Steel and Doog. Until you can provide clear answers to why markets in the likes of Perth have not seen any real increases, despite having negative gearing and CGT discounts, then there is no reason to change the thought that the affordable housing is an isolated issue, related maninly to Sydney and Melbourne.

In fact, the biggest influence on upward values in the past two decades has been the first home owners grant whereby buyers were given a 'gift' from the tax payer and this gift simply saw prices increase.

When prices increase, limmiting ownership, rents increase.

Now if this had been an interest free loan for ten years, the benefits would have been ten fold.

As for negative gearing V company investment, PAYG earners (the only ones who can use NG) pay their taxes up front, then claim them back. A company/trust does the opp which allows for more flexabily, tax minimising, planning.

Perhaps they are barking up the wrong tree.

SteeleRedux, "the rental trap"

More wrong and crooked thinking from the Class War rhetoric of leftists.

Leasing an asset frees dollars for investment elsewhere or for consumption. It is about choice.

Even apart from that, who is to say that tying up large sums of money in an illiquid asset that does not allow for convenience in living, especially in relocation for children's education for work and so on is a good idea for everyone?

It is interesting that the same interests engaged in the misleading rhetoric against the 'devil' of negative gearing I(but they hate positive gearing too!), are also those who sledge older Aussies for continuing to live in their homes where they raised their families and in an environment that is familiar to them.

The demand for 'necessary downsizing and mobility' of the elderly is simply a grab for their asset, so that some double income no kids Chardonnay socialist can own and enjoy it instead. Then the very same interests want to take the remainder of the oldie's estate in Death Duties.

There is no argument that all should have shelter. -Although they should also have a duty to contribute to and care for it. But it is absolute nonsense that everyone should own a property, even if they don't want to and would, as many do, prefer to live a better lifestyle now instead of scrimping and saving on the lifelong mortgage and consequent overheads as their parents may have done.

Steely, just when I thought you might be catching on you come up with your "Oh come on mate...." statement. Geez!

Under the abolition of NG, that retiree would have rolled losses forward and written them down against capital gain on sale, just the same. NG has no bearing on the outcome. Don't you get that?

You want the investor nobbled from gearing into a more expensive property than he might otherwise afford and so increase absolute (not percentage) capital gain in a general market movement. OK.

You want the concession on capital gains on houses removed, despite the fact it taxes those making real losses as well as real gains, as I have pointed out, and as the tax system recognized prior to the concession's introduction. I might concede no concession in relation to financial assets, such as stocks, because they are principally shares in profits using depreciable physical assets, and supply and demand for them is accommodated by capital raisings and buybacks.

When a fully depreciated physical asset fails to at least maintain appreciation in line with inflation, it is devalued and the owner makes a real loss on its sale. Why should property investment carry the risk of being taxed on a nominal rather than a real gain? There is no CGT on the principle place of residence, and isn't that a non-level playing field from an investors viewpoint? Why flail him more with a removal of the CGT concession which superceded indexation of the cost base?

I'd rather see NG and CGT, and philosophy surrounding them, discussed outside the heat of Melbourne and Sydney where it is abundantly clear that supply and demand is the chief issue.

cont'd

The supply side is constrained by many false barriers and gov't tax gouges dissuading new land development. Today I've learned an application for a battle-axe subdivision of my home block may go through. To get to this point, after 4 long months, I have had to engage a town planner to navigate the maze. I have had every authority reviewing my application take the default "no" position.

I have paid thousands to the planner as a base fee and to negotiate this bureaucracy, and thousands just as a development application fee. I will pay tens of thousands to bring services in and connect them (7 thousand just to attach the sewer alone). Upon sale I will pay GST. All up, the block will cost at least 120K before I can make a dollar. All this BS has to stop if supply is not to fall further behind demand and push prices higher.

Stop blaming investors for everything (explain Perth) and stop believing in the Magic Pudding of a supposed NG subsidy by taxpayers. It's a mirage that can provide nothing towards more affordable housing.

Well, Steely, I've shot my bolt trying to educate you on the reality of property investment, and haven't even told you any of my bad tenant stories. You have to drill down below the noise to look at the underlying supply issue and taxation philosophy, and I hope you have gained a fuller perspective, even if you disagree.

PS, and the buyer of my block will pay around 20K stamp duty, plus his own round of gouging fees and charges to authorities to build and move in.

But do let's keep kicking the stupid investor on housing affordability.

Out of posts by now. Cyas

Dear Lucifrase,

As much as I dislike battleaxe blocks you subdividing your own property does not put you in the realm of the speculator. Rather than excluding a property from a potential home owner you are creating the opportunity, unless of course it is an investor who is buying it.

You wrote;

“Under the abolition of NG, that retiree would have rolled losses forward and written them down against capital gain on sale, just the same. NG has no bearing on the outcome. Don't you get that?”

Just the same? Strewth mate you really are failing to grasp this aren't you.

Okay, for most properties the major item of expense is depreciation.

The first is depreciation on 'fixtures and fittings' which is calculated on either a Prime Cost (PC) or Diminishing Value (DV) basis. If it is DV then the items are again divided into those above a thousand dollars and those below which go into the 'Low Value Pool' and get a higher rate. While the DV rate allows for greater deductions early the PC amounts drop more slowly over time.

I have no problem with depreciation on fixtures and fittings being part of the expense calculation for positive or negative gearing calculations.

What I do have an issue with is the second class of depreciation, that on the building itself. It's often the largest chunk of expenses and claimed at the 100% deductible rate. Sure claiming it yearly increases the CG amount when the property is sold but given the 50% discount, compounded if the vendor is in a lower tax bracket due to retirement, there is obviously tax foregone. I can not fathom why this is so difficult for you to grasp.

Look ultimately I would wear NG and CGT if the depreciation deduction on the building was removed. The NG amount would be less and the period that the expenses outstrip the income would be notably shortened. This was the situation before 1985 and we should return to it now. It is something this government could do in the upcoming budget without abolishing NG.