual loss carried forward.

A lesson in Taxation 101 must be spelled out by Turnbull, along the lines I have done above, so people know what they're voting for. His effort with Leigh Sales was not his best.

It is obvious that Labor's policy is either very ill-considered, or, callously designed to divide Australia for political advantage. Reading the comments on the Poirot's Guardian link demonstrates the palpable hatred out against anyone providing rental housing.

"...His effort with Leigh Sales was not his best."

That's the understatement of the year.

He was pathetic.

But, it's par for the course - can you direct me to an interview where he hasn't waffled and dithered vacuously since he became PM?

Address the points, Poirot, or are you just in this to kick up dust like the Labor Party?

NG is a pathway for the mum's and dads to have a flutter without forming a company structure, and it's how I got ahead early on. I'm positively geared now but NG helped me gear myself into investment for an independent retirement.

Why take it away? The wealthy will form company and trust structures which achieve the same ends if NG disappears, as I've outlined above.

Individuals must be free to aspire and strive. What do you want, taxation on gains but no allowance for write-off of losses? You live in a capitalist society with a far better life than you could enjoy in a communist state.

Instead of beating the class drum, and claiming rorts and so on, have a think and see some sense in what I'm telling you, or is that not the aim?

Written quickly and last post for 24 hrs.

Luciferase,

"NG is a pathway for the mum's and dads to have a flutter.."

"Instead of beating the class drum, and claiming rorts and so on..."

Save it, mate - we all know who is making a killing from these taxing arrangements. If you're so outraged about a rort for the top echelon being removed, perhaps you can come up with a better arrangement - one that targets more fulsomely the ordinary mums and dads without providing a feeding trough for the nobs to gorge themselves?

"The Grattan Institute notes that 54% of the benefits from negative gearing goes towards the top 20% of taxpayers. But importantly, because negative gearing is used to reduce people’s taxable income the report also notes that when you look at peoples’ incomes before taking out the rental losses, the benefits are even more unequally distributed – with 47% going to the top 10% and 68% to the top 20%."

Graph:

http://www.macrobusiness.com.au/wp-content/uploads/2015/04/ScreenHunter_7244-Apr.-28-13.45.jpg

It'a always a "class war" when the richest have their rorts nobbled....

Luciferase,

The argument that “mum's and dads [can] have a flutter without forming a company structure” loses its meaningfulness and significance once new people can no longer enter the market. At some point (probably where we’re at now), all that is created (granted not just by negative gearing, but by overseas investment), is a permanent, intergenerational separation between the haves and the have-nots in which social mobility is virtually impossible. That’s not conducive to societal health. All it creates is social unrest, and history is a litany of examples of this.

Waleed Aly put the negative gearing issue well: http://www.facebook.com/BillShorten/videos/991522904217604

Poirot,

You are no spring chicken. With your knowledge of the certainty of windfall profits to be made from tenanted housing you must be a millionaire many times over.

So, how many properties in that investment portfolio of yours? What about your gross and net earnings, do tell?

Or like the major investment houses have you decided instead that providing and managing rental property is fraught with risks (legislative risks too as proved by both sides of government) and poor returns and the management is too costly and difficult to bother with?

If you agree with the major investment houses such as insurance and superannuation, NONE of which speculate their investors' money on rental housing, you would also be joined by both State and federal governments, all of whom have been moving over the years to divest themselves of those very difficult and management-intensive welfare and low income tenants and have been pushing the load onto the private sector.

You can cherry-pick 'research' modelling (the asterisks note the carefully slanted briefs on many) all you like to bash the LNP, but at the end of the day there is no challenging the very obvious truth that large corporation and government regard the sector as distasteful and to be avoided and for damned good reasons.

Is your L'il Willie Shorten planning to provide and manage more welfare and low income housing?

NO, NOT on your Nellie! What Shorten is about is increasing tax by introducing a new tax on a new sector.

@AJ Philips, Friday, 29 April 2016 4:40:14 PM

Wedge politics. Beating the intergenerational jealousy drum and quoting 'Little Wally' on L'il Willie Shorten's faceache page.

I can't remember the exact figures, but the top 20% pays 60% of the tax.
The bottom 20% pays zero tax.
Those figures are not accurate but they do give the idea.
So beware what you wish for the top 10% or so, they might pull the plug.

Thanks Bazz,

Not forgetting the nearly 600 mega-companies that pay no tax - we wouldn't want them to pull the plug.

"Australian boardrooms are braced for the release of tax data on Thursday morning that will name 579 of the country's largest corporations that paid no tax in 2014."

http://www.afr.com/news/policy/tax-office-to-name-579-companies-that-paid-no-tax-20151216-glp3vc#ixzz47CfOSZ93

Or the 55 millionaires who did the same...

"Tax statistics released Wednesday reveal that 40 of them claimed an extraordinary $42.5 million for the "cost of managing tax affairs" meaning they each paid an average of $1 million to an adviser prepared to help to bring down their taxable income, which is itself a tax deduction.
Between them they reported earning $129.5 million, an average of $2.3 million. By the time their accountants had finished with them they reported losing a combined $12.8 million.

The implausibility of someone earning $2.3 million and paying half of it to a tax adviser suggests some may be understating their earnings."

(Just a tad)

http://www.smh.com.au/federal-politics/political-news/tax-office-statistics-reveal-the-55-millionaires-who-paid-no-tax-20150429-1mw2zp.html

AJ Philips

That video explainer by Waleed Aly is excellent.

Wedge politics or not, onthebeach, the social implications of creating a permanent, intergenerational underclass are well-established. You can write them off as jealously all you like, to avoid addressing the claims, but it doesn't change the facts.

One of my other favourites is “class warfare”, which conveniently brushes off the fact that those with the coin make the rules and, therefore, the activities of the poor are more likely to be criminalised and demonised; while white-collar crime goes almost completely unnoticed, despite the fact that the social and economic costs of it far outweigh those of conventional crimes.

But I digress.

For what it's worth, I resented having to link to Shorten's Facebook page, but it was all I could find. I was, however, curious to see if someone on your side of the debate would point that out rather than address what Aly had actually said.

Poirot,

Brilliant, wasn't it? Watching Turnbull fumble around, trying to muster some sort of a scare campaign with nothing to back his assertions, was as priceless as it was painful.

"....perhaps you can come up with a better arrangement - one that targets more fulsomely the ordinary mums and dads without providing a feeding trough for the nobs to gorge themselves?"

I have, in my posts above, if you would only understand them, Poirot. I even suggesting a cap on NG so Mums'n'Dads could still have a win without incorporating, while curtailing the big end of town, (which would revert to a company structures if ever investing in housing after this).

Where a loss is made in business are you suggesting, Poirot, that's quarantined as the investor's problem but, where a profit is made, the Gov't should expect a piece of the action? If you are then I'll withdraw, with the understanding that you and Labor are beyond reason.

If you are not, tell me where you draw lines, or where we disagree, rather than drum beating. Same AJPhilips.

The US and other countries have no NG but have a lower home ownership rate than Australia. Perhaps we should aim emulate Romania? https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate . Where's the causal link between the level of home ownership and NG?

On ABC 7.30 Report, LEIGH SALES: "The statistics are that the top 10 per cent of income earners...... who are receiving three quarters of taxable capital gains"

MT: " Well Leigh, that is - that's beside the point. Of course - of course people on the highest incomes will make the highest gains because they tend to have more property. But Leigh, ..."

LS then talks over him in another direction but, somehow, MT's words get turned into something about NG, not CGT, by twisters like the Guardian and its lynch mob of followers. Who makes taxable capital gains IS beside the taxation point, but bring out the Guillotine and lop heads, guys, not missing that pig that makes a real capital loss yet pays CGT (see my CGT thread).

I contend that there is a sensible way forward, while you guys just fall in behind Labor's ill-considered class war on NG and CGT.

Spare the Les Miserable rhetoric and get to tax details.

The first problem is why does Labor need a new tax.

The second, why isn't Labor proposing savings to pay for its promises?

I believe that the Property Owners Association of Australia, whose membership is in the thousands and few if any might be those wealthy millionaire entrepreneurs Labor talks about, is right in its assessment,

< PROPERTY DEVELOPERS WILL BENEFIT HUGELY UNDER SHORTEN’S PLAN.
The Property Owners Association of Australia has slammed Bill Shorten’s proposals to increase the Capital Gains Tax and to restrict negative gearing to new housing, calling for no change to CGT and negative gearing.

The Association, representing all the states Property Owners’ Associations, in response to the ALP’s proposals, says the ALP plan would hit first homes buyers and tenants most.

However, property developers would benefit hugely under Shorten's plan.
“Bill Shortens proposals are short sighted and if anything will make it harder for 1st home buyers who only have relief from Stamp Duty by buying new housing, which combined with restricting negative gearers to this class of property too, would definitely see increased profits for developers.

The proposals also would reduce confidence in established residential property, that would reduce the supply of rental
housing and disadvantage tenants.” Property Owners Association Of Australia President Bruce McBryde
said.

“The only major asset most Australians have is under threat from political opportunism based on envy, lack of vision and money grabbing. Most Australians want to own their own home at some stage, some want to rent but usually not forever.

By announcing such ill-considered policies Bill Shorten has actually
proposed increased taxation on property, Bruce McBryde said.“History is littered with failed government ideas of taxing property & stamp duties have increased faster by bracket creeps than property prices, which have largely increased due to lower interest rates and interest-only loans.>
http://www.poaa.asn.au/POAA%20Shortens%20Negative%20Gearing-1.pdf

AJ Philips, I've said this often, "take a drive down your local café strip on almost any weekend and you will see why so many can't afford a house". "$45 per litre for warmed milk, and $8 for eggs".

It is not uncommon for a couple (mainly young) to spend up to $60 for a single breakfast, yet they complain that they cant save a deposit for a house. Tattoos also make up for a large portion of their ill spent money.

Of course the other huge problem with housing affordability is the fact that so many today want 'THE HOUSE' not 'A HOUSE'.

It is not uncommon for a young couple to bring in $120K combined per year, yet, from this they cant save a third of that for a deposit.

They have two nice cars, mobiles, plasmas, Tatts, Tatts and more Tatts and pay about $450/week in rent.

So where does the money go!

We definitely have a spending crisis, but im not convinced we have a housing affordability crisis, unless of course the proposed buyer is too fussy.

If a couple can earn $2 to $3K per week and not afford a home with record low rates, and a gifted gov grant, then they have a spending problem.

"The first problem is why does Labor need a new tax."

Lol!...nice try, otb, straight from the govt's play book.

Turnbull was asked on the 7.30 Report if he had any modelling to back up his claim. He waffled a bit and mentioned the BIS report (which was wasn't modelling Labor's proposal - and was described by Grattan as "manifestly ridiculous")...he then proceeded to waffle some more and said "it's common sense".

Magnificent Mal's "common sense" is his idea of modelling.

Here's an indication of what negative gearing in tandem with the changes to capital gains tax has done to house prices - taken from Waleed's explainer.

In 1960 the median cost of a house 1.6 x household income.

In 1985 the median cost was 2.25 x household income

In 1999 the Howard govt introduced the capital gains discount.

In 2016 the median cost of a house is 4.3 x household income.

...and that's with most houses these days receiving two incomes.

That'a a powerful cocktail.

The ANU's modelling says that limiting negative gearing to new builds will slow the growth of house prices - not make them fall. It would also increase new construction giving us more housing stock.

Even Turnbull's prop - the one year-old baby - could profiting from investing under that plan.

A few gramma slips there I see Poirot, its just a shame people who live in glass houses continue to throw stones, hey!

As for your figures showing housing affordability and the impact claimed that NG has caused, you might also want to consider a few more facts.

1. The child care sector has boomed in the past 20 years, allowing both couples to earn an income, meaning more can afford a home, meaning prices increase.

2. Lenders have loosened their borrowing criteria allowing more people access to funding, along with the ever popular interest only option. A house is like anything being traded on the open market, the more buyers, the higher the price.

3. First home buyers grant. When first introduced it was $7,000 and most properties increased by this amount, if not more almost overnight. It then increased to $14K then $21K, same same as 'common sense' would suggest, the more people with access to funding, the higher the price goes, its like a silent auction.

There are a few.

I do agree that the 50% reduction in CGT has played its part, because many used this to upgrade, or even cash out.

The bottom line is, to touch anything to do with the economy with a big stick approach right now is extremely risky and let's face it, labors past attempt at running the country was nothing short of dismal. And the history book show that. They caused so much damage, much of which is unrepairable, left us with huge debt and no money and, they left unfunded commitments all of which we cant fund without cutting something else.

They inherited a healthy beast, and left a Skelton behind

rehctub,

Lol!...yes a few "typos" - I apologise.

My point to you was that mine, as are most peoples, are inadvertent...I do attempt to edit but some get through.

You are far more slap happy on that account and your work is often littered with "glaring" errors which you don't seem to think matter at all. I know you can take more care because large tracts of your stuff are also well written.

rehctub,

".....labors [sic] past attempt at running the country was nothing short of dismal. And the history book [sic] show that. They caused so much damage...."

Every time you make that bald statement, I intend to reprise this:

"From the time of the last election:

Net debt was: $175 billion
Net debt now: $274 billion

Gross debt was: $273 billion
Gross debt now: $409 billion

Net debt to GDP was: 10%
Net debt to GDP now: 16.9%

Wages growth was: 2.6%
Wages growth now: 2.3%

Govt spending was: 24.1% of GDP
Govt spending now: 25.9% of GDP

Unemployment was: 5.6%
Unemployment now: 6.0%"

That's what this LNP govt has done since taking office - no GFC - no idea.

And another thing - where are the pre-budget leaks?

Can you name me a budget in recent years that has leaked some detail to soften up the electorate beforehand.

One has to surmise that keeping with the pattern of this vacuous govt on all things fiscal, that they are struggling to come up with anything of substance.

Mr Morrison is way out of his depth in the role of Treasurer - that's a given.

Can't wait for Tuesday....

Poirot,

The figures you are chucking around are largely irrelevant to the argument. Simple economics dictates that if you reduce the incentive to invest in property, the consequences will be a reduction in the value of property and the reduction in properties available for rent. How low property values drop and rents increase depends largely on the demand / scarcity of properties for sale and for rent. That this result is borne out of every single historical example is the proof of the pudding.

Given the tightness of the market, I believe that the drop in property prices will be minimal in cities but the increases in rents will be substantial.

The reality is that to reduce housing prices is to increase the supply of housing close to employment. Turnbulls vision of infrastructural improvement will be far more effective than a great big new housing tax.

Hi Poirot,

You suggest that "In 1960 the median cost of a house 1.6 x household income. In 1985 the median cost was 2.25 x household income.... "

Perhaps we mix in different circles but I've always assumed that, in my youth, a house, i.e. an affordable, acceptable sufficient house, cost about the equivalent of three years' pay: three or four thousand pounds for a plain, 3-BR, one-toilet, one bath, fibro dwelling.

When my parents put a down payment on their first house in 1965, it was priced at seven and a half thousand pounds, or about four or five years' pay for my dad. As it happened, they were forced to take out a second mortgage and pay higher interest but eventually had to sell it, and go back to renting.

Coincidentally, I was remarking a couple of weeks ago to a friend that one put one's spare money into EITHER overseas trips, a habitual high night-life, OR into a house: you couldn't have it all (most of us anyway). Of course, we were talking about our kids.

As somebody remarked, if a couple are on $ 120,000 or more, no kids, then why on earth can't they save forty grand a year towards a house ? A couple of years and there's the deposit. At current interest rates, the place is paid off - or another deposit for a second house is accumulated - in fifteen or twenty years.

Unless, of course, they want a McMansion and they want it NOW ! In which case, my heart aches appropriately.

Cheers,

Joe

SM,

Those figures were in reply to rehctub and his mantra...I explained that when I posted them.

Yes, I understand that is your analysis.

The fact that it is at odds with the modelling and analyses of other entities with more expertise than you is my point.

The modelling and analysis you quote was aimed at figuring how Labor could get its new taxes up.

Whereas there is plenty of practical evidence that the mediocre, usually negative returns from rental housing are totally out of whack considering the known and easily proved risks and the known and easily proved management problems and overheads.

As has been stated previously and again it is easily proved, no hypotheticals, no 'modelling', large corporations and government regard the rental housing sector, particularly the low rent and welfare housing, as distasteful and to be avoided and for damned good reasons.

It is a fact that State and federal governments, ALL of them, do not have the money to develop welfare housing and it is on the public record from reports of government auditors that governments, State and federal, never could manage the exposure they have had.

You also ducked the question, "Is your L'il Willie Shorten planning to provide and manage more welfare and low income housing?". The answer is an emphatic "No". All Shorten is about is proposing new taxes to support Labor and Greens spendthrift ways.

Labor and Greens see housing, shelter, as a milch cow for more taxes. Both are already on the record for wanting to extend CGT to owner-occupied homes and both want to bring back Death Taxes.

"The modelling and analysis you quote was aimed at figuring how Labor could get its new taxes up."

Hohoho!...new taxes?

Snort!

You mean attempting to cease the practice of the highest 10% having a field day guzzling taxpayer's money for their own enrichment?

Here's a go. Someone put this up on Twitter and Stephen Koukoulas said it was correct:

"If you earn a salary of $500K and make $420K in interest deductions on an investment portfolio - your taxable income is $80K.

Nice little earner, eh!

Where will Shorten be building that new low income and welfare housing and how many units? What about housing for the disabled?

The answer is that Shorten has no plans to build anything, let alone get into long term rental management.

Shorten is after new taxes. He regards shelter as a milch cow for new taxes to support Labor's and Greens' spendthrift ways.

That is his track record. He wasn't interested in those 'Struggle Streets' either and went on about gay marriage instead. 'Negative gearing' (a misleading term) is just more of the same tactics from irrelevant Labor and their Greens sidekicks. Mark Latham about Labor and gay marriage, and he could add 'negative gearing' as another diversion,

<Former Labor leader Mark Latham slams Labor over gay marriage

FORMER Labor leader Mark Latham has slammed his party’s “obsession” with gay marriage saying it should focus on the nation’s “Struggle Streets” instead.

He told 3AW radio Bill Shorten’s private members bill to push for changes to the marriage act to allow same-sex couples to tie the knot, to be introduced into parliament on Monday, was nothing more than a symbolic gesture.

He said the biggest social issue facing Austalia was unemployment, drug use and homelessness in suburbs such as Mt Druitt which was the focus of the SBS documentary, Struggle Street.
..
“We didn’t hear anything.
“They’re obsessed, instead, by gay marriage.”>

http://www.news.com.au/lifestyle/gay-marriage/former-labor-leader-mark-latham-slams-labor-over-gay-marriage/news-story/6c89f7077536bf321ee40c25946e6f0f

What will be the next diversion after 'negative gearing' and when will Shorten and his crew of leftovers from the failed Galah'd and Rudd Labor governments come up with some real policy?

Hi OTB,

A propos to your reference to Labor and diversions, yonks ago, there was a brilliant series on ABC TV on poverty in South America, David Dimbleby, I think: in his focus on village Bolivia, he noted the terrible problems, but also that the village council was preoccupied with fixing the communal barn door. Ever since, we used to exclaim when we saw a diversion, usually in relation to what is called laughingly 'Aboriginal self-determination', 'Barn door !'

Poirot, your envy is showing :)

Cheers,

Joe

Poirot, im starting to think you are taking the piss, either that or you have no idea what so ever how the wheels turn.

For someone to earn $500,000, then borrow to commit in excess of 80% of their gross income in interest payments simply would not happen as all lenders have strict policies on what percentage of ones salary can be used to service debt.

The other flaw in this is that the $80K you say their wage is reduced to would hardly be enough to pay their tax, because you must remember, tax is taken out first, then refunds applied, so the tax office is assuming you are earning the whole $500K and taxed appropriately. Surely you're not that stupid to be fooled by such rubbish!

I've seen some holes dug on this site before, but that's a doozy!

As for housing affordability, my dad was a welder in 1972 and netted $42 per week, paid about $2 tax. This made his annual wage about two and a half grand. My Grandmothers house sold in 1973 for $12,000, it was in Bardon, Brisbane. That's about 5 years of my dads salary.

Not sure where your numbers came from but this is fact.

With duel incomes and record low interest rates, combined with fierce lending competition and the likes of mortgage insurance and first home buyers grants to boot, housing affordability has never been easier. The problem is rents have been too cheap and lifestyles have been too extravagant so homeownership is made harder than it needs to be, especially when buyers become too fussy.

Poirot,

The problem for you is that modeling agencies with far more expertise and experience than the ones you mentioned agree with me.

I too believe Poirot is stirring possum and struggling to understand the basics of taxation, butch.

C'mon, Poirot, do better or stick to threads you can grasp. You know you're struggling when you reference Twitter.

Luciferase,

I referenced Stephen Koukoulas - who knows a bit more than random characters on OLO.

Just saying....

I do recall the great economist, rehctub, also rejected Saul Eslake's opinion on negative gearing on this forum - so I won't reprise Saul's post at the moment.

Far be it from me to reference well-known Australian economists when the crew from OLO are here to reassure me.

Lol!

Stop crapping on and address my points on taxation.

Acknowledge the fair way forward vs Labors class war on NG and CGT.

I've always held you in high esteem as a poster but you're not in this for the truth, it appears, just the posturing.

Joe (Loudmouth) got it right with his, "Poirot, your envy is showing".

That is the demographic that Shorten and his leftovers from Galah'd and Rudd are appealing to. However, as Galah'd and other leftists before her have found to their cost, Class War appeals to the 'never did' and 'always watched' who, having sat on their increasing behinds for years and relied on the taxpayer for most of that time, always need excuses for their own failure in the world. Arse out of their pants, jealous of the hardworking successes around them and needing someone to blame for the inevitable sad consequences of their own choices and slackness.

But they vote Labor or is that Greens anyhow. Hey, there's the problem: L'il Willie Shorten is trying to out-protest the wilful Greens to win some of the 'Useful Idiots', the always stupid and dependent vote back.

Labor could come up with some real policy if only the rank and file of the party had some say in things. But no, it was Shorten and his Big Union thugs who removed any vestiges of democracy in the party by discounting the votes of ordinary members to ensure that the union heavies ruled. Shorten would call that 'progressive'.

Appeals to authority Poirot, are the last resort of an impoverished mind.

That goes double when those authorities are the very ones who got us into this mess in the first place.

rehctub,

Your argument assumes that if people didn’t spend in the way that you have described, then they’d be able to afford a house. But that’s not the case as all. Two people on decent wages couldn’t even afford a two-bedroom fibro shithole an hour out of the city nowadays. Your argument is simply a rehash of the old, “You kids are just blowing all your money on iPods” argument (which could have been purchased for as little as $80 when that argument was going around). But not spending like that would make no difference, so your argument is invalid.

Don’t take me for your average fool who doesn’t know the first thing about spending and saving. That’s the whole problem with the older generations. You assume that an inability to manage money is the entire problem. It’s not. It’s just that your generation is too stupid to understand that times have changed. When two wages don’t even cover the mortgage costs, something is wrong. Get it?

Clearly you didn't bother watching the video I linked to. It shows.

I note, still, that no one has yet come up with any arguments that invalidate what Aly said in the link I provided.

Did Little Wally tell you that a 6 year (say) suspension of immigration, or even wind it back by 50% for ten years and whooska, Australia's housing, energy, water, roads and other infrastructure problems will be fixed?

That is where the demand for housing is coming from, cities like Sydney with population growth from immigration that an undeveloped country would be criticised for.

Not that housing is expensive out of the few major metropolitan cities like Sydney, which is where the migrants always lob.

Now, what about that $30.4billion [2014 Indigenous Expenditure Report] annual spend on Indigenous, is that something that Shorten and Labor could be getting their teeth into? Y'know, small matters such as many indigenous homes are built and how many still standing and habitable after a few years?

<Chair of the Productivity Commission and Chair of COAG Steering Committee, Peter Harris said, “The report of total government expenditure and the information on outcomes in the ‘Overcoming Indigenous Disadvantage’ report are two critical building blocks.

Governments, Aboriginal and Torres Strait Island Australians and researchers have the opportunity to use these reports to consider the effectiveness and efficacy and efficiency of government expenditure. In that way this report will contribute to better policy making and improving outcomes for Aboriginal and Torres Strait Islander Australians.”>

Labor were in power for six years and did squat but create boat people problems and empty the federal coffers on failed insulation and other hare-brained schemes. Shorten and his leftovers from the Galah'd and Rudd governments were part of that.

How come they are suddenly so interested in 'negative gearing', when they didn't do anything about it if it was such a problem in the long years Labor was in office?

It is just another diversion, like gay marriage.

Australian cities vary in housing affordability. What gives anyone the right to live where they choose without the income necessary to support their choice?

If you can't afford what you want in your city, AJP, change your city.

Aly's piece is a theory. Pre 1985 there was no CGT, yet there were periods of high affordability. CGT then came in, with indexation of the cost base, at the full marginal tax rate, yet there were periods of low affordability. Later, a 50% concession was introduced with indexation removed, yet there were periods of high affordability. Throughout this NG existed as it has since the 1920's, I think I read.

I keep coming back to what is fair. What I can't get out of you or Poirot is your view of what is fair on NG and CGT. Do you think rental losses should be quarantined and profits taxed? Do you think that a real capital loss should incur tax? Do you think rental housing as an investment should be prohibited or thoroughly dissuaded through punitive taxation arrangements?

These are serious questions with answers of major significance. How about addressing them instead of simply falling in behind Labor's class war?

Hasbeen,

The reason I always cite "higher authority" like Koukoulas and Eslake is because they are far more knowledgeable on this subject than the fellas on OLO. I cite scientists when I argue on climate for the same reason.

http://www.theguardian.com/business/grogonomics/2016/apr/28/how-negative-gearing-replaced-the-great-australian-dream-and-distorted-the-economy?CMP=share_btn_tw

"Prior to the CGT changes, the number of rental properties that produced a loss were roughly equal with those that made a profit. But as soon as the changes came in, rental losses became much more attractive:"

(Look at the graphs in the article)

The reason is the combination of the CGT discount and negative gearing made for a very attractive tax minimisation scheme.

The tax system thus in effect encourages you to engage in “debt-financed and speculative investments” because negative gearing enables you to minimize your current income and the CGT discount enables you to minimize the tax on your profit – because you get to choose when you sell your property.

There was no reason in the early 2000s for why suddenly landlords would start losing money on their rents – it was a purely driven by the changes to the capital gains tax – and the level of impact clearly demonstrates that the discount is too great.

And yet we now have the government in effect arguing that not only is the distortion not a concern – it is something that should be encouraged.

We also have the prime minister arguing that the ALP’s proposed changes are attacks on economic freedom and that negative gearing “is not a tax break, it is a standard concession.”

No one has any issue with being able to deduct business expenses, but that is not what negative gearing is.

Negative gearing is about deducting the interest costs of an investment property against income that has nothing to do with that investment."

Luciferase,

You've mentioned "class war" at least six times in this thread - so it's clear your mouthing the govts line and slipping the slogan du jour in regularly - maybe you should stop "crapping on".

AJ, I just purchased a house for $355K, borrowed $362K and interest only payments are $2K per month. So lets do the math.

Estimated repayments with a 20% deposit, 30 years at 4.5% i'm guessing about $550 per week. $28,600/an

Rates 2500
Insurance 3000

All up, $34,100, or $655 per week.

So, assuming a net combined income of $2,000 per week, where has the rest gone?

Its a simple question!

Poirot. I have communicated with Saul via email,however, once I put my case forward about where is the new land going to come from, he ceased communicating. I also invited him to participate in the relevant thread, but he obviously declined, just like everyone else did.

He may well be a respected economist, but it appears that not even he is willing to enter in to the debate.

The policy is flawed.

As for your perception on negative gearing, it is quite simple.

One buys a property and rents it out, The shortfall between the loan repayments and other holding costs such as rates, water if applicable and repairs are then serviced through ones annual salary, with the difference, lets say $4,000, becoming a tax deduction.

How this works is lets say one earns $80,000 per year, pays say $11,000 in tax, the $4,000 is deducted, meaning the gross earning are now $76,000, so the difference in tax between $80K and $76K is the refund.

For some reason people think if your shortfall is $4,000, that you get $4,000 back, which is plain wrong, as you only get a portion back.

So what you are now wanting one to do is buy the house, rent it our, maintain it, pay the rates, pay the water (if applicable) pay the shortfall and receive no tax return for their efforts.

Why on earth would one do such a stupid thing, unless the rent covers the costs of all shortfalls, meaning either one does not buy, or the tenant bets a big fat rent increase.

Its so simple yet people like yourself just don't get it. This is a dumb policy.

rehctub,

Just to add to what you have said, a rental property that starts positively geared can easily revert to negatively geared in a financial year or run of years and most do.

Tenants can tell Poirot why. They could also tell Poirot why most tenants wouldn't themselves put money into tenanted housing. However just to give some clues, examples could be replacement (especially unscheduled early replacement) of larger items, carpets, air conditioners and so on and of course the usual one, which is professional tenants absconding without paying rent.

Government interference in the market always results in swings and troughs. Presently the destabilising effect of Labor's and the tabloid media's (where tabloid media now includes the ABC!) speculation about negative gearing and capital gains tax is starting to be felt.

So, when the positively geared property reverts to negatively geared what happens then?

BTW, I see nothing wrong with a solo trader, which describes most long term investors in rental housing from claiming losses against all of their income streams, which would usually only be their (moderate) wages and earnings.

Also, such investors would often be interested in cheaper, older properties to improve as rentals through their own labour, skills and creativity. That results in cheaper rentals too. However, Labor and Greens would deny them that leg into the market to improve themselves and provide for their own retirement. It is ridiculous to expect them to stump up a large wad of their own cash to buy a property, make it suitable and cover the risks.

Much as I hate to disagree with the great economist Poirot, one only has to review the two last instances of the removal of negative gearing in the USA and in Aus in the 80s. In both instances the most notable result was the spike in rentals.

Here are the assumptions and conclusions of the independent report by one of the most respected economic agencies in Australia.

Note that this was done prior to labor's policy, for no one directly involved with politics.

Assumptions:

Abolition for established dwellings – removal of tax deductibility of losses on established residential property against general income

New properties exempt – the change applies to established dwellings only; new dwellings continue to attract concession as per usual

Grandfathering – the new policy applies to purchases of property made on or after 1 July 2016, but purchases of property made before 1 July 2016 would not be affected

Deductibility within property portfolio – no restriction on negative gearing deductions against another property owned by the same taxpayer • No change to related taxes – capital gains tax and stamp duty remain unchanged

No change to other asset classes – negative gearing offset remains for shares, etc

In effect, the current negative gearing tax provision would be replaced by ‘neutral gearing’, for established properties. We find that limiting tax deductibility of negatively geared residential investment properties would have consequences that go well beyond any tax saving

Impacts:

Rents will rise by up to 10% ($2,600) p.a.

New home building will shrink by around 4% nationally, or 7,200 dwellings a year

GDP would shrink by around $19 billion per annum on average, equating to some 1% of Australia’s $190 billion annual income

175,000 fewer jobs would be created over the next 10 years, resulting in the unemployment rate rising from 5.8% to 5.9%

Government revenue across a range of taxes would shrink by $1.65 billion per annum

70,000 extra households would be pushed into housing rental stress

If the government were to compensate these stressed households, it would require an additional subsidy outlay of $650 million per annum.

rehctub,

"Poirot. I have communicated with Saul via email,however, once I put my case forward about where is the new land going to come from, he ceased communicating. I also invited him to participate in the relevant thread, but he obviously declined, just like everyone else did.

He may well be a respected economist, but it appears that not even he is willing to enter in to the debate."

Oh really?

What's this then?

http://forum.onlineopinion.com.au/thread.asp?discussion=6518&page=0#194134

"Rechtub", what I was saying on the ABC yesterday morning..."

and...

http://forum.onlineopinion.com.au/thread.asp?discussion=6518&page=0#194167

Two lengthy posts on your thread "An open letter to Mr Saul Eslake"

Here's your reply:

"Firstly, thanks Saul for participating, your input and knowledge is much appreciated and, if I misunderstood your statement to the ABC, I apologize."

So your tune has changed markedly. Why did you attempt to paint Saul in a bad light - especially since he did the honourable thing and took the time to engage you on OLO?

rehctub,

"Why on earth would one do such a stupid thing, unless the rent covers the costs of all shortfalls, meaning either one does not buy, or the tenant bets a big fat rent increase."

I dunno...

Here's an investment chappie explaining the "positives" of negative gearing:

"Negative gearing is the strategy of generating short- to medium-term tax losses – arising from tax-deductible costs that are higher than investment income – and leveraging this to increase exposure to potential gains and losses.

This strategy is popular because the tax losses that arise can usually reduce an investor’s other taxable income, resulting in a lower annual income tax bill. The savings generated can help to at least partially pay the investment’s way.

http://www.yourinvestmentpropertymag.com.au/property-tips/the-positives-of-negative-gearing-79707.aspx

"... is the strategy of generating short- to medium-term tax losses..." no less!

And this one's even better:

"How is losing money considered a wise investment strategy?

Buying an investment property is an important financial decision that is part of an overall strategy designed to meet both your shortand long-term goals. This strategy should be based on your current financial position and personal circumstances.

With this in mind, the main reason investors use negative gearing as a strategy is to reduce taxable income, while building wealth through potential capital growth. Put simply, if you make a loss on an investment property, you can claim a tax reduction on your income (known as a tax offset). You can then use the tax offset to lower your tax bracket, meaning you pay less tax.

Negative gearing is a particularly popular strategy with high-income earners who are looking for ways to build wealth and have the tax department help fund the investment...."

http://www.whichproperty.com.au/News-Articles/Negative_gearing_explained

Gee you will have to do better than that Poirot, that thread was about two or three years ago. Yet another diversion.

I have also sent a letter to my local member (well where my work is) Mr Wyatt Roy, he has replied, and another to Mr Bill Shorten, with no reply.

My communication with Mr Eslake was recent and although he did respond via email, he has not debated the serious issue to my knowledge, but I will check.

Now back to the serious question once again, where do you propose the new land will come from, to build the new houses, the only ones that will allow NG. It's not a hard question to ask, but a very hard one to answer if you are NG negative such as yourself.

Unless one can provide such an answer then one is simply caught up in the moment without a clue as to how this policy will effect investors, builders and their workers, retirees who want to cash in or renters wanting more houses to live in.

So many potential looses with such little gain, if any.

I say 'if any' simply because while the investor may write off the NG aspect of their expenses, at anywhere from 25 to 48 cents/$, the lenders pay company tax @ 30 cents/dollar on every single dollar they charge on the interest.

Of cause this is a whole new subject, and one that nobody has cottoned on to yet.

rehctub,

"Gee you will have to do better than that Poirot, that thread was about two or three years ago. Yet another diversion."

Jeepers...what was I thinking.

You start a thread in the General section titled: "An Open Letter to Mr Saul Eslake" in 2014. The man himself actually deigns to respond to you respectfully.

Now you see fit to write this derogatory line above, :

"He may well be a respected economist, but it appears that not even he is willing to enter in to the debate."

And then you opine that because it was some time ago it doesn't count.

Btw, it was August, 2014 - way less than two years ago.

Next you tell us he responded to your recent email - and you're still happy to bag him.

This top economist appears to have engaged you, a humble butcher, above and beyond what one could reasonably expect - and the best you can do is bitch about him to us.

Says more about you than it does about Saul.

A word of warning, opinion, as ever, between economists is changing.
More are realising that energy is the real problem with coal an
immediate problem and oil & gas less immediate.

Economists are now noticing that neither austerity nor stimulus are
doing what is expected.
The escalating cost of search & developing for new energy sources is
causing considerable concern in financial circles.
Deloitte has stated that between 30% and 60% of energy producers and
service companies world wide will become bankrupt this year or next.

The following well known companies are on the list;
Quote; In a prescient report published last November, Carbon Tracker
identified the energy majors with the greatest exposures—and thus
facing the greatest risks—from stranded assets: Royal Dutch Shell,
Pemex, Exxon Mobil, Peabody Energy, Coal India and Glencore.
unquote

ps by stranded assets they include those not economic not just inaccessible.

Peabody, the largest coal producer went bankrupt last month.
Peabody has mines in Australia. Presumably as a different company.

Nothing is predictable under previous rules, it is all changing.
And the pollies are arguing about negative gearing ? Oh dear !

"No one has any issue with being able to deduct business expenses....."

Hooray, a statement of belief we can work with. Now, where does that lead us?

Q1: Should any rental loss be able to be written off against income from paid work, or, should business loss only be able to written off against future earnings?

Q2: Should CGT at the investor's full marginal tax rate apply to nominal gain on rental housing, or, gain calculated after CPI indexation of the cost base of the asset?

Q3: Same as Q2 but with a 25% concession on the marginal tax rate thrown in per Labor policy.

The answers to these questions affect the entire investment outlook on housing for M&D's and corporates. The wrong answers will turn housing investment into a wasteland, if it's not already there in some cities.

Not all economists agree with Saul Eslake and when it suits his anti-negative gearing spin, Saul disagrees with many others including Dr Ken Henry.

Property is very heavily taxed and the property market is always highly distorted by that taxation and by government policies on land use, immigration and many others.

Where Saul stands out is his unerring attention to negative gearing on property (but not where it affects other asset classes such as shares), while dismissing any action to correct the known and far more serious influences on housing supply and distorting costs (and prices), such as taxation.

The observer could be forgiven for assuming that Saul still is still working for Bank of America Merril Lynch and he is trying to herd small investors money away from residential property and into asset classes such as shares where small investors are eaten alive and the fleas on fleas on fleas enjoy larger than necessary management fees and trailing commissions, because they can.

Nothing heard from Saul about minor(sic) things such as the unfairness to small property investors (especially) of not allowing them to carry their losses forward to later years. Nothing about the cumulative load of taxes on property and especially new developments, or the morass that is encountered obtaining government approvals.

The reasons why smaller investors take on the high risks and poor returns of providing rental accommodation long term are precisely because investment in other asset classes such as company shares is littered with examples of nasty, unconscionable behaviour - which is only to be expected of the crocs that infest those muddy swamps.

The trouble with neg gearing, is it is a market manipulative. The market should be allowed to find its own real worth without govt; interferance.
Because Keating backpeddled had more to do with politics than results in just two years.

Poirot,

Like all people, economists have their political allegiances, and Saul Eslake like the Kouk are firmly left whinge and as such often given to inconvenient truths. For example from SE,

"if negatively-geared investors didn't buy dwellings, then those dwellings would be bought by people who are currently unable to compete with negatively-geared investors. The supply of rental housing might drop - but so would the demand for it, and by an equal amount. So what's the problem?"

The major problem with this is that renters typically are in the bottom 30% of earners, and house prices would have to fall massively for this to occur. As 75% of houses are owner occupied, this would mean a huge loss to most families, which Labor is trying to pretend won't happen. And with the price of existing housing falling, the incentive to build will evaporate, and rents will inexorably increase.

Poirot, I don't discredit Mr Eslake, all I am asking is why is he not willing to debate this either.

Also, while I accept the previous thread was in fact 2014, we have a whole different ball game on our hands now as we are fast approaching D day for our car industries, jobs, jobs and more jobs gone.

With this unknown, now is not the time to tinker with another un known, that being negative gearing.

Why jump hurdles that may not exist. No one can predict the sort of outcomes that is going on here.

Butcher has something to protect and that being his own ars.

It would be better the govt; supported renters, than negative gearing which is supporting a false market.

SM implies neg gearing keeps house prices high, another good reason to discontinue neg gearing.

SM,

"...And with the price of existing housing falling, the incentive to build will evaporate, and rents will inexorably increase."

But...but...why would the incentive to build "evaporate" when you can still negatively gear a new build - ie use it as a strategy to reduce your taxable income?

Seems it's employed mainly for that purpose, so why wouldn't people flock to new builds?

Rehctub,

I'm sure Mr Eslake has got better things to do than debate on forums like OLO. The fact that he came here and briefly laid out his ideas to you should be taken as a plus...not a reason to whinge that he's not here now.

Poirot, there are two unknowns in your theory with regards to your last post.
1. Once purchased, a new home becomes a used home and the next buyer can not get the same NG benefits as the first buyer, therefore unless the first buyer takes a huge hit, or rents go through the roof whereby returns are in the order of 8% instead of your typical 3% now, what incentives are there for the investor to buy the new home?

Furthermore, what assurance do the banks have that their share, usually 80%, or more, is going to hold its value? If it doesn't, are they going to continue lending at the same LVR? Now if they decide not to, where does that leave your wannabe first home buyer who was saving their original 20%, or less. Because they may now have to save 30% deposit and risk have fewer buyers to bail them out should the need arrive.

2. Once again, where is the land going to come from to build the new home if investors have to wear the holding costs during the DA's with after tax dollars. The end result will either be less land, or higher prices, or perhaps both.
3. If we reduce the turnover of existing housing, where do we find the void created in the public purse from reduced stamp duties and the likes.
4. If less money is loaned, less taxes are paid by the lenders due to reduced profits. Where does this void get filled from. Remember, we are going backwards, not forwards.

As for Mr Eslake, if someone of his stature voices an opinion on such a vital piece of proposed legislation, he should at least be prepared to debate the legit issues, as this is, when they are raised. Don't worry, I will find someone to bring on the debate, perhaps even Andrew Bolt.

Doog, renters already get subsidised, besides, if you increase the subsidies, the rents will increase. Then what!

The risks are simply too high and outweigh the potential gains.

rehctub,

".....what incentives are there for the investor to buy the new home?"

We've addressed that point.

"With this in mind, the main reason investors use negative gearing as a strategy is to reduce taxable income..."

There's yer incentive - straight from an investment chap.

"..Don't worry, I will find someone to bring on the debate, perhaps even Andrew Bolt."

So you'd replace the stature of Saul Eslake with a dingbat like Andrew Bolt (if you could)

Lol!...

In actual fact it is Saul Eslake's advice that is difficult to explain.

Because he is dismissive of far more significant influences on house prices such as the existing tax burden on property and homes in instead always homes in on 'negative gearing'. She is cocking his leg on a shrub and forgetting the forest behind. Also, negative gearing applies to other asset classes but Saul is not looking to curtail or ban it for shares and so on.

How does that figure? You'd think that an economist with 'stature' would not be backward in identifying and making recommendations for the main drivers of higher prices, especially where those drivers have government (policy and decisions) written all over them. What about that over-the-top immigration for a 'Big Australia' that has been setting ever higher records for decades? Who does that suit? Because it sure doesn't suit ordinary Australians and not just because of higher home prices either.

A professional who tells only part of the story is not a professional in my book.

My para should be,

"Because he is dismissive of far more significant influences on house prices such as the existing tax burden on property and always homes in on 'negative gearing'. He is cocking his leg on a shrub and forgetting the forest behind. Also, negative gearing applies to other asset classes, but Saul is not looking to curtail or ban it for shares and so on."

Why the obsession with 'negative gearing' when there are more worthy targets with greater impact?

Poirot: "The reason I always cite "higher authority" like Koukoulas and Eslake is because they are far more knowledgeable on this subject than the fellas on OLO. I cite scientists when I argue on climate for the same reason."

Claiming that understanding taxation and its effects is like understanding climate science as an excuse not to debate details is weaselly cop-out, Poirot. You prefer to cherry-pick opinion, for which there exists no consensus, rather than bone up on the subject of taxation and respond sensibly to questions I've posed.

If you want to discuss this topic seriously, rather than toe the Party line, then the questions were (refined),

Q1: Should a rental loss be able to be written off against income from paid work, or, should it only be able to written off against future earnings?

Q2: Should CGT at the investor's full marginal income tax rate apply to nominal gain on rental housing, or, the gain calculated after CPI indexation of the cost base of the asset?

Q3: (Refined) Should a concession on the CGT rate be applied, without indexation and, if so, at what percentage?

Q4:Should housing investment be treated differently to other investment classes?

The answers to these questions determines the property investment climate. In Butch's post, Point 1, he gives you a good insight into the mind of the experienced property investor, which seems to have been left out of the prognostications of your favourite analysts

All very well, Lucuferace.

<<If you can't afford what you want in your city, AJP, change your city.>>

But one still needs a job to pay off the house. Hobart is still nice and affordable, but good luck finding a job to pay for it. You're argument is invalid.

It also doesn't take into account foreign (and in Tasmania's case, interstate) investment.

AJ Philips,

Saul Eslake, who has the support of some on this forum has advised the Tasmanian government to sell off state-owned assets including electricity retail, poles and wires, transmission and distribution businesses to stimulate the Tasmania's economy.

Economist Poirot would doubtless be all for that since, 'What Saul Says, Rocks!' and without question.

So there you go, you will have higher rents through the withdrawal of negative gearing if Saul has his way and you will be competing for jobs with a host of job seekers from public service redundancies to allow their managements to compete against private bids for public utilities.

Of course the sales would happen anyway and the new workers will be coming from overseas (and more competition for rental accommodation as a spin-off).

Luciferase,

I will debate how it suits me, thank you very much : )

For someone whose style you critique so fulsomely, I think I acquit myself rather well on this forum - if I may say so.

I've posted articles on this thread with which I agree. If you wish to dismiss them as "cherry pickings" - go right ahead. Just because you throw questions at me doesn't mean I've got the time or inclination to answer them (I have neither this morning)

Now you get to throw a few more epithets in Poirot's direction a la "weaselly cop-out"...and ..."Stop crapping on and address my points on taxation."

Charmed I'm sure!

Why, when I have the choice to whom I respond, would I reply to that sort of churlish rhetoric?

So AJ, have you figured out where the rest of the $2K per week has gone yet? I have established that some $650 of it (give or take) has gone towards the house, so where is the other $1350 going.

Remember warmed milk is $45 per lt, eggs sell for $8 each, and ink costs about $150 per hour. Just thought I would throw that in to help you find where the money goes for the deposit that is unachievable. Apparently!

As for where to live and jobs, if you choose to live in the big smoke, Sydney/Melbourne and you are on a minimum wage due to lack of skills, then you are choosing to live outside of your means. It truly is that simple.

There are jobs around for un/low skilled in the likes of Caboolture, 50 km north of Brisbane and a house can be bought for mid $200,000's. How is that not affordable?

Poirot, part of the thought process of buying a new home for rental purposes is capital growth forecast. Now if there is little to no capital growth, why would an investor invest in a rental, with all the risks, both known and now unknown, when they can still negative gear with the likes of shares and, they can cash out in about 3 days.

Where is the incentive in this?

BTW, Saul Eslake has debated me on OLO before, by direct invitation, 2014 as you pointed out. He has not done the same this time so I have asked Mr Bolt to try and bring him, or anyone out to debate this very important issue of 'where is the new land going to come from'. So watch this space.

On the other point, do you acknowledge that the lenders pay tax on their earnings (being interest charged) meaning on the one hand we have money going out, to NG, while on the other we have money coming in, taxes.

Let's face it, if we give away $10 billion, and receive $9 billion back (example only) is this really worth risking our housing industry over?

Poirot,

Pretend offence and stalk off. Exit stage left, yet again.

Heh, heh, for a boy you are big girls blouse. That distinct pear-shape, the high-pitched voice and the obviously false moustache were dead give-aways. Then again it could be the too high, too tight trousers.

BTW, you never got around to detailing your own property holdings, which must be extensive given your belief in the magic of 'negative gearing' - money for nothing and so on. Well, you would have taken advantage, you'd be a fool otherwise knowing what you know, right?

otb,

"Heh, heh, for a boy you are big girls blouse. That distinct pear-shape, the high-pitched voice and the obviously false moustache were dead give-aways. Then again it could be the too high, too tight trousers."

There you have it, folks..."onthebeach" in full flight in a sexist rant to satisfy some bent little foible he nurtures around here.

Seen it a million times...yawn.

rehctub, "Poirot, part of the thought process of buying a new home for rental purposes is capital growth forecast. Now if there is little to no capital growth, why would an investor invest in a rental, with all the risks, both known and now unknown, when they can still negative gear with the likes of shares and, they can cash out in about 3 days.

Where is the incentive in this?"

You have identified why rents will rise when 'negative gearing' is abolished for new and existing accommodation. I

Simply put, there is NO money in long term rental housing, and there are big risks and costly management problems.

Those mums and dads 'investors' are being sold the dream of one day making a windfall profit from a final sale. Yet unless there is a favourable rezoning, which is highly unlikely for zoned residential, it is quite impossible for the 'investor' to even claw back what he put into the property over a ten or fifteen year period (by way of example).

That is because the value of residential housing tracks behind inflation for years, then does a catch up and overshoots, drops back and tracks behind inflation again. All of that time however, the owner has to have very deep pockets for the high maintenance, repairs and other losses associated with rental housing.

On top of that, very few modern homes/units and fittings can withstand the rigors of letting. In tenanted dwellings, dishwashers, stoves, air-conditioners and kitchen benchtops and cupboards as examples, do not last anywhere near the ATO depreciation periods and usually have to be repaired by tradesmen in between.

"You have identified why rents will rise when 'negative gearing' is abolished for new and existing accommodation"

Should be,
"You have identified why rents will rise when 'negative gearing' is abolished for existing accommodation and there will be a flow on effect to new."

As I thought, Poirot, all pants and no trousers.

Poirot,

The whole point of negative gearing is that if you can't make a profit on the rental, then you make a profit on the capital gain. However, when you sell the house you built, it can no longer come with negative gearing, so the resale value is depressed. Thus the investment value of a new house is reduced, and thus the construction of new houses is depressed.

The effects predicted for negative gearing are:
1 That house prices drop which is bad for the 75% of owner occupiers, bad for investors selling their houses, but good for the relative small number of new buyers. (capital gains revenue is depressed too)
2 That rents will go up. (as it has done every time NG has been removed) This is bad for the lowest paid in Aus that rent and have to compensate for the new tax.
3 That some tax revenue will be received. However, given the grandfathering clause, this will be close to bugger all for the first decade or so as existing investors will hold onto their properties longer and the revenue from capital gains will drop.

SM,

"The whole point of negative gearing is that if you can't make a profit on the rental, then you make a profit on the capital gain...."

Judging from the investment advice I posted, "the whole point of negative gearing" was to reduce your taxable income - with the possible capital gain being of secondary importance.

A la "How is losing money considered a wise investment strategy?"

"...Put simply, if you make a loss on an investment property, you can claim a tax reduction on your income (known as a tax offset). You can then use the tax offset to lower your tax bracket, meaning you pay less tax."

As things presently stand the top 10% are making a killing.

In 2005, Malcolm Turnbull described negative gearing as "tax avoidance".

It's pushed up house prices out of reach of first home buyers in general.

It's a system which provides an unbalanced largesse to the rich - they are the one's deriving the most from the set up - I think that's an unfair advantage.

....

Luciferase,

You and your defender, "onthebeach", appear to have a problem when you can't control the narrative and the debate...so you sling around derisive epithets.

While I expect such low rent tactics from otb, your latest style is a tad disappointing.

Worried about rents rising, we will regulate rent prices. Gouging the system does not go down well. Rent prices are a national issue and should be treated as such.

What do we need investers in housing at all. You lot go on as if they are doing a favor. The real investers are house byers to live in. Get rid of price gouging investers.

I expect people with whom I discuss a topic have a well informed, down to details, opinion.

You sir/madam, do not.

Beach, find me a property, in a suburban area, that has not seen a significant rise in value over the past twenty years.

I have bought and sold many properties, my first being my 1st home in 82.
82, cost $39K, sold in 90 for $82K, current val CV $390K
90, cost $110, sold in 98 $225, CV $900K
94, cost 186, sold in 99 $227, CV $1.2 mil
95, cost $72, sold 99 for $76, CV $295
2001, cost $280,vc $600K+

About 18 all up, including some still held, so I do know a bit about property.

Ng usually works like this.

You buy the home, rent it, and claim the short fall NG.

Once the equity builds, you use this to purchase the next, both are NG because the equity in 1 has not been realised. This continues.

The problem is, nobody knows whether the new home will increase in val as the NG is not transferable as it is today.

As for first home buyers getting a bargain on used homes, they only get their grant on new.

Poirot, I am not being disrespectful towards you, I am simply asking you where the new land is going to come from.

It stands to reason if an investor can not claim shortfalls during the Da process, how can they produce land at the same cost as now?

If land goes up, and you limit investment to new homes, how does this help 1st home buyers?

Observation. If NG brings the earner into a lower tax rate, then the NG rate is lower as well. Say $81K, to $75K, diff being 7 cents/$. That's a saving to the gov, not a cost.

Luciferase,

In that case, don't address me then...it's fairly simple really.

.....

http://www.abc.net.au/news/2016-05-02/negative-gearing-driving-house-prices-up-liberal-mp-says/7374478

"The Liberal MP who led a parliamentary inquiry into housing affordability has conceded negative gearing has contributed to the current spike in house prices."

"Liberal MP John Alexander led an inquiry into affordability, and told Four Corners negative gearing has led to a housing market "dominated by speculative investors".

"Too often we see the young couple getting beaten out at the auction, and then renting out the very place that they were trying to buy," he said.

What happened to the Great Australian Dream?

First home buyers are competing with experienced investors equipped with tax breaks and negative gearing.
Last year, more than half of new home loans went to investors, rather than to people wanting to buy a place to actually live in.

"We're travelling towards a market that is dominated by speculative investors. First homebuyers have really been unable to compete," Mr Alexander said.

Parliament's inquiry into housing affordability is due to report this year.

While his Liberal colleagues are singing the praises of negative gearing, Mr Alexander said it had helped to create the current price boom.

"Negative gearing has worked very well when it has provided affordable rental properties," Mr Alexander said.

"The moment that it intrudes on the marketplace and stops young families from buying the house, that's not ideal. And that's what's happened in this moment when interest rates have gotten so low."

"Millennials shut out of market

In 2016, the generational divide in Australia splits along suburban streets.

It used to be that houses cost, on average, three or four times average earnings.

Now, it is more like 10 times average earnings in Melbourne. In Sydney, it is over 12 while in the middle and inner suburbs, it can be much, much higher, forcing first homebuyers into eye-wateringly large mortgages, or out to the fringes of the cities"

The whole "point" of using NG is leverage. In itself it is not a path to riches as, if the market goes against you, or does not keep pace with inflation, you lose.

If you buy a more expensive property because NG allows you to afford the larger mortgage required, you gain or loss is greater.

That's it. Now if you think that's too potent a cocktail, cap NG at some figure that allows M&D's to invest without having to incorporate and curtails the big boys, on all investment classes including used homes. Any rental loss over the cap is carried forward to write off in years of gain.

CGT should only apply to real gain, not nominal gain, IMO. LNP's 50% concession in lieu of removing indexation of the cost base still taxes those making a real loss. Labor's 25% concession exacerbates this problem.

There is a fair solution, but Labor's isn't it.

...and, if, at times Gov't wants to stimulate new building, it could extend full (uncapped) NG to investors.

LOL Poirot, you are on continuous loop repeating the same old stuff that has already been challenged and dispelled.

No attempt to consider and weight the facts that are being put to you and ignoring questions that are always inconvenient for you.

You just don't get it that Shorten and Labor are being obliged to hunt for new taxes - 'revenue' to cover their vote-buying promises.

'Negative gearing' is a misleading term made pejorative by Labor's political spinmasters to pelt the LNP with Class War manure. Equally, 'positive gearing' could similarly be construed as something truly nasty, landlords making money out of shelter, and in fact that is the more usual spin of the socialists.

Both 'negative' and 'positive' gearing are OK though (for Saul too!) where shares and other asset classes are concerned. How does that figure?

What your compartmentalised thinking doesn't get is that it is all part of a system. Imagine a balloon - you can't push in on one side without distortion elsewhere, and in this case higher rents is an example.

The government could put a brake on demand and prices tomorrow by tightening immigration numbers, which have been excessive for decades. Many Labor State Premiers have criticised their federal counterparts for overenthusiastic migrant numbers that set new records annually. Here is one example of many,

<Bob Carr calls for Australian immigration to be cut by one-half
February 17, 2016

Former NSW Premier and Australian Foreign Minister Bob Carr has called for Australia to consider reducing its immigration intake by up to one-half before growing population density on the eastern coast changes the Australian style of living.

"I think the Australian people, if asked, would want immigration slowed," Mr Carr said at a press conference in Sydney on Tuesday. "We've got a third-world style population growth rate.

"If you bring 100,000 people into the Sydney basin every year, the price of housing goes up [...] people wonder why their youngsters can't get houses in the big cities... the answer is we are going for breakneck population growth."
[SMH,February 17, 2016]

Doog, let's sell off all the rental houses, then burn them down, and throw all renters on the street, because this is the only way you will see just how badly our country relies investors.

Make no mistake, very few investors, myself included, have St Vincent De Paul on our letterheads, as we are in the market for one reason, to make a profit.

Another fact is that increasing the number renters,(immigration as one example) and decreasing properties for rent, (turning investors away) simply increases rents.

Poirot, is your perception of first time home ownership a $600,000 home. Because if it is, then there in lies your problem.

BTW, that $800K home they missed out on, and are now renting, how much rent do you think they would be paying ?

I will bet its less than the loan repayments would have been and the ONLY REASON FOR THAT is due to two influencing factors. Negative gearing and CGT concessions. And you want to remove these. Go figure!

If you can't afford to live in a home of a standard and location to which you feel entitled, AJP, then move. The world does not revolve around Sydney and Melbourne. There is life beyond.

Heck, we come from pioneer stock that migrated across continents for a better life, even if some were forced into it.

Think bigger.

For the financial inept. Negative gearing 101 example

Joe gets $100 000 per year and already owns his own home which is paid for. He buys a house for $1000 000 with a deposit of $200 000 borrowed against his existing home, and rents it out for $700/week or $36 500 p.a.

His costs on the new house are:
Interest: $40 000 p.a. + $10 000 on the existing mortage. ( plus stamp duty of $50 000)
Rates: $2500
Land tax $8000
Maintenance $5000

So Joe makes a net loss of $29 000 p.a. of which he can claim $19 000 against tax.
His marginal rate is 42% and average rate is 25% so before the investment he took home %75 000, but with the negative gearing he will take home roughly $54 000. Without negative gearing he would take home $46 000, so he saves roughly $8000 p.a. on tax, but still takes home substantially less for an investment that will only mature in 10 yrs

When he sells the house, say for $1600 000 he will then pay capital gains on $550 000 less agency fees leaving him with a profit of $450 000 -$210 000 = $230 000 or $150 000 without NG.

So even with negative gearing the payback is not huge, but essentially the tenant has has a tax subsidised rent.
Without negative gearing the owner would need to charge another $150 pw to break even.

That is a slim list of costs. Just to add a few more, but not making it an exhaustive list by any means:

Property management
Letting commission: Equivalent to one week's rent
Rent collection and management: 8.5% of rent collected + GST

Plus an ever-increasing diversification of fees, examples being,
..Lease negotiation/Renewal fee,
..Fees for professional regular photos of property (inspection/ management, claims and for advertising, example is $200 for annual photos for vacancy advertising)
..Advertising and listing on the internet fees
..End of year financial statement fee $25-50 per each press of the computer key
..Appearing in mediation (RTA) and Tribunal, min $65 per each
..Various special inspections for smoke alarms ($95-165), gas detector check/service ($100-$165) and the new one being recommended at present because of litigious tenants attempting to shake down owners, annual safety inspection for $200
..Periodic inspection fee: $25
..Administrative expenses (e.g. postage, STD phone calls, fax transmissions and bank fees.): $5.50 sundries per month

all plus GST where applicable.

Loss of rental income for tenant changeovers, two weeks lost rent. Where the lease was for 6 months, that could be an additional loss of 4 weeks rent a year.
..The Tribunal says that tenants must be allowed a grace of time following the conclusion of their tenancy to return to inspect and conduct tenant repairs. Tenant repairs, while acceptable to the Tribunal are usually substandard and detract from the property, resulting in necessary rectification arranged and paid for by the owner. -More costs and more lost time.

Insurances and losses occasioned by limits imposed.

In defence of REAs, the tenancy regulations are complex and skewed towards making the landlord his brother's keeper. Tenant responsibilities have been watered down by changes to regulations and by Tribunal decisions.

-Which means that responsible tenants must pay a premium to support an increasing number of 'Professional Tenants' who make a practice of eating PMs and owners alive and leave a trail of debts, damage and claims in their wake. There is enormous turnover of property management staff.

Watch 4 Corners tonight on this subject. They might even have someone who knows what he/she is talking about.

SM, I see it differently as the income is added to his gross wage, then the deduction subtracted, the an adjustment on the PAYG tax paid is made.

So, $100,000 + $36,400 = $136,400 total income.

His deduction for year one are Combined interest of $50,000, stamp $50,000 (assuming this is correct) rates, $2500, Land tax $8,000 (not sure if you can claim that as it can not be passed on in a com lease)

All up for 1sr year $115,500 resulting in a taxable income of $20,900.

Tax on this would be about $460, so refund for 1st year would be $24,540. This is assuming the land tax and stamps can be offset in year one.

Year two, income $136,400, less deductions of $57,500, bring pre tax income to $79,000, tax on this about 17,000, tax paid $25,000, refund $8,000 which forms the negative gearing.

Remove this and the rent will have to increase by at least $8,000 per annum otherwise why buy the house, especially if you have no idea of the value once lived in.

Very few renters will rent that house for $850 per week, so the asset will have to be held indefinitely, meaning less homes will be built.

It is so obviously ridiculous this policy that it's almost laughable, or would be if Turnbull wasn't such a dud, because there is a chance Shorten will get up. But even if he does I seriously doubt this policy will get though.

The example given is unclear to me (e.g. $10000 existing mortgage?), but stamp duty is carried as a part of the cost base until capital gain is finally calculated. It's another reason the cost base should be indexed for CGT calculation.

Land tax is not a part of the usual residential tenancy agreement but part of the annual income and expenditure of rental investment.

I am this close to chucking in my rental property. This class war makes it clear just how enviously hated landlords are, judging by newspaper letters and online commentary, not only in Guardian, but everywhere.

I'm tired of being a cash cow for the state gov't too. Last FY my land tax rose by more than 50%,with zero market/vacancy pricing power to recover this through raising rent. The gov't gets away with this BS simply because it can.

Yes Luc, im with you there as the threshold for land tax is ridiculous and by now, given the movement in values should be at least 1.5 to 2 million. Just like bracket creep, its a joke.

I pity renters if the likes of you and I do chuck in the towel, because tent sales at BCF will skyrocket and governments and local councils will spend billions policing public space to move unauthorised squatters on.

Of cause that's only a rant, but I doubt the next generations will take the same risks to provide much needed housing and there in lies the real problem with this policy, who is going to pick up the baton.

Yes 4 Corners interesting tonight.
Note the part about the empty unit buildings without lights on.
This is probably related to the overseas (read Chinese) investors not
paying up at settlement time.
They use local banks for finance because of currency restrictions in
China, but the banks are having trouble getting money of them as many
were buying in the hope of selling for capital gain.
As the price escalation has slowed or indeed stopped they are in a bind.
The banks, except NAB so far, are now not lending to overseas buyers.
It will be interesting to see what effect that has in six months.

Has anyone noticed a lack of Chinese at auctions ?
They were prominent a while back.

If the competition to buy is reduced will the effect of neg gearing
be less adverse ? Pity we cannot go back to buying on one income.

4-Corners could have chosen less of a tragic than the young lady (and absent partner) trying to buy a house on a large sub-dividable block. Hardly surprising that she missed out at the end with her unrealistic expectations. It put her endeavours over the previous 12 months into question IMO, and how realistic she was being expecting a bargain. Sub-600K for a nice home with house block backyard is not ridiculous, but there she was.

I came away believing that if taxation has anything to do with the scale of the run-up in Sydney and Melbourne prices, it is due to CGT changes in 1999. The graph showed overall negative returns on rentals from then onward.

An investor with a fair belief in strong gains from supply and demand analysis might indeed decide to pin his ears back and go hard at capital gain with a 50% tax concession carrot dangling there. While interest rates were low and inflation was not affecting the bottom line, the game-plan was sound.

Negative gearing, which has been in place since the 20's or 30's and doing no harm, provided the vehicle to maximize capital gain by allowing the investor to service higher debt (a 10% increase on a 1 mil house is greater than on a 500K house).

NG is not the culprit. It is the treatment of CGT. We must remove the carrot and revert to indexation of the cost base, with no concession.

The concession was Costello's idea (as was turning super into a tax minimization scheme for the wealthy) and must be wound-back, with fairness.

Well my thoughts are that while negative gearing has played its part in inflating prices, it has come a distant second to lack of supply.

It stands to reason that if there are ten buyers and five houses, and rental demand is high, that competition will ensure a high price, however, if there are five buyers and ten houses, the opp will be the case.

If governments are serious about housing affordability, they should be leaving ng and CGT alone, and legislating the use of ones super to buy their home, under strict guidelines of cause.

This will mean more renters will be able to buy, which in turn should put downward pressure on house prices due in large to less renters.

Of cause the bleeding hearts would say we are discriminating against those with limited super, but hey, id that really societies fault, especially given the economic circumstances we have recently come through whereby anyone who wanted a job, had one.

In saying this, there must be VERY STRICK guidelines put in place to protect the value of ones super, even to the point whereby the amount drawn must be replaced within a timeframe, say ten years, along with interest at CPI rates.

"Well my thoughts are that while negative gearing has played its part in inflating prices, it has come a distant second to lack of supply."

Completely. The CGT concession ignited the house price rise, but heavy market pressure was already there and prices were headed north. NG was rounded into the fray to gear greater capital gain.

Market fundamentals will eventually come home to roost and the speculative period appears halted and possibly in reverse. Markets overshoot. However, unless something is done with CGT, there will be a repeat of sharp speculative upsurges in markets around the country in times ahead.

...not "completely", sorry, NG is third in the order of factors.

If we look at its influence over many decades I think it should be left as is. When there was no CGT (pre-1985) and supply and demand were more in balance it did not drive speculation. Market forces are the primary cause of price speculation.

If, however, there is anything at all done to NG, such as capping it, it should not just be on housing, not on used houses only, but across all asset classes. Otherwise investment in housing will be nobbled and rents will rise. Labor's plan is wrong.

Negative gearing has been available for a hundred plus years hasn't it? So where is the historical evidence of its alleged dramatic effect on prices?

The high prices reflect demand and that is high in the larger metropolitan capitals such as Sydney and Melbourne because of:

- High Immigration. Bob Carr and other premiers were right to say that the federal government had no regard for the resultant infrastructure problems for States. The quote given earlier refers,

<Bob Carr calls for Australian immigration to be cut by one-half
February 17, 2016.

"I think the Australian people, if asked, would want immigration slowed," Mr Carr said at a press conference in Sydney on Tuesday. "We've got a third-world style population growth rate.

"If you bring 100,000 people into the Sydney basin every year, the price of housing goes up [...] people wonder why their youngsters can't get houses in the big cities... the answer is we are going for breakneck population growth." >
[SMH,February 17, 2016]

- High Taxes on property. It is a milch cow for government, federal, State and local. Property development tax treatment is complicated due to the number of potential taxes and their breadth of application. However increased expectations of government, particularly of State and local government services requires higher taxes. Land tax is expensive and a disincentive. Its original purpose was lost many years ago, but government is addicted to taxes and kept it.

- Changes in demographics and expectations. Increase in single person households for instance. Increased number of bathrooms and other features such as air-conditioning.

It is typical of spendthrift Labor&Greens that they are focussed on new taxes and they have such a short term view - immediate gratification and undisciplined. Why any alternative government would purport to disrupt and deter small investors providing for their own retirement and education of their children is beyond me. It is one of the few sectors where the small investors has any control of his/her investment and where it is real and not something written only on paper that could disappear overnight.

Too right beach, just look at what almost happened to Qantas a few years back, whereby a union thug went on a personal vendetta to bury the company. How many mums and dads almost lost out there, and how many lost money by abandoning ship when the price was low.

In summary, there is only one real potential winner here, and that is housing affordability, but there are a multitude of potential losers.

Meanwhile our stupid governments continue to ignore the effects mass immigration is having on our economy. These immigrants breed in totally unsustainable proportions in situations where there is no hope for a future, one can only imagine how many children they will have when the realize we are stupid enough to care for them.

But no one dare utter a word for fear of being called racist.

Perhaps migrants, refugee and economic, could be incentivized to settle elsewhere in Oz rather than a majority Sydney and Melbourne.

If 100,000 people per annum are coming into the Sydney bowl alone, it's a recipe for rising rents and house prices, with concessionally taxed capital fanning the flame.

http://www.businessinsider.com.au/chart-australian-capital-city-house-price-growth-since-the-gfc-2016-5

Such steep house price rises have not extended to capitals not experiencing such inflows.

South Australia could be a place for the canny investor to consider, with the level of Gov't largess going its way over the next few years and a progressive gov't. It'd be my tip for AJP, if he has the skills for work outside of manufacturing, and not too far away from the eastern seaboard.

Labor's proposed changes to NG and CGT will not attack the fundamental issue, will stymy M&D investors, will reduce the wealth of home-owners and investors alike, will drive property values down and raise rents. It's CGT change will exacerbate what already unfairly strikes the investor who has a nominal CG and not a real one.

For the punter who is not across the details, Labor may well make sense in its budget speech reply, so it's good politics, but bad policy.

Overpopulation indeed !
Sydney's population is expected to reach 5 million by December.
Now that is a national disaster.
The latest complaints from commuters;
They have to drive to work because they cannot park anywhere near the station !
I have seen this massive swing to public transport myself.
I walked to the station and found that if I had taken the car to the
station I would have parked halfway to the station.
A place I visit which is just three blocks from the station now has
the streets full of commuters cars.

Public transport has had very significantly increased patronage.
This has happened with low petrol prices, what will happen when they go up again ?

Luciferase, "Perhaps migrants, refugee and economic, could be incentivized to settle elsewhere in Oz rather than a majority Sydney and Melbourne"

A simpler solution is to cut immigration. Tighten immigration until those problems, which have defied solution for decades, are solved. Government has gone as far as building new cities (Whitlam and Albury-Wodonga), decentralisation Whitlam called it.

The enduring fact is that only some peoples will choose country areas and stay there to bloom. While the 'diversity' tail swings the immigration policy dog and worse there are large numbers involved, the problems remain intractable.

To take an example, there are plenty of young skilled people from Europe, especially skilled trades eg building trades, who would like to live in farming communities and would be able to set up new industries at the same time. But the 'diversity-Australia-is-somehow-being-compelled-to-have' puts diversity first. So we have umpteen accountancy, business and computer graduates from Asia (coals to Newcastle!) lobbing in the major metro cities. Along with the Centrelink-dependent bandits of course.

Much of this is because the dullards in Parliament past and present (and Hawke was one such) never understood the Mercator map and imagine that Australia is close to India and China and must become 'Asian' to fit in to its part of the world as they see it (ie as a predominately Asian nation).

Australian education has a lot to be sorry for.

Then there is the paranoia of 'populate or perish' that imagines if Oz isn't populated to the max and right now, those 'jealous' Asians will take over.

Some migration is welcome, but in much smaller numbers and targeted to real needs, with tightened quality control. It is a buyers market and it always was that way.

However NONE of the major parties and certainly not the feckless Greens is willing to have an open, frank and honest conversation on immigration with the Australian people. Make no bones about it, immigration is a big issue in the next and future federal elections.

Here's a holistic look at NG, per se. I concurs with what I have said here. Poirot, and other class warriors, might take the time to read it.

http://ipa.org.au/publications/2464/what-politicians-need-to-know-about-negative-gearing.

The recent Reserve Bank memo concerning financial stability in Australia, read in conjunction with this document, directs me to the conclusion that sharp property price rises in Australia (i.e. Sydney and Melbourne) are brought about by too little supply and too great a concession on CGT.

In fact, since NG has been in place for nearly a century, and there was no CGT until 1999, it would be fair to put the level of past and present price rises down to short supply, and, the rate of attaining the level partially down to leverage through NG, which can be strongly mitigated by a non-concessional CGT.

Market can rise quickly, overshoot, then correct. However, this is no reason to remove the "time-shift" (Davidson) of operating losses that NG effectively is. It aids people of modest means to invest and become financially independent of government.

Luciferase,

The IPA?

You've got to be joking....

I'll find that article in The Economist that describes negative gearing as "crazy" and post it when I get back to the laptop.

Luciferase,

Here's the article from The Economist:

http://www.economist.com/news/asia/21698298-prime-minister-gambles-weeks-budget-will-win-election-turnbull-rolls-dice

And here's a paragraph on negative gearing...

"The budget rejected reform in an area that will feature in the campaign: housing. Low interest rates are not the only thing that has encouraged average house prices to nearly double over the past ten years. The crazy practice of “negative gearing”, which allows investors in property to write nearly everything off against tax, has also helped push up prices beyond the reach of Australians in their 20s and 30s (many of whom, even if they are able to buy a property, still have to live with their parents to afford it). Yet Mr Turnbull calls the idea of repealing negative gearing “reckless”, knowing that it would anger property-owners—and possibly alarm banks, heavily exposed to mortgages."

Read it if you wish...but I'm not going to bother reading anything from the extreme-right IPA.

Poirot, I really don't know why you weigh back into this discussion with the same vacuous puff as you left it.

When I hear Labor say that it's going to redirect negative gearing "concessions" to other expenditure, I wince. It, nor you, demonstrates the vaguest understanding that NG simply time-shifts operating losses, and that there is no net gain to the public coffer in the medium term to provide for expenditure.

Labor clouds this simple fact in class warfare, and it is one of the reasons I have cleaved away from it after many years of feeling it held the higher moral ground on many issues. Renewable energy is another area like that, for me.

The LNP has gone schtum on a the "debt and deficit disaster", but that didn't actually win it the last election. Labor's leadership fiasco was the cause of that. Either party must now face years of deficit while debt is sorted.

However, I do believe the LNP has a plan to reduce the expenditure side and dismantle Howard,s middle-class welfare system that is killing incentive. When 50% of families receive more in welfare than they pay in tax, we have a problem, Houston.

You obviously want to assert politics over the facts on NG and CGT I have raised in this and other threads. I'm disappointed, because I've always felt you were more of an independent thinker than a political hack.

"...I'm disappointed, because I've always felt you were more of an independent thinker than a political hack."

Says the guy who posts material from the IPA to support his argument....

Poirot,

Endlessly citing 'authority' is a bit pointless. Yeah, my authority is bigger than your authority and anyway my dad's a policeman and he can put you in jail. Yeah, well my dad is a boxer and he can bash yours up. Yeah, well .....

And that gets us .... where ?

Joe

Lucy,
I love the way that Labor gets itself twisted in knots and contradictions.

1 Their NG policy won't reduce the value of houses, but will increase affordability.

2 All NG investments will be grandfathered, but the handful of new investments will increase tax revenue by the $bns required for Gonski.

3 The incentives to invest in rental property are removed, but as rental supply dries up rental prices will miraculously stay the same.

4 People renting won't be competing for less rentals, because the 2% drop in house prices will enable those on the lowest incomes to afford the million dollar houses sold by investors.

5 The spike in rental prices when NG was removed in the 80s is no indication of what will happen today.

6 The model by economic modelling specialists BIS is rubbish, yet the modelling of one man at ANU (still unreleased) is far more valid.