Yes, of course the top 10% get the most from neg gearing because they are on the highest tax bracket.

As an example, your Union fees, lets assume you pay $1000 a year to be a member if you pay 30% tax rate you get $300 tax refund on your Union dues, if you are a union boss earning $180k or more he is paying 47% tax. So he gets $470 tax refund. Is that fair in your eyes?

He earns more but he gets a greater benefit.

So, obviously high earners paying high tax get a greater benefit from tax deductions. What these reports don't tell you is how many people own residential investment properties. Over 80% are owned by Mums and Dads, not multi-nationals.

Change neg gearing laws and you hurt 4 out of 5 investors.

kirby483,

" Over 80% are owned by Mums and Dads..."

By that you mean the little folks?

Not true....

"When I crunched the numbers, over 60,000 people with investment properties whose taxable income was $80,000 or less had total incomes above that $80,000 threshold."

"Almost 74,000 people who declare rental income or losses have a total income of less than $0 - that's right, they either live on nothing or have other means of paying the bills that don't have to be declared to the ATO."

"That's because the ATO's measure of "total income" includes net, not gross, rent - that is, rental earnings or losses after deductions such as interest payments have already been removed.

The very reason that many housing investors fall below the $80,000 threshold is because they have used negative gearing to slash their tax bill.

The net result of all these calculations could be boiled down to a 'fact check' of the HIA's statement, and the outcome would be 'massively overstated'."

http://www.abc.net.au/news/2014-09-24/janda-the-myth-of-mum-and-dad-negative-gearers/5766724

Just another con...

kirby483,

Spot on again.

As are other posters who are trying to explain to the unwilling who need an excuse for not doing what government from both sides of the House have exhorted and are forcing them to do, to provide for themselves and for their own retirement.

I don't imagine that there would be many who would agree that the government's tax arrangements should be discriminating against the smaller investors, those mums and dads and aspirational others, that government itself is very strongly encouraging to sacrifice present lifestyle to provide for their own, their spouse's and their children's present and future needs. In fact, government has the expectation that workers should be extending their support to aged relatives too.

Without negative gearing the individual investor who does not have high earnings nor the advantages of incorporation is very limited in his/her investment opportunities, and is also denied personal input while being eaten alive by management and trading fees.

There is no valid reason why the individual who only has access to his/her pay from a boss, or is otherwise restricted eg by low in come, should not be considered a sole trader and be able to deduct losses from all of his/her other income streams, eg his wages. He/she is after all the one entity when ATO comes to compulsorily take its share in taxes.

What Shorten and others are doing with their Class Wars is hurting the wage earners and disadvantaging them compared with those investors who can play the field.

Women are a very good example of a class of investors who would be excluded form investing in property when Shorten hits them with his new taxes. It is simply not good enough to claim they can always invest in one sector of the market, new developments, where the entrepreneur has already squeezed out all profit than can be made and the rapacious federal, State and local governments have taken their large cookie cutter bites too. Why should they be effectively excluded from used property where they can make improvements to their, the renters and community's benefit?

not true Poirot,

The reason is why many pay zero income tax is only partly due to neg gearing, the biggest tax benefit of owning an investment property is depreciation.

Many of my friends earn good money, but through depreciation they can reduce their income tax and in some cases to zero. Even positive geared properties still claim depreciation.

So, your Union boss earning $200k a year claims 2% depreciation on his million dollar investment property, so he claims $20000 and gets back $9400 in his tax return. You and all of the workers earning less get back $6000. If your Union boss has enough properties he will end up paying no income tax.

Sorry to correct you poirot, but gross rental income is added to your PAGY income, then you deduct your expenses, which include interest, then if your net income becomes smaller than what you have already paid tax on, you receive a refund. Plus, the banks get taxed on their profits (interest on your loans) so the tax man on the one hand gives a deduction, NG, while on the other charges tax. Income from interest charged.

As for trusts, trusts own the property and collect the rent, then they distribute the profit/loss to the beneficiaries. The huge difference is they (the trust) distributes the P or L then pays tax post distribution, well the beneficiaries do. Whereas the PAGY investor pays their tax each pay period, then claim back any losses. Furthermore, as trusts are a far more effective tax minimizer, so steering investors towards them is counter productive from a tax collection point of view.

Now if this this go ahead, and second hand properties fall in value, first home buyers wont be able to buy them with the grant, along with PAYG investors. This means those with trust arrangements may secure a few bargains.

Tax reform is a very sensitive area and any action will be met with a reaction, so caution is very much needed, and anything that has the potential to damage our building industries is not well advised in times of uncertainty like we have right now.

BTW, Wayne Swann listened to treasury, and look where that got him. So yes, in some circumstances, general people are smarter than the likes of treasury.

Treasury works off old data, business works of future predictions, and that is the main deference in the two.

My goodness this is why they regulate financial advice.

Dear kirby483,

You write;

“The reason is why many pay zero income tax is only partly due to neg gearing, the biggest tax benefit of owning an investment property is depreciation.”

Depreciation is not separate to negative gearing rather it is just one of the expenses that make the final figure. Others are things like rates, interest, and insurance. Providing they outstrip the income derived, the property is deemed to be negatively geared.

It must be remembered that depreciation on the building claimed each year is not unencumbered. There is a reckoning when the property sells as it adds to the amount of CGT payable. That being said while the 50% deduction for properties held for over 12 months remains it is still better in most circumstances, although not all, to claim depreciation.

I hope this clears things up a little.