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The Forum > General Discussion > Negative Gearing

Negative Gearing

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NG simply time-shifts a loss from being offset against future profits (thru' carrying the loss forward) to being offset in the present income year. Any notion of barrow-load of money to spend on public housing from its abolishing is pea'n'thimble self-delusion by the left, or, a confidence trick to imbed a case for class-warfare.

NG gives small time investors a chance to handle the cash-flow that leads to capital gain and positive-gearing, so leading to self-reliance and relieving the welfare system.

If the left thinks small investors, particularly, are going to trip over themselves to provide new housing that can be negatively geared, it will only be after the business case stacks up through rocketing rents and/or gov't subsidies, which will surely come to pass.

The left's case for election is based in class-warfare on NG and other fronts (including emissions), all which are presented very simplistically. This will be the hallmark of its governance.
Posted by Luciferase, Monday, 12 November 2018 10:08:30 PM
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Aidan: You say "That effect would be cancelled out by the increase in the number of people buying their own homes, resulting in a corresponding loss of rental demand, so rental prices aren't likely to rise very much."

This statement is based on a very flawed assumption, specifically it assumes that most people who rent want to buy homes and are capable of buying homes. But this is simple not the case.

Some renters actually choose to rent even though they can afford to buy a home. An example reason for this behavior is being able to change address easily (changing address when you own a home is very expensive if you sell your current house to buy another elsewhere). Another reason why people choose to rent instead of buy a home even though they could easily afford it is because it is financially beneficial for them (eg: those who can make more money by investing the money it takes to buy a home).

But the biggest reason why many current renters will ALWAYS be renters (even if they claim that they want to own a home) is because they lack the character attributes and/or the financial nonce required of someone to buy and manage a home. Many renters are absolutely hopeless at managing money and lack the self discipline and forward planning required to save or prepare themselves against unexpected expenses. Many simply cannot resist the urge to spend all their money on short term gain items instead of doing without somethings now so that they have a lot more latter, or they have drug/gambling/other addiction issues or they have personal problems/baggage such as busted relationships they their still paying for or they were born/became people with low IQs, etc. In the worst cases even if given a house for free, they would soon loose it because they are incapable handling the cost/responsibility of maintaining it.
These people (and it is a seizable portion of renters) are destined to be renters all their life unless they have a massive personality / mental / life change.
Posted by thinkabit, Monday, 12 November 2018 10:24:10 PM
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Dear Shadow Minister,

You write;

“If you ban negative gearing, the return on investment properties drops considerably, people invest their money elsewhere, the stock of properties for rent drop, and the prices shoot up.”

Labour has not called for removing negative gearing totally but rather on existing housing stock. It is still available for those investing in new homes. So what possible reason do you see preventing the measure building further housing stock as more new houses attract more investor capital?

The rest;

“Presently the rent/$ invested in Aus is about 1/2 of what it is in countries typically without negative gearing, so without negative gearing, the long term outlook would see house prices drop and rentals increase. Considering that the people renting are mostly in the lowest earning brackets this would effectively be a tax on the poor.”

Again we will not be 'without negative gearing' but rather it will be focused it more appropriately, into new houses. So you will have to explain to me how “ the long term outlook would see house prices drop and rentals increase” in this scenario.

All our rentals are positively geared now as any reasonable investment should be. Last year we built a rental as an investment property in a fairly low socio-economic suburb being revitalised. It is positively geared and has gained $100,000 in capital. We will probably look to do another in 12 months. The older stock has been artificially inflated because of investors like us but in a fair and caring society it should really be left to owner/occupiers.
Posted by SteeleRedux, Monday, 12 November 2018 10:50:34 PM
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SR, you say, "All our rentals are positively geared now as any reasonable investment should be."

..."now"? So, the rentals were negatively-geared previously, right?

Now you're down on NG after enjoying the convenience of time-shifting losses it facilitates. That's fine, however, for new investors in established houses shouldn't income losses be able to be carried forward to offset future profits, as with any other business, until they reach the investment's income break-even point?

Also, you suggest investments are "reasonable" once positively-geared, i.e. do not make a loss in any financial year beyond some point in time. Presumably, up until reaching that point, investments are unreasonable. Why?
Posted by Luciferase, Tuesday, 13 November 2018 12:25:55 AM
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Dear Hasbeen,

«In every industry in Australia, a business person is entitled to deduct the interest paid on money borrowed to invest in their business from income, before their taxable profit is rated.

Why should investing in rental property be any different to every other business activity?

Is it OK to deduct the cost of borrowing, if it is a shopping centre or factory you are renting out? Is it only housing that should be different to any other business investment?»

Indeed, it is not OK to deduct the cost of borrowing, regardless of purpose.

Borrowing and using money that is not your own, beyond one's means, is an unwholesome trait.
While it should not be prohibited by law, it should not be encouraged either and those who do so should receive for it neither medals nor tax-deductions.
Posted by Yuyutsu, Tuesday, 13 November 2018 5:40:51 AM
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Negative gearing eventually equals negative economy. Flat tax is the ONLY economically sound system no matter what the greed monger experts claim.
People must stop looking at this in the short term.
Posted by individual, Tuesday, 13 November 2018 7:09:54 AM
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