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.