Negative Gearing and Capital Gains Tax Discount Should Be Abolished

Property investors have had it too good for too long, claiming Negative Gearing and CGT tax incentive. Property investments sectors are mature and highly profitable, NGs and CGT serve no purposes.Investors provide rental housing are not out of their kindness or altruism but post the opportunity cost for home seekers.

NGs and CGT tax breaks should be abolished so that these funding can be recouped as Government's revenues. People's' power can force policies makers to flatten the forever housing prices rise then you'll have a chance to buy a house at OzBargain.

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  • -3

    People need to be paid a universal income so all can afford housing, and also put a hard cap limit on how much houses should cost.

    Let there be a socialist people power revolution, and people earning above $250,000 should be subject to the top bracket of 80% tax. That way they although they take from society, then give back to society.

    Subsidise housing, groceries and electronics for the underprivileged and poor so everyone can be equal and also have the same access to everything just like the rich and elite of Australia.

    That way you don’t get Ozbargainers gloating and posting about splurging many hens of thousands on random exotic cars while others have trouble putting food on the table.

    Elitism and selfishness should not be Australian values.

    • +1

      Yes to universal income, no to pretty much all the rest of what you suggested.

    • +3

      Good luck with that. We can barely provide our pensioners enough to live on but you want the government to provide everyone enough money not to work? People are lazy, a large portion of the population will just up and exit the work force.

      Also no high achiever is going to hang around and have 80% income tax. They will shove all their assets and income under a business and pay zero tax.

      This would self implode.

    • +1

      This wont work. No one will do the highly stressful jobs at $300k if they are taking home the same amount of money as the person in a less stressful job stacking shelves at Woolies.

      Socialism/Communisim just kills motivation for inovation and competition.

    • +3

      You are not any better. Plenty of starving children around the world yet you are here whinging about owning a house.
      At least be honest and admit you just want to be better off yourself.
      It's usually the selfish people who put on a facade to look like they care about others.

    • +1

      Universal income ….aka communism

  • +1

    Negative gearing should definitely be abolished.

    It was brought in to create a large rental housing stock.
    it's achieved that, now it's giving too much of an incentive to investors, allowing them to buy and speculate on land at the cost of the Australian taxpayer and the family who may have moved into that home.

    • There is another thing called "positive gearing" which is what I prefer. Most people haven't heard of it, that's a far better strategy longer term. I couldn't care what happens with neg gearing but I definitely benefit from CGT discounts

  • -3

    Stop falling for the media BS.

    If you want to cut house prices, just tighten credit policy and cut immigration. Easy.

    When the whole world moves to Australia with lots of cheap debt (and our property is put on the global marketplace) then yeah BOOM $1M houses.

    It's not the boogie man 'evil investors'

  • +4

    what a shallow thing to suggest. With no negative gearing, landlords will raise the rental. Tenants will be forced to move into bushland hours from their workplace. I do not think many of us are ready for that.

    • what a shallow thing to suggest. With no negative gearing, landlords will raise the rental but will have to reduce rental later because more tenants will be able to afford their own home. Tenants wanting to own their home will be bidding against less investors. I do not think many landlords are ready for that.

  • Might as well abolish the capital gain tax exemption non owner occupier home too since that's an even bigger than 50% CGT and negative gearing.

  • Another tall poppy syndrome post. Folks, we found the guy who voted for Bill! We can close that cold case.

    I will reword what the OP is actually saying. They never see themselves being in a position to own a property or any kind of investment benefitting from a CGT discount so therefore nobody else should be entitled to it either. Let's take the aspirations to be successful in Australian away, that's it isn't it.

    It's the same mindset Bill took to the last election. Let's hurt "the big end of town" was the language he used. History shows his "big end of town" included many labor mums and dads voters, a heck of a lot of tradies own investment properties these days. We actually pay quite a lot of tax in Australia but it wouldn't seem like it if you're earning under $37,000 I guess. I don't negative gear (I think it's a terrible financial strategy that too many accountants push), but I do utilise CGT discounts which allows me to, among other things, reinvest money back into the general economy (who'd have thought). But it's all perspective isn't it so let's just agree to disagree.

    FWIW though, I do think governments around the world will start scrapping or modifying CGT policy in the wake of Covid as a cash grab but we don't have to worry about that here in the short term unless both parties proposed it (not going to happen). The old confused guy running USA has been trying to do the same there.

  • In my opinion govt should make the first home more affordable. May be the councils can work with the developers and a certain % of lots/home could be reserved for first home buyers which is priced at a lower level based on the inflation/icome/prevailing interest etc. They could come up with a system where people register and get an option to wait for their turn. Offcourse they need to define some crietria to keep it fair and reasonable like only couple can register/only one registration per couple etc…the finer caveats can be worked out.
    What has gone out of hand is people using the built up equivity and keep using it to fund the next property….there is no level playing field for the new entrants.

    • Sounds reasonable but too reasonable to public servants to implement well.

  • +8

    Reading this sh1t.. seriously…3 bloody threads on more or less the complaint.

    Okay, let me share some insights for the guys who want to listen.

    1) Negative gearing - First and foremost, give the current low interest rate environment, a decent amount of investment properties aren't even negative geared. Rental income > interest expense + outgoings. Many are likely break-even. You have to be leveraged up pretty hard to be negative geared atm.

    But lets roll with your theory. Do you guys actually know what the implication of negative gearing are? You don't just suddenly make money from it.

    Say you own a investment property. Outgoings > rental income so you have a loss on the P&L. Btw, outgoing are real costs. You gotta pay the banks, water, council, (strata), etc. That loss can go towards your total personal tax liability. Lets use simple numbers.

    Say $20 loss on investment property. Put the $20 loss against your total income - lets say you made $500 that year, then your taxable income is $480 at whatever the F your marginal tax rate is. Lets now apply that to more real life numbers.

    Say you own a $1m property renting it for $500 a week ($25K rental income). Your loan is $800K and interest for simplicity sake, call it 2.5% interest only. So thats $20K interest expense. Lets say there is Strata and water - call it another $5K of outgoings. Notice how a pretty typical scenario leaves you with break-even result? But forget it, lets be more aggressive with the costs and say its $10K so you have a loss of $5K from your investment to play out the negative gearing scenario. Btw, these are all real costs to you.

    Finally, you make $100K a year, you place the $5K loss to your overall tax calculation — whats that? $5K x 30% in tax liability you get to recoup / save. Mind you, it costs you $5K extra to actually own the investment property to begin with for that year. So tell me how negative gearing makes investing in property SO ATTRACTIVE?

    2) CGT discount

    Someone has already provided a working example of why they take the approach and it makes sense too. Property typically a held longer than 12 months.

    3) here's the hard truth:

    People who are buying up property these days have the money - they earn alot and have the equity to fund the deposit and service the debt. Wanna buy a property in a good suburb, near the water or close to the CBD? make more money or ask for a big deposit bonus from your parents. There is frankly no other way.

    There are still plenty of apartments and places outside the immediate CBD that is affordable. We all have to live within our means.

    • +2

      btw, if you gloss over my post because it contained numbers or you CBF'ed and you are also complaining about property prices, you would have struggled to buy one regardless where the market went. I have less sympathy for you.

    • +2

      You've summed it all up very well.

      Judging by the OP's avatar, he has taken a photo of his parents house in inner Leichardt or somewhere and can't afford the $3.5M price tag to be nearby all his modern conveniences. Time to leave the nest and get in the property ladder within his means.

      As you said, move further out. Given he's likely in Sydney. There is Newcastle 90 minutes up the freeway - I commuted to Sydney from there for years, it wasn't pleasant and it burns you out over time but it's a start and there's always lower paying local work which offers a better work/life balance. Around this area he'd get good stock, unit or villa under $500,000. Still too much? Go another 45 minutes west or north and that drops to $300,000. Sure everything is no longer a 5 minute walk to get to.

      Or he could just complain about it all on Ozbargain and take no action.

      • Yeah but not just the OP right. So many others too. Easy to blame others, isn't it?

        • Sad but true. The path of least resistance, it becomes habit for many.

  • I have so many things to say about this that i don't wanna even get started. The best thing would be for aliens to colonise us, " God" to finally show up or a world war 3 hard reset 99% population loss and back to basics of life. If you went 1 by 1 around this world to 8 billion people you realise possibly 7/10 people minimum have a sh*ty hard life even with the basic human survival need of a place to sleep and food to eat. Epic species failure.

  • The fishing is magnificent in this pond.!!

  • -1

    Blah blah blah

    The window to do that was last election. It's beyond late now.

  • +3

    Geez, this lame argument again. Whenever I go looking for a house, surprise surprise, at least one of them is an ex rental! I sell when I move then buy again where I go; it's always been the same. Just do some basic maths for yourselves - unless you have a relatively new house (I never have) there are always maintenance costs. I don't think it is worth the rent - does anyone make money from rent? If they do it can get gobbled up as soon as you start fixing things up. Negative gearing pretty much sums up the housing investment market - I'm sure if people could do well with a positive rental income, they would. Negative gearing was introduced to induce people to invest in rental properties - so that there are places to rent! If there is no profit in owning a rental, and no tax incentives…no rentals? Or much higher rent so that owners can make a positive income? Just go and look at some houses, and ask how many of them are ex rentals.

    • +1

      Yeah, should just cancel it and let the rent increase, so that such discussion will not appear again

  • Do you think it being removed would push some landlords to become slumlord?

  • +2

    CGT should be abolished, that's about it.

    I don't believe you have a grasp on what Negative Gearing actually is.

  • I disagree, negative gearing has little to do with property prices.

    When you look into the prices, the one that pays highest prices is houses by owner occupied buyers. Investors buys high depreciation brand new or new-ish apartments, that can maximise tax gain.

    Ultimately, a home is the final goal of every new adult. They would save money from food, entertainment, even by eating mi goreng every day so that they can get out of their mother's nest.

    Unfortunately their funding will consist of loan, up to 95% of it. This then largely depends on the interest rate. This is where investors has advantage. When interest rate drops, Investor's existing loans repayments drops as well, thus increasing their ability to borrow more.

    If negative gearing abolished, new homes prices and apartments will come crashing down. Building companies will likely gone out of business. But house prices will remain very high

    • You say at the beginning "negative gearing has little to do with property prices." then you say "If negative gearing abolished, new homes prices and apartments will come crashing down".

      How is home and apartments going down in price a bad thing? Isnt that the market saying prices are a bubble and being artificially propped up? As an investor and owner occupier you could pick up a bargain then can sell in the next bubble

  • Whilst I don't think it should be abolished, I do believe that they should change the amount on an annual or biennial basis. Stop with the drastic changes, it doesn't have to be black and white. And it becomes another tool they can use to help fight inflation or curb demand.

  • The anti-negative gearing crowd has little idea how the ATO administers tax. It is unworkable for them to say "only one negatively geared property" or for each property to be isolated from the next. Whatever the law is, it has to be possible to administer.

  • Op , are you the guy that keeps spamming this on social media ? literally

  • I find it really interesting that the Liberal party are the supposed to be the party of small government and libertarian ideals, except when it comes to property. The market is clearly propped up by government when a true libertarian would insist on the free market. Kind of confusing.

  • +1

    Interesting how most people mention negative gearing and CGT, and nobody talks about stamp duty.
    That is a tax that you pay upfront and has no real reason to be charged. I believe it should go.
    I believe that the CGT exception should be removed, and just use CPI - or something like it - to account for inflation, is not like someone will just do it by hand… with computers and so on is not hard to get it right. At least like this it will be more equitable and fair.

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