Source?

Sorry - that is total and utter bullsh#t. Macroeconomics is not just "a set of metrics that measures what is happening at the micro level and aggregates the results to provide a snapshot of a countries economic health".

That is completely false. Macroeconomics provides NEARLY ALL of the guidance to government as to what policies should be put in place.

You really are exposing your complete ignorance of how economics functions re govt policy analysis and recommendations.

When looking at negative gearing, it is not sufficient to just look at who makes use of it.

The key issue is not just how many people use negative gearing, but how much they benefit from it. Most people who negatively gear don't get much benefit either way. But a massive percentage of the total benefit of negative gearing goes to a disproportionately small group of people.

"As soon as you start thinking about where most of the benefits in dollar numbers and in percentage terms are actually going, the answer is overwhelmingly that they are going to doctors and lawyers, not nurses and cleaners."

http://www.smh.com.au/federal-politics/political-news/negative-gearing-benefits-the-rich-far-more-than-everyday-australians-analysis-shows-20151113-gkyllz.html

This is the key problem with negative gearing:

"Under the current rules in Australia, investment property losses are not “quarantined”. That is, the losses on an investment property are not only tax-deductible against the income from the investment property. As a result, the higher your total income, the greater the tax-minimisation benefit of negative gearing.

Quarantining losses is a major point of difference in the application of negative gearing in Australia to the rest of the world, and a key area that previous reforms in Australia have targeted."

http://theconversation.com/policycheck-negative-gearing-reform-58404

I'm not much of an economist but the major arguments I see for keeping negative gearing are:

- It will wipe tens of thousands of dollars off housing prices. I've recently bought a house and stand to lose if negative gearing goes.
- It will drive up rents in places with housing shortages so renters in Sydney, Brisbane and where I live the Gold Coast will face more competition for a house.

What is the validity of these arguments? I'm not at all keen to lose money on my house with the government intervening in the housing market. If we make renting even more competitive the mrs mum will be in a world of trouble.

This might be very simplistic but what I can see if negative gearing gets the chop is mum and dad investors selling up squeezing the rental market. For people who will never afford a house they could really suffer and have nowhere to go?

I think houses are unlikely to go down on price since prices have a downward rigidity (unless a recession happens). It should instead slow the growth of house prices by making property speculation less lucrative. Property speculators often rent their houses out so there might be less people with houses for the sake of rentwhich in theory should increase the growth of rent rates. What complicates this picture slightly is there might also be less people looking to rent which would bring rent prices down (although perhaps not as much as they are increased).

Here is some data about the breakdown. It is true that the vast majority of negative gearing occurs my middle income families and up.

There are 8 million rental properties in Australia. Don't know how many own those properties. Negative Gearing is also available to Share Market.

http://www.news.com.au/finance/real-estate/buying/average-aussies-negatively-gear-property/news-story/b0e71802652ac578e96efcf066ec0ebf

The very wealthy don't usually buy rental properties. They either invest in a business, or buy shares.

Edited by Aikhme: 17/5/2016 09:55:45 AM

10 million out of 13 million individual tax payers!!
Damned lies and statistics, or just plain lies? :-k :-k

8 million Rentals.

Sorry, I made a mistake. There are actually 9 million dwellings in Australia with 2.6 occupants per dwelling.

There is not much validity to these arguments.

The other thing to consider is that it distorts the economy by giving too much of a tax advantage to property in comparison to other forms of investment.

The opportunity cost here often gets under-appreciated.

If you have an investment in property that is only feasible because of negative gearing, you should not be investing.

Now is a great time to remove it, because interest rates are historically low, so it won't have as much of an effect in the short term.

Please also remember that it only applies to properties purchased after the date it comes in. It will not apply to existing properties. So if you have bought a property already, the proposed changes won't affect you.

If people sell up their properties, how does that squeeze the rental market? The property won't be demolished - someone will buy it, maybe for cheaper. But then they will either move in (freeing up the property they were previously living in) or they will rent it out themselves (maybe for less if they bought the property for cheaper).

It will have an effect only on the margins. At most it will slow property value growth. This is a good thing, as property is over-priced.

The time for reform is now, when interest rates are low.

Remember we are just about the only rich country that did not undergo a property price collapse during the GFC. So we need to slowly deflate the housing bubble before we have a collapse. This reform is part of that.

The tax advantages exist with the Share Market.

By removing negative gearing on property, it will still be available on stocks and other investment classes.

And it would cause a slowing of demand, hence prices will fall.

Properties which are grand Fathered, will raise rents because demand for rentals will increase.

Some, like myself will just buy property in New York and Europe.

Dwellings Shmellings. In 2012-13, 10% of individuals claimed a net rental loss.

The article you linked to says this:

"New analysis from the Grattan Institute which examined the occupations and incomes of those negatively gearing property shows while more lower-earning workers are claming the reductions, those in higher-paid jobs are reaping the largest financial tax breaks."

"The Grattan Institute’s chief executive officer John Daley said the tax benefits of negative gearing were skewed towards high-income earners and said it together with capital gains tax needed to be reviewed.

“The vast majority of the benefit of negatively gearing goes to the people who are doing very nicely,’’ he said.

“The capital gains tax discount should also be substantially reduced or eliminated.’’

The article you quote directly argues with the point you are making.

The people who gain the most from negative gearing are the richest:

Job No. negatively gearing Ave net rental loss Ave ind. reduction in tax liability

Cleaners 6,330 $201 $41
Sales 16,060 $206 $42
Hairdressers 1685 $812 $166
Nurses 49,535 $715 $254
Teachers 63,805 $921 $327
Emergency 18,995 $2137 $768
Lawyers 585 $3846 $1788
Mining 2135 $3469 $1335
Finance 7385 $3239 $1247
Surgeons 990 $8947 $4160
Anaesthetists 885 $7208 $3351

Over 1 million - nurses, police and other workers in the most part.

Btw, those who engage in Marginal Lending are also able to claim Share Market losses and interest. If you include those individuals, then the number is much higher.

Edited by Aikhme: 17/5/2016 10:08:36 AM

The higher your income, the more tax you pay, and the more you can potentially get back. It's not rocket science.

But any tax credits are also offset by LAND TAX, COUNCIL RATES and WATER RATES! Everyone neglects to mention this.

No you are wrong.

The key difference with other forms of investment is the quarantining of the claimable losses to the value of the investment.

With property in Australia you can use it as a tool to reduce your overall taxable income far beyond the income/loss derived from the investment.

That Is what is unique, and is so distorting.

Yeah no sh#t. That is the f##king point mate! The richest people can reduce their taxable income by a huge amount, meaning that they are not paying income tax in line with their earnings.

That is the whole issue.

I have 5 rentals and I don't consider myself rich. I also have over a million worth in debt which allows me to deduct from tax.

My Land Tax Bill is $13,000 pa. Anything I claim is much less than $13,000 so overall I am paying more tax if you combine Federal and State.

But I don't have a clue what you are referring to.

I challenge that notion.

I bet you that most are actually paying more tax if you include LAND TAX!

I know that is the case with myself. A net positive contributor after deductions.

Is there a way you can compare what amount of deductions Vs LAND TAX?

Edited by Aikhme: 17/5/2016 10:17:16 AM

That's for sure!

So you got nothing to add about LAND TAX!

If the State loses its Land Tax revenue or if it reduces which it will, they won't be able to fund schools and hospitals. They will just go back to the Feds begging for more money or have to raise taxes to cover the shortfall.

Are you denying that LAND TAX has been overlooked in your equations?

Edited by Aikhme: 17/5/2016 10:26:47 AM

I just had a look at last years tax return.

Over 5 rental properties and a million in debt, I managed to claw back just under $3500 in tax.

I paid $12,500 in LAND TAX.

Am I paying more or less tax?

gosh is this an aussie battler with only 5 properties
screw the poor and middle class! Cut his taxes now and cut health and services necessary!
Gee don't you guys have a heart! He has it so tough!

very ignorant statement.

Yes, people with 5 rentals have struggled putting food on the table.

Sometimes you are scrounging for every penny to make payments and it is tough and I remember times with 0 money for entertainment, FOXTEL or eating out. At times, we have even defaulted. That's pretty scary. At other times, we were slugged 17% in interest.

I am not complaining. Just letting you know, that it takes a lot of hard work and sacrifice to get there. You go without many things for a better tomorrow.

The difference is that some of us are aspirational and work hard to achieve some goals whilst others always have their hand out and beg for OUR money or for the Government to slug us.

Most of us ARE NOT WEALTHY!

Sometimes you even get the tenants from hell like you see on A Current Affair. I had $20,000 worth of malicious property damage once. How would that make you feel?

Edited by Aikhme: 17/5/2016 10:47:56 AM

Why will land tax revenues decrease???

Because over time, Rentals or Property Investment will decrease.

You avoided my question.

If I got $3500 from the tax man due to property related business expenses, and paid $12,500 in LAND TAX, am I paying more or less tax over and above normal Income Tax?

And one more question, if I make a profit on these property revenues, will I still be liable to Income Tax?

Edited by Aikhme: 17/5/2016 10:52:39 AM

Property and rental investments won't decrease. All that will happen is that more people will be able to invest in one or two properties, instead of being crowded out by idiots invested in 5 investment properties, over-leveraging themselves with over a million dollars in debt.

I don't even understand what your point is with land tax. You chose to invest in properties, you pay land tax. If you get income from any source you pay income tax. The problem with negative gearing is that is encourages people to structure their finances to create a property loss.

Go speak to your accountant champ...

No one is going to be investing in properties unless they got rocks in their heads without Negative Gearing.

My accountant is worried about it. But he also believes there is little chance Shorten will win so it is moot.

Land Tax is a tax on property values. It contributes to the total Tax Mix. Therefore, most property investors actually end up paying more tax. The public purse ends up being better off.

Furthermore, there is little chance people will be able to invest in property if their house prices fall 30%. What will happen is that some people will lose their homes.

I'll sponsor one of your childredren :roll:

I sponsor yours!

Land Tax $12500.

I think enough is enough. Do the right thing and cut spending.

Otherwise I am fucking Australia off and fleeing all investment overseas.