 |
|
|
| View previous topic :: View next topic |
| Author |
Message |
Skids 
Quitting drinking will be one of the best choices you make in your life.
Joined: 11 Sep 2007
Location: Joined 3/6/02 . Member #175
|
| Post subject: |  |
|
Have you all forgotten that negative gearing was abolished in 1985?
It was re-instated in 1987 due to the negative impact it had.
_________________
Don't count the days, make the days count. |
|
|
|
 |
Mugwump
Joined: 28 Jul 2007
Location: Between London and Melbourne
|
| Post subject: | |
|
| Skids wrote: | Have you all forgotten that negative gearing was abolished in 1985?
It was re-instated in 1987 due to the negative impact it had. |
The negative impact it had on the re-election prospects of the Hawke government in some Sydney marginals, yes. Keating was nothing if not a politician.
_________________
Two more flags before I die! |
|
|
|
|
David 
I dare you to try
Joined: 27 Jul 2003
Location: Andromeda
|
| Post subject: | |
|
Some paint a very different picture, Skids:
https://en.m.wikipedia.org/wiki/Negative_gearing
| Quote: | In July 1985, the Hawke/Keating government quarantined negative gearing interest expenses (on new transactions), so interest could only be claimed against rental income, not other income. (Any excess could be carried forward for use in later years.) What is less appreciated is that Hawke/Keating introduced negative gearing only six months prior. Previous to their initial decision the Income Tax Assessment Act 1936 (As Amended) had quarantined all property losses from deduction against income from personal exertion (other business or salary and wage income). Any losses incurred in any one year would be accumulated on a register and would only be allowed as a deduction from income from property in succeeding years. In so doing property income and property losses were in one 'bucket' and personal exertion income and losses were in another 'bucket'.
This ensured that either at personal level and more importantly at a national level, that property losses would not be subsidized by income from personal exertion. In applying this formula, all previous governments thereby isolated and consequently discouraged capital speculation being subsidized from the general income tax receipts pool.
Keating initially changed this legislative treatment only months prior to attempting to revert to the original. Politically, those who took immediate benefit from the initial change made false claims that any attempt to remedy the situation would give rise to an explosive increase in rents. There was no statistical or real world data to support this claim, other than localised increases in real rents in both Perth and Sydney which also happened to have the lowest vacancy rates of all capital cities at the time. This was enough to have Hawke/Keating submit to the landlords' demands and remove the attempt at repairing the initial decision.
This is what is described below as a dampening of 'investor enthusiasm', which is not quite the context, as the previous rules (which Keating had first removed and then quickly attempted to reinstate) had been in place since 1936. The argument that somehow investor enthusiasm had been dampened is a shallow argument as negative gearing had not existed in all the time of the ITAA's existence and had only had a very short life to that point and only after Keating's initial amendments to the previous long standing practice. After intense lobbying by the property industry, which claimed that the changes to negative gearing had caused investment in rental accommodation to dry up and rents to rise, the government again amended the ITAA to re-include Keating's changes to the previous legislation, thereby once again permitting the deduction of interest and other rental property costs from other income sources.
An alternative view
The view that the temporary removal of negative gearing caused rents to rise has been challenged by Saul Eslake, who has been quoted as saying, "It's true, according to Real Estate Institute data, that rents went up in Sydney and Perth. But the same data doesn't show any discernible increase in the other state capitals. I would say that, if negative gearing had been responsible for a surge in rents, then you should have observed it everywhere, not just two capitals. In fact, if you dig into other parts of the REI database, what you find is that vacancy rates were unusually low at that time before negative gearing was abolished."
While Saul Eslake's comment is correct for inflation adjusted rents (i.e. when CPI inflation is subtracted from the nominal rent increases), nominal rents nationally did rise by over 25% during the two years when negative gearing was quarantined. Nominal rents rose strongly in every Australian capital city, according to the official ABS CPI Data. However it has not been proved that this strong rise in rents was entirely a direct result of the negative gearing quarantine.
Further as negative gearing had not previously existed at all prior to Keating's initial amendment to the Act, it is a very difficult argument to say that its short term absence in this period of indecision had any effect on property values. Prior to this period there was no such thing as negative gearing, all property losses had always been quarantined from deduction against income from personal exertion and could only be deducted against future profits/income from property sources.
With some irony, it is a return to this treatment (to quarantine losses) that comprised the Centre-point of the Crawford Reports arguments in dealing with property losses and the removal of negative gearing.
Further and later commentary from Saul Eslake and others has highlighted the preponderance of negatively geared purchases in established suburbs where the probability of a lightly taxed capital gain exists and therefore the debunking of the myth that negative gearing leads to new construction. Many economists have commented extensively on the tax subsidy being made available to speculative buyers in competition against home buyers, who have no such tax subsidy, leading to significant social dislocation.
What is not broadly realised is that the tax subsidy feeding into higher home prices adds to the wealth of those taking advantage of negative gearing. The process which crowds out domestic home owners by pushing up the price of housing also automatically makes the successful user of negative gearing more asset rich via the increase in land value, which perversely then allows the same people to borrow even more funds against equity in the previously acquired properties - resulting in even more acquisitions under tax subsidy, which further exacerbate the problems for those seeking to become owner-occupiers.
This clearly leads to heavy economic and social dislocation and creates a property bubble to which the banks are clearly vulnerable. This represents both a danger to future economic stability and, by the introduction of powerful vested interests (the banks) to this speculative equation, a potential limitation of financial and budgetary settings which we have seen from recent overseas experience will blight the lives of many to favour the few. |
_________________
All watched over by machines of loving grace |
|
|
|
|
sixpoints
Joined: 27 Sep 2010
Location: Lulie Street
|
|
|
|
|
think positive
Side By Side
Joined: 30 Jun 2005
Location: somewhere
|
| Post subject: | |
|
| David wrote: | | Mugwump wrote: | | David wrote: | Thanks Mugwump. It astounds me that an idea which is mainstream in the UK and accepted by conservative governments - in this case, inheritance tax - is so radical that even the Greens have walked away from it. What's going on?
TP, you've probably done the right thing by them, and you've worked hard to get to that stage, but how many young Australians have parents who can buy a property for them? For most of us it's simply not an option. |
Actualy inheritance tax is another matter entirely. I support Australia's position on that. Those who have a lot of money avoid it easily, by gifting it to their children (they don't miss a few million, as they have more than enough) while the poor bloody middle (and working classes in London) pay it. So it is actually regressive. And it was, of course, money taxed when earned, with any investment earnings on it taxed as income. I might accept CGT on the family home given that accumulates value tax free. But that'd be it. Government and welfare has to be funded, but as a general principle, it's not the government's money - the government didn't work for it, the person who owns the money did. |
Not to get too far off topic (again! Ah well, no limits on thread splitting...  ), but I hardly think non-compliance is sufficient reason to walk away from policy - otherwise, we may as well just chuck most tax policy out the window. The goal ought to be enforcing compliance, surely. |
im sure there was a thread on inheritance taxing not so long ago!
_________________
You cant fix stupid, turns out you cant quarantine it either! |
|
|
|
|
Mugwump
Joined: 28 Jul 2007
Location: Between London and Melbourne
|
| Post subject: | |
|
| David wrote: | | Mugwump wrote: | | David wrote: | Thanks Mugwump. It astounds me that an idea which is mainstream in the UK and accepted by conservative governments - in this case, inheritance tax - is so radical that even the Greens have walked away from it. What's going on?
TP, you've probably done the right thing by them, and you've worked hard to get to that stage, but how many young Australians have parents who can buy a property for them? For most of us it's simply not an option. |
Actualy inheritance tax is another matter entirely. I support Australia's position on that. Those who have a lot of money avoid it easily, by gifting it to their children (they don't miss a few million, as they have more than enough) while the poor bloody middle (and working classes in London) pay it. So it is actually regressive. And it was, of course, money taxed when earned, with any investment earnings on it taxed as income. I might accept CGT on the family home given that accumulates value tax free. But that'd be it. Government and welfare has to be funded, but as a general principle, it's not the government's money - the government didn't work for it, the person who owns the money did. |
Not to get too far off topic (again! Ah well, no limits on thread splitting... ), but I hardly think non-compliance is sufficient reason to walk away from policy - otherwise, we may as well just chuck most tax policy out the window. The goal ought to be enforcing compliance, surely. |
It's not non-compliance .... What is done is perfectly compliant. It just doesn't work as intended. It raises little money in the overall scheme of things and causes great dislocations and much "tax planning" expenditure, while being easily avoidable by the really rich. Finally it causes great pressure on old people to liquidate their home to gift it to their children rather than give 40% to the taxman. Such an ugly tax.
_________________
Two more flags before I die! |
|
|
|
|
David
I dare you to try
Joined: 27 Jul 2003
Location: Andromeda
|
| Post subject: | |
|
My approach to that, as it is to many things in life, is "well, let's try to make it better then". Unless you think the flaws are somehow inherent in the very idea of it, then I think improvement is possible. Particularly if the flaws are the main reason for you wanting to ditch the policy in the first place.
_________________
All watched over by machines of loving grace |
|
|
|
|
Mugwump
Joined: 28 Jul 2007
Location: Between London and Melbourne
|
| Post subject: | |
|
| David wrote: | | My approach to that, as it is to many things in life, is "well, let's try to make it better then". Unless you think the flaws are somehow inherent in the very idea of it, then I think improvement is possible. Particularly if the flaws are the main reason for you wanting to ditch the policy in the first place. |
Sure, but unless you can identify how to do that without interfering grossly in the right of parents to gift things to their children over time, it's just bad policy. In the UK gifts 7 years before death escape the net. So it's a death lottery. Charming. You might say that any gift from a parent to a child over 18 is taxable. And if you did, you'd be well on the way to despotism, I think.
_________________
Two more flags before I die! |
|
|
|
|
David
I dare you to try
Joined: 27 Jul 2003
Location: Andromeda
|
| Post subject: | |
|
| All gifts already are taxable, aren't they? If my parents give me a car for my birthday and I'm claiming Centrelink, for instance, I'm going to need to report that. It's not that much of a big deal. Why shouldn't all your assets be taken into account when you pay taxes? It would stop precisely this kind of rorting. |
|
|
|
|
stui magpie 
Prepare for the worst, hope for the best.
Joined: 03 May 2005
Location: In flagrante delicto
|
| Post subject: | |
|
| David wrote: | | All gifts already are taxable, aren't they? If my parents give me a car for my birthday and I'm claiming Centrelink, for instance, I'm going to need to report that. It's not that much of a big deal. Why shouldn't all your assets be taken into account when you pay taxes? It would stop precisely this kind of rorting. |
Actually, I'm pretty sure you don't need to declare it, it's not income. If you sell it, that's a different argument.
In regard to how many people can afford to buy investment properties, I'd say a surprising number. I can think of 4 people who work for me, who've done it recently, some using self managed super funds to do it, which again is possibly a different argument.
_________________
Every dead body on Mt Everest was once a highly motivated person, so maybe just calm the **** down. |
|
|
|
|
HAL
Please don't shout at me - I can't help it.
Joined: 17 Mar 2003
|
| Post subject: | |
|
| Perhaps your thoughts are just electrical impulses. |
|
|
|
|
stui magpie
Prepare for the worst, hope for the best.
Joined: 03 May 2005
Location: In flagrante delicto
|
| Post subject: | |
|
^
yeah but mine (usually) make more sense than yours. 
_________________
Every dead body on Mt Everest was once a highly motivated person, so maybe just calm the **** down. |
|
|
|
|
3.14159 
Joined: 12 Sep 2009
|
| Post subject: | |
|
| HAL wrote: | | Perhaps your thoughts are just electrical impulses. |
|
|
|
|
|
Mugwump
Joined: 28 Jul 2007
Location: Between London and Melbourne
|
| Post subject: | |
|
| David wrote: | | All gifts already are taxable, aren't they? If my parents give me a car for my birthday and I'm claiming Centrelink, for instance, I'm going to need to report that. It's not that much of a big deal. Why shouldn't all your assets be taken into account when you pay taxes? It would stop precisely this kind of rorting. |
No, a parent is allowed to give their children whatever they like without it being taxable. If you are on the government dole that may be different. But once the government starts controlling what parents can give their children and commercializing the family relationship, we really are in 1984 territory. What a horrible thought.
_________________
Two more flags before I die! |
|
|
|
|
David
I dare you to try
Joined: 27 Jul 2003
Location: Andromeda
|
| Post subject: | |
|
Oh come on, that's a bit hysterical, isn't it? The way I look at it, it's just the government having a rough understanding of what every adult citizen's net worth is (including income and assets owned by dependent children) and adjusting taxation levels accordingly. Is that so much more of a dystopia than allowing the wealthiest tier of society to pay much less than their fair share of tax because of loopholes, one of which you just raised as an easy way to cheat the system?
A gift is just a transfer of money or an item of value from one person to another. I'm not for a moment suggesting that that process should be regulated, but I don't think there's anything wrong with it being logged and acknowledged as part of the recipient's total assets.
If you get audited, the government is going to want to know what gifts of substance you received. We are not talking about some fanciful sci-fi scenario, we're talking what happens right now. That's as it should be.
_________________
All watched over by machines of loving grace |
|
|
|
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
You cannot attach files in this forum
You cannot download files in this forum
|
|
The Rules
FAQ
Usergroups
Calendar
Search
Log in
Register
