What's your prediction on the Australian Dollar?

[drron]

Can you elaborate a bit on why you think someone with a million dollars in the bank should qualify for welfare ?

However someone with a million dollars in their superfund on retirement may be no better off than a pensioner.Indeed worse off.
Challenger 2 weeks ago put out their figures for annuities.Someone buying an annuity for a million dollars would get $1297 a fortnight.
A pensioner with the extra benefits receive per couple per fortnight-$1287.But their pension will increase,the annuity payment will not.
Obviously with yesterday's rate cut the annuity figure will fall.
Why is it important.The Tax Office's COO has suggested that all super payouts should be in the form of annuities.The Superfunds are in full agreement as their excessive fees will continue.

 

[JohnK]

Let's get rid of negative gearing first.

Why?

I pay high income tax but instead of throwing my money away on expensive clothes and restaurants I save my money. But then I pay tax on the interest I earn. That's one of the silliest policies ever and discourages saving.

Then I have enough money and borrow money to buy a property and rent the property out. I pay interest on the loan and I receive rent. But then I have to pay tax on the rent I receive. Again another silly requirement.

And then when I sell the property I have to pay a capital gain tax. Why?

Without negative gearing I am being punished severely. The government is taking advantage of me. I am taking all the risks.

Here's a thought for you. Get rid of negative gearing now. But at the same time do not tax investment income or profits from sale of investments. Can't have it both ways.

 

[andye]

Getting OT, but negative gearing is only the same as the deduction you would expect for interest on a loan to buy shares. Its the reduced rate of CGT on the property when sold that is the main reason property is tax advantageous. My guess is that a lot of property sepculators would be less keen on taking on a negatively geared property if they had to pay full CGT when they sold

 

[Warks]

Well Joe says we should borrow money and invest! So invest in term deposits!

 

[amaroo]

We've got one (residential) investment property left. The market is just starting to jump up here ... by x-mass we'll probably be out of the game. Good luck providing sufficient rental accomodation without negative gearing!

 

[cove]

I still like CBAPC hybrid as you get more than 6.3% less 30% tax.
The annuity earning rate is just too low as that tends to have a modest 1% income factored inside it so beware of that smiling sales person who will do better than you on that product.
CBA shares dropped 5% in a day and that is a wild ride for folks close to or at retirement age.
Of course hybrid securities would not be a place to be if the real estate market crashes as that would wipe out a lot of our big 4 banks net equity.

 

[drsmithy]

Why?

I pay high income tax but instead of throwing my money away on expensive clothes and restaurants I save my money. But then I pay tax on the interest I earn. That's one of the silliest policies ever and discourages saving.

Then I have enough money and borrow money to buy a property and rent the property out. I pay interest on the loan and I receive rent. But then I have to pay tax on the rent I receive. Again another silly requirement.

And then when I sell the property I have to pay a capital gain tax. Why?

Without negative gearing I am being punished severely. The government is taking advantage of me. I am taking all the risks.

Here's a thought for you. Get rid of negative gearing now. But at the same time do not tax investment income or profits from sale of investments. Can't have it both ways.

So, basically, you don't think you should pay any tax but are more than happy to leech off the stability and opportunity civilised society provides.

"Entitlement" writ large.

 

[drsmithy]

We've got one (residential) investment property left. The market is just starting to jump up here ... by x-mass we'll probably be out of the game. Good luck providing sufficient rental accomodation without negative gearing!

No reason it should be a problem. It isn't in the rest of the world.

 

[amaroo]

No reason it should be a problem. It isn't in the rest of the world.

I've seen a fair chunk of the rest of world - not something you'd want to replicate!

 

[drsmithy]

Getting OT, but negative gearing is only the same as the deduction you would expect for interest on a loan to buy shares. Its the reduced rate of CGT on the property when sold that is the main reason property is tax advantageous. My guess is that a lot of property sepculators would be less keen on taking on a negatively geared property if they had to pay full CGT when they sold

Another big difference is you can't get 100% loans to buy shares.

Negative gearing is primarily a tax rort for the wealthy. It does next to nothing to increase supply.

 

[drsmithy]

I've seen a fair chunk of the rest of world - not something you'd want to replicate!

Yeah. Scandanavia, Germany, Switzerland, USA. Who'd want to live in any of those hellholes.

Renters are treated like dirt in this country. You'd be hard pressed to find anywhere worse in the western world.

 

[amaroo]

Yeah. Scandanavia, Germany, Switzerland, USA. Who'd want to live in any of those hellholes.

Renters are treated like dirt in this country. You'd be hard pressed to find anywhere worse in the western world.

Is this the humour thread?

 

[cove]

We do not expect to receive any Government entitlements and we are ok about the 30% rate we pay on our super fund contributions and the 49% incremental tax rate. All we hope is that the Federal , State and local governments do a much better job when it comes to their expenditures.
We have never believed that we are "entitled" and I would hope there are lots of folks who think about what they can do for Australia.
The Aussie dollar is trying to break 0.80 on the news of China improving.

 

[MEL_Traveller]

Good luck providing sufficient rental accomodation without negative gearing!

I'm not an economist, or an accountant. So I can't understand the argument.

I see it that if you take out all the investors, property prices would fall, and then those that are renting could actually afford to buy?

Is negative gearing restricted to new build only? Otherwise if it applies to existing properties, why should 5 investors, none of whom want to live there, push up the price for the battler that does want to live there?

Switzerland has rent control. That seems a fair system.

 

[amaroo]

I'm not an economist, or an accountant. So I can't understand the argument.

I see it that if you take out all the investors, property prices would fall, and then those that are renting could actually afford to buy?

Is negative gearing restricted to new build only? Otherwise if it applies to existing properties, why should 5 investors, none of whom want to live there, push up the price for the battler that does want to live there?

Switzerland has rent control. That seems a fair system.

Construction = employment/increase rental accommodation. Good luck finding a developer that will invest for a negative return.

Apartments, townhouses continue to drive Australian building approvals

The latests statistics again underline the importance of dwelling construction in Australia's economic re-balancing away from mining infrastructure.

They also underline the strength of demand for inner-city housing among buy-to-let and buy-to-sell investors, with record low interest rates helping to fuel growth.

"For the first time there are more approvals to build new apartments (in trend terms) than free-standing houses," CommSec's chief economist Craig James said.

Interesting stat

Negative gearing cost to taxpayers falls 31pc | afr.com

 

[JohnK]

So, basically, you don't think you should pay any tax but are more than happy to leech off the stability and opportunity civilised society provides.

"Entitlement" writ large.

How did you figure that one out?

I pay income tax. More than my fair share. Why would I pay tax on my investments and not be able to claim all the expenses associated with it?

Without negative gearing I wouldn't invest out of the goodness of my heart taking all the risks so civilised society can take a cut off my profits. Would I? If my property investment or any investment fails I get no concession other than loss carried forward until I make a capital gain.

Next you'll be saying people should pay tax on pokie machine and horse gambling winnings but when they lose it's tough luck?

 

[cove]

Negative gearing is possible on all property and involves buying on a low deposit and the gross rental is below the interest and other expenses of the property. It can work well in rising property markets and badly if the property prices fall heavily.
Australia has had a love affair with property.
It is believed that if investors were removed from the market rents would rise as a consequence. Whether that actually would happen is a try it and see issue.
Overseas buyers of Australian property are only supposed to be able to buy newly constructed homes and apartments. Those rules have not worked properly.
Money flow into Australia has kept our Australian dollar stronger than it would have been.

 

[medhead]

There are many ways to modify the negative gearing system without denying a reasonable recovery of expenses. 1) accumulate annual loses to capital account. Or 2) limit the claim for expenses to a net zero position. Or 3) limit full expense deduction to a short time frame 3/5 years. Or 4) all of the above full expenses for 3 years, then net 0 position with loses deferred to capital.

NB while I understand the current building depreciation write off. It was counter intuitive to me that I could claim a deduction for building depreciation each year, thereby losing money (yes my property for cash flow positive). Then I had to reduce my cost base for the depreciation amount effectively increasing my capital gain. So don't pay tax until later when I sell. What is so different with option 1) pay tax now, but don't pay tax later?

 

[drsmithy]

Construction = employment/increase rental accommodation. Good luck finding a developer that will invest for a negative return.

Returns are only negative because of our property bubble. If property prices reverted to mean (ca. 50%+ drops), then rental returns would not be negative.

Negative gearing does not improve supply in any meaningful way. NGers *overwhelmingly* buy established properties (something like 90%).

Interesting stat

Negative gearing cost to taxpayers falls 31pc | afr.com

Wow. I'm surprised calling it a "cost" managed to get through in the AFR.

Negative gearing cost to taxpayers is dropping because interest rates are dropping.

 

[drsmithy]

How did you figure that one out?

Might have something to do with the way you keep whinging about how much tax you pay, despite Australia being one of the lowest-taxing western countries in the world.

I pay income tax. More than my fair share. Why would I pay tax on my investments and not be able to claim all the expenses associated with it?

Nobody is saying you shouldn't be able to claim expenses. Just not against unrelated income (like you can't in most of the rest of the world).

Without negative gearing I wouldn't invest out of the goodness of my heart taking all the risks so civilised society can take a cut off my profits.

Right. So you're "investing" primarily to avoid tax.

If my property investment or any investment fails I get no concession other than loss carried forward until I make a capital gain.

Yes ? What's the problem with that ? That's how making losses on your property (be it rental or capital) *should* work.

Next you'll be saying people should pay tax on pokie machine and horse gambling winnings but when they lose it's tough luck?

Not quite sure how you get to there.