Negative Gearing Affects Everyone

NEGATIVE GEARING IS NOT A PERK OF “THE RICH.” IT AFFECTS EVERYONE. IF THE PLAN TO GET RID OF IT SUCCEEDS, IT WILL BE A DISASTER FOR OUR FRAGILE ECONOMY. WHY WOULD WE RISK THAT?

In recent months, a policy to get rid of negative gearing on existing residential property and increase capital gains tax has been all over the media.

This policy – if ever adopted – directly affects the millions of Australians who own any property, whether it’s an investment or their own home. It also affects the 18 million Australians who have a stake in property through their superannuation funds.

But as well as falling house prices, the knock-on effects will see jobs destroyed and government revenues fall, and may even send the Australian economy into recession.

This site is part of a campaign by real estate groups across the country who have united with the Real Estate Institute of Australia to make Australians aware of these disastrous consequences. Our industry participants pride themselves on being apolitical, but this time, the issue is far too important not to speak out.

Yes, this policy will affect the property industry, which is now the biggest industry in Australia. Such a policy would rip billions of dollars out of our sector at a stroke. But it’s obvious that taking billions of dollars out of the economy all at once is a recipe for disaster for all of us.

Please take the time to read the material here, which will be updated regularly, and to contact us if you have questions about your own specific circumstances.

You can follow us on Twitter: @ngaffectsyou

We encourage all Australians to make an informed choice. Negative gearing is not some taxpayer-funded perk for “the rich.” It matters to, and affects, everybody.

Negative gearing affects everyone. Why risk so much right now?

Authorised by Jock Kreitals, 16 Thesiger Court, Deakin ACT 2600

Copyright © Real Estate Institute of Australia 2016. All Rights Reserved.

272 thoughts

  1. The intricacies of the business of investing and comments about the impact of NG are interesting to read, but some of these judgements about investors are mis-informed and not a true reflection of who “these people” are! I am one of those people who, according to one commentator, did a “useless” Arts degree then became a teacher. I worked through the various payscales in some pretty isolated places (I only had a Satellite phone 1 year!) and saved my money. Now, at 48, I have 3 homes (not all paid off, though). I intend to be self-funded when I retire. What’s immoral about that? It’s no more immoral than other people’s choices such as a flashy car or a boat or X Box or an i-phone version 362!! I don’t consider myself wealthy, either-I’m just your average middle-income worker. I was lucky and got in at the right time, but I was also prepared to put up with Bessa bricks and planks of wood for shelving and second-hand stuff.Although it’s harder to buy in to the market than ever, your expectations /standards of what you can afford (without buying on credit) have to be realistic and more basic. My brother was able to save for a regular house on a disability pension. It’s usually a choice. PS Landlords don’t just sit back and rake in the cash. As a landlord, you have to pay rates or body corporate fees, repairs, landlord insurance, building insurance, fees to the property managers etc etc. Yes, thank goodness there’s NG, but you have to be earning (and paying tax!) in the first place to pay for all this as you go. This is not, as someone suggested, paid for by other tax payers-it’s linked to MY income. And frankly, having worked since I was 17, I’ve paid thousands and thousands of dollars in tax, so I’m not “robbing” anyone! Anyway, enough of the ranting…this is a very polarizing topic.

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    1. You shouldn’t be criticised for buying property, but you don’t have to let the taxpayers of Australia effective pay off your mortgage. I too am trying to set myself up for retirement and have my 2 properties positively geared which is better tax wise as negative gearing is only really beneficial for three years If the laws change the only thing that will change is that property investors will need to do there sums again and invest within there means. There won’t be a wholesale sale of real estate because of the way Labour have planned to implement this. House prices will become fairer as it will stop property portfolios going at the governments expense. Most currently negatively geared properties will be held onto because if you have this guaranteed benefit then you are very lucky to be able to keep financing your property out of what should be tax revenue.

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      1. Hi Richard – what modelling are you basing your claims on? The only two models of this policy both say it wont work and instead with have untold negative consequences for our economy. It’s a difficult debate as politics can be full of emotion, but please, read through the site including the SQM report on the links.

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  2. Negative gearing is one of the biggest contributors towards the very high house prices we have in Australia. Investing into something that loses you money in hopes of achieving capital growth in the future is fine, but sadly such a strategy is made much more attractive and affordable when up to 50% of those losses are paid for out of taxpayer’s pockets. Effectively, a negatively geared investment, subsidised by the tax refunds, boosts the buying power of the investor by that negatively geared amount. Once everyone starts doing it, or rather, one can’t afford not to do it … we end up with significantly inflated house prices.

    In simple terms if one can’t afford to pay $1000 per month in loss they make on the property, they might be able to pay $530 per month in loss. The $470 is paid for by the tax man. Oh and if you’ve ever been to those lending companies that try and push investment loans on you, they will show you a neat spreadsheet where they will also add $700-800 per month in depreciation cost, that will reduce your “out of pocket” by a further $350. Tada! You can be a property investor/owner for ~$200 a month. They never tell you that those “abstract” depreciation claims you make need to be subtracted from the acquisition cost for the CGT purposes….

    One of the girls that works for my business just bought an apartment with her fiance. Great! Except, when I asked “when are you moving in?”, she replied: “oh, I don’t know. we can’t afford to live there. We will rent it out until our incomes increase”. That is the problem that property investment, made more attractive by negative gearing created.

    It’s a problem that will need addressing sooner or later. The longer it is left, the more painful it will be to deal with. Starting off with stopping NG on future purchases is good!

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    1. HI Jester, thanks for posting. With all due respect, please do have a thorough read through our site – you’re under some false assumptions right now (as many people are) which hopefully can be answered by what we’ve included here to explain. Perhaps check out the blog section first, there’s a good article from FN explaining neg gearing and also a video from Dan White. Also check out the first home buyer section for info on affordability. This policy is very dangerous and represents unacceptable risk to the Australian economy.

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      1. I don’t quite understand your reasoning behind saying that Jester is under some false assumptions. Jester makes a pretty clear argument. Could you explain exactly what part of Jester’s reasoning you feel could be better informed and give us that specific information.

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        1. Hi rich probably the best thing we could do is direct you to independent modelling that’s just been released today by SQM research http://sqmresearch.com.au/pdfs/Labor's%20Negative%20Gearing%20Policy%20%20-%20A%20Market%20Viewpoint.pdf

          It broadly supports everything we’ve been saying – price falls of up to 20% over three years, sales volumes falling by 17-20% in the first year resulting in stamp duty losses to the states of some $3.1-$3.8billion and rents rising above the long term average. Sound like a good policy now?

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          1. SQM were in support of NG reform for years and have previously released reports in favour of reforming NG. All their modelling shows is that they’re a research house that can be bought.

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            1. Hi there, According to what we read, SQM is still in favour of NG reform and that’s no secret. The modelling they’ve produced is on the particular policy that’s on the table, not about whether NG is good or bad. It’s interesting that people who don’t like the outcome of that modelling are now busily trying to discredit what is clearly an independent and credible report. It would be more useful if we could all use that information to avoid enacting a policy that will clearly create significant problems in our economy and instead, talk about more comprehensive reforms to address the real issues at hand.

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              1. Hi. I am confused. Can the institute please tell me where the price fall of up to 20% is in this report? It’s not on the summary on page 2. Does it take into consideration the ramp up in prices caused by investors buying in the lead up of implementation to get the grandfathering? I note adding the worst cases for each financial year from today to 2020 only results in an 8% fall from today’s prices?

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                1. Hi Pez the sqm report has compared yields to countries that don’t have negative gearing and suggested that if negative gearing removed abruptly here, there’s a likely correction of 21% (see example on page 4) as the average yield to investors here is significantly lower. They then go on to say this could be a mix of price falls and rental increases. It’s obviously impossible to say exactly what will happen but the likely correction could be up to 20%.

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                  1. House prices in Australia are overinflated and need to fall. I own two properties, one in Darwin, which due to economic factors recently saw my weekly rental revenue dive from $390 to $320. This has a significant impact on me financially as I’m a single Mum working part time, but I’d prefer to see property prices fall to allow others to get into the market.
                    Negative gearing helps those who have already attained ‘the dream’. Let’s help those who haven’t. Home ownership gives people stability, a sense of pride in themselves and helps those who were inclined to jump from job to job to become responsible citizens that will work at maintaining good workplace relationships because they have responsibilities.

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                    1. HI Juanita, thanks for your post, we understand what you’re saying. But if house prices were to fall 15% over the next four years and you were to lose your job, what will happen then? This is what you could be facing under this policy. State stamp duties will be hit by $3.1 -$3.8 billion and there will be massive knock on effect to the rest of the economy. We welcome sensible reform – but this is not that. This is a blunt instrument for a delicate issue – please read through our site and especially the links page for the SQM Report, which is where the figures we’ve quoted come from.

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    2. Typical uneducated opinion – lets take negative gearing away, watch construction stop, see unemployment drive up toward 30% again & rents go up!

      The construction of houses & units is one of the major pieces of the Australian work force – yeah, lets shut it down.

      There is always two sides to every conversation – negative gearing is a tax incentivized investment strategy to drive the economy & yes you do have to pay back the depreciation when you sell the property due to diminished value Versus the Capital gains!

      But should your employee stay in rent land forever as you say “they cannot afford to live there” or should they get their money & taxes working for them to start building appreciating assets?

      My opinion is well done to them – in 30 to 40 years times they will have a strong asset base because they are active & look to the future.

      By the way – you should look at Tax as your money anyway NOT the ATO’s why else do these strategies exist?

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      1. Negative gearing changes are the least of the property lobby groups concerns. Melbourne attached dwelling unit prices down an annualised 5.2% for last quarter (ABS House price index). This is the start of a severe contraction in attached unit market prices with another 150,000 units to be added in the next 18 months. With the reduction in the migrant intake and negative real wage growth, there is lots of homework to be done by any new property investors.

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      2. I’m confused…how will construction stop when 90% of negative gearers buy existing property and labor policy allows negative gearing for new property? Also how will rents go up when unemployment increases…how do i pay more if i dont have a job? Wouldn’t i have to move out of the place i am in because i have no money (if not my landlord gets no money) that would then free up a house increasing supply…causing rents to drop…

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          1. I think that your research doesn’t understand supply and demand, but Umm does. Rents can’t rise if no one can afford them – because then in order to get anyone into their properties, landlords would have to drop the prices (or leave them vacant, and lose 100% of their money).

            If housing prices fall, then renters will buy them.

            You cannot have a system where house prices fall but less people buy houses, AND a system where rents increase and therefore no one rents.

            All your research just maks me think that your organisation is just a shill for an industry group that directly benefits from sucking up the additional money (ironically in economics called ‘rents’) that negative gearing brings.

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            1. HI Olivia, what your referring to isn’t “our” research – it’s research from independent companies who specialise in this sort of analysis. In fact, SQM Research has been termed Australia’s most accurate property forecaster by the AFR – pretty good credentials! We’d suggest reading their report and it will make more sense how these dynamics would play out.

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  3. Okay, I give in. I tried reading all the comments but there are just to many.
    My question is this: If abolishing Negative Gearing is such a “good” idea, why did Paul Keeting abolish it and then reinstate it.
    If abolishing Negative Gearing back then caused so much damage to the economy that it had to be reinstated, why is it such a “good” idea now???

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    1. HI Ron, thanks for posting. In to your question, it isn’t! Some people will say conditions were entirely different then with high interest rates and high inflation, and this is true. The economy was unstable, in a completely different way. But it was still unstable, that’s why Keating’s plan didn’t work. We don’t believe it will be any different this time around, which is why we’re standing up and speaking out. There are so many falsities being put out by the propaganda machine of the Labor party, people just to look at this logically to see the policy represents unacceptable risk and should never see the light of day. We hope for all our sakes that it won’t!

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  4. It has become obvious from reading the comments that most people who want to abolish NG have absolutely no idea how it actually works. They seem to think that any costs such as interest payments are just deducted from your tax bill.
    Let me put is simply, THIS IS NOT HOW IT WORKS.
    Let’s use an example where an owner receives $18,000 in rental payments and pays $19,000 in expenses such as interest, body corporate fees, etc. (a very realistic scenario). The $1,000 difference would be deducted from their annual income, which they then pay tax on. So someone in this situation, earning $52,000 a year from their job, would instead pay tax on $51,000 a year. As such they would receive a very modest tax benefit of a couple of hundred dollars, no huge windfall as the ill-informed seem to believe.
    When the property becomes positively geared. i.e. the costs are less than the rent, then the difference is added to their income and they pay MORE tax.

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    1. Hi Apollo,
      I agree that this modest tax benefit of a couple hundred dollars is small, but the taxes around real estate do seem quite generous toward those with more wealth who are more able to borrow money.

      For example, costs associated with the investment property are allowed be deducted from unrelated income such as salary, rather than being deducted from future income received when the investment property becomes positively geared. In fact, there is no requirement for the property to show any positive net income in the future as with other investment classes. Secondly, if a capital gain is realised and the property was held for more than twelve months, there is a tax concession of 50%. This does seem quite generous because when I earn interest on my savings I am paying tax at the full marginal tax rate. So there is quite an incentive to invest in real estate instead of saving money. I wouldn’t have such a problem with this if the investment in real estate was targeted at construction, but many investors are buying existing properties (source needed). If the incentive was targeted toward productive investment in business, STEM, etc instead of real estate, I would more likely invest money than stick it in a savings account.

      So the tax laws around real estate seem generous to me because it allows negatively geared investors to deduct all costs from other unrelated income (reducing taxable income $1 for $1), lowering the tax bill at the full marginal rate. Then if a capital gain is realised this is added to their taxable income but with a 50% concession, allowing the investor to pay less tax. Of course there needs to be a way to account for inflation of land, cost of building etc. but 50% concession seems generous.

      In summary, the whole system is generous toward negatively geared investors because they reduce their tax while owning the loss making property through the ability to deduct all costs from other unrelated income. They then reduce their tax again when they realise a capital gain and receive a 50% concession. I think there is more to it than the modest tax benefit of a couple hundred dollars you mentioned.

      Disclaimer: I rent and own an investment property (obviously an existing property which is negatively geared).

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      1. Hi young investor you raise some valid and interesting points but unfortunately this is not a debate over whether negative graring is a good thing or not – which is a debate we would welcome. This is a debate over a policy that will cause untold damage to our economy. Even those who have been advocating strongly for negative gearing reform like sqm research have now come out publicly (after modelling this policy) saying that it won’t work. The risks are extreme – please check out the rest of the site for our take on the matter and you’ll find a link to the SQM report on out interesting links page.

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  5. It seems all those people who are against NG have not read the comments posted on this site. They can’t seem to answer the questions that are posed to them. they can’t give detailed reasons why NEW properties only should be negatively geared, when those rents will naturally be higher than existing properties.

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  6. I think people are confusing 2 issues.

    Negative gearing happens when the expenses on any investment are greater than the income from that investment . It only makes economic sense to negatively gear if you eventually have a big enough gain on the disposal of the asset (the capital gain – the second issue). Why spend $100 to earn $90 rent (and make a loss of $10, which you can claim as a tax deduction and only get back a maximum of $4.90 in tax?). You have still made an after tax loss of $5.10 and only an idiot would do that. It only makes sense to make that $5.10 loss if you make a capital gain on the disposal of the asset bigger than the $5.10 loss after tax.

    You currently pay tax on 50% of the capital gain (after taking into account the costs such as stamp duty, etc etc) – if you make a gain of $200, you pay tax on $100, so a maximum tax of $49, so a net gain after tax of $151 ($200 gain less $49 tax), so an effective tax rate on the gain of 24.5%. That’s where the real issue is. There is “concessional” tax on the capital gain, not that negative gearing is a rort. The principle applies to whether its real estate or shares. Reducing the capital gain discount, is the solution, not touching negative gearing. It was set at 50% when inflation was high and gains from capital modest, as a means to only tax the real gain. Now we have low inflation and high capital profits (some would say the latter caused because the tax rules encourage investment in property).

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  7. Greedy real estate never care about how much pressure first home buyer feels. NG keep adding fuel into property market which will be never acknowledged by greedy real estate industry, banks and Libs.

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    1. HI Annoyed, sorry, but you are mistaken. We are very concerned with affordability for first home buyers, and we’re even more concerned that they’re being tricked into believing that this policy is going to solve their problems. Please do check out out blog page and also the page that’s specifically for first home buyers. This policy will hurt all of us, i
      ncluding you.

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      1. Yeah, because your’re making good money out of it and think that everyone has a misconception on negative gearing. This is typical.

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    2. HI Annoyed, sorry but you’re mistaken! We absolutely care about first home buyers and affordability generally – we’re particularly concerned that FHB are being tricked by false promises that this policy will fix their issues. Please check out our blog and also the section for first home buyers for more information.

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      1. In response to annoyed, you are one of those people who complain but don’t know the housing market at all.

        1. Do you know how long NG has been around? If so
        2. How do you explain the falls in the cost of housing at different times over the years?
        3. Aren’t you aware that the only reason house prices were higher than usual is because of the Chinese buyer?
        NOTHING to do with negative gearing.

        It’s not about greed, never was, it’s about planning for your future.

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    3. Omg how niave. What about the huge impact on rental for those people unable to buy a house. Not to mention the impact of higher rents on those saving for a deposit. Rents are about supply and demand. Drop NG, housing prices may drop a little, construction will have a massive hit, property shortage will drive rents up, people saving for homes get hit. Less stock (construction has crashed) means prices of home rise again! The people can least afford it get hit with high rent, and house prices rise again and become just as unaffordable. Great outcome not!

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      1. I have two rentals and have had no end of troubles at different times with ferral renters. At present have two lovely tenants. However if doing it again I would not. rather put money in Super. Much less stress. When I bought my own home interest rates were at least 3 times their current rate. They took at least half of my ex’s low teaching income(new teacher) and we only had one while children were very young. It was a struggle. Very basic food, no eating out or holidays for us and could not put curtains on windows but old sheets for many years. No mortgage assistance and no income assistance etc. Child support about $2 a week rose slowly over the years to about $38 for 3 children and people today complain! It was never easy to buy a home and it took a lot of perseverance and a lot of sacrifice but as circumstances improved with increased income and especially when I was able to get a job after years of part time education it started to pay off. House prices rose, income rose, and mortgage was very slowly paid down. that led to equity in the home and enabled the RISK of purchasing very cheap house for investment to rent. It needed to be improved a little and improved a little more each year in repair and replacement of things that wore out or broke down etc so that today that first house is much better than it was and the second also. Too many people think that buying a home has always been easier than it is today. It has not been unless people have very good incomes in the first place. The Government was not coping with the numbers of people needing rental accommodation and especially due to the cost of houses being wrecked by unruly tenants who thought that it is only a government house so if they don’t give us the best we will trash it. The government wanted to share the risk by encouraging private investment and so gave the incentive of negative gearing. It is not a perfect system but I think renters benefit from this with homes to rent where there would otherwise be a shortfall. I would never have taken it on without negative gearing and think anyone would be foolish to do that. It is very expensive to have rental properties and it takes a lot of Time and energy to maintain. Of course many people want their own home but many want the home without the hassels and many think it is so much harder now. It is not. If you want it you save for your deposit you need have the income to ensure you can meet payments and especially if rates rise in the future and you need make a lot of sacrifices to put the home first for maybe a period of AT LEAST 10 years! That is why many prefer to rent and lead more active outgoing lives.

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  8. Could not agree more with Paul, no landlord wants to have their property negatively geared, it simply is fiscally silly. Where I think some people get confused is that they see depreciation as a negative gearing tool and whilst it is in some respects, if and when the property is sold, and it has, as one would hope attributed in value then that depreciation break goes back to the government as the property has not experienced any depreciation. If the government removes any negative gearing from the real estate investment sector then should it not also remove the ability for any small business to claim any losses against their incomes because that is really all they are doing.

    Just a random thought here, if all landlords decided to not renew any leases and left their properties vacant for six months all at the same time, I wonder how the government would handle the social housing crisis that that would create. Put simply Government does not and can not meet the social housing requirements now and heavily relies on private investment in rental housing to meet that short fall. I believe the Whitlam government tried this in the 70s and it was quickly revoked. Do subsequent governments learn nothing from history. if they want more revenue clamp down on the large multinationals who thumb their noses at our ATO

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    1. In 1985 THe hawke government with Paul Keating as the worlds best treasure stopped ng. It went for aprox 18 months. It produced very little rentals and higher rents for those properties that were out to rent.I had frustrated renters in my office crying and yelling at my staff not good

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      1. Hi Terry thanks for that. Your experience tallies with many highly experienced agents and leaders who experienced the same things. Unfortunately because data collection was almost non existent in our industry back then, it’s difficult to quantify for those looking for hard evidence. Suffice to say you know and we know this proposal is not a good idea – we can only hope for the sake of every Australian hat it never sees the light of day.

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    1. Hi Lawrence to the contrary, people like Malcolm Turnbull have nothing to fear from labors policy – you see under it, people who have lots of different investments, like shares, deposits etc, will still be able to claim their losses on property against other investment income. The only people who’ll be affected are the mum and dad investors who currently claim the loss against the wage or salary income – that’s the only real change! Check out the policy in full detail – it favours the wealthy, exactly the opposite to the message Bill Shorten is promising (dare we say misleading) voters with.

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      1. Not quite. Existing investors in real estate will lose nothing under the Labor policy. They will claim any losses the same way they do today. They just won’t be able to have any additional or later purchases treated the same way. Nobody will have an existing entitlement altered.

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        1. Hi Geoff unfortunately existing investors will lose because house prices will fall. This means while they’ll still be able to claim cash flow losses, it will all be for naught because the whole reason they tolerate a loss is for a capital gain – a capital gain that under this policy won’t exist!

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        2. Geoffb
          And this is the point “Investors will not be able to claim losses on future purchases”
          So why would an investor bother investing?
          Without investors development slows to a crawl and insufficient properties come onto the market.
          Supply and demand kicks in and RENTS on all properties increase. Who is the loser then?
          That’s what happened with Keating and Hawke

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          1. Actually Investors WILL be able to claim losses on future purchases, they just have to be new housing. Which in effect, forces any future investment monies into new developments/housing, instead of purchasing existing older stock, thereby pushing *more* money into construction.

            “Hi Geoff unfortunately existing investors will lose because house prices will fall.” This *MIGHT* be true, but lets be honest. Anyone who is purchasing an investment property, AND negatively gearing it (thereby making a claimable loss) is playing the long term game. Values might drop initially, but over the long term they’ll recover and a capital gain will be realised.

            If you’re purchasing and flipping expecting short term gain, you know full well you’re playing a dangerous game at the whims of the market.

            The ONLY purchases the proposed NG change is going to impact is *future purchases on existing property*. Existing NG arrangements will be unchanged. Investors can still buy, and NG property if they want.

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          1. Independent Report!??! Or commissioned by the Real Estate Lobby Groups?
            It has been fun perusing the vested interest lies herein.

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            1. HI Greg, thanks for your comment. We can confirm we did not commission the report. We did consider commissioning some modelling (in the absence of either of the political parties doing it) when our campaign began however there did not seem to be much point – we are well aware that a commissioned model would be considered to be bias. Having said that we are glad someone has stepped up to the plate and note SQM are the only company who’ve modelled the actual policy, not NG in general. We wonder why you haven’t made the same comments about the Grattan report or the McKell report? Interesting….

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  9. I work in real estate sales but will also be a first home buyer in coming years. Negative gearing is helping the economy and encouraging aspirational buyers to invest; that is good. Getting rid of it is not the answer to help first home buyers. That is the major issue. First home buyers should have to only pay 50% stamp duty. Will still be hard for them but gives them a better chance.

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  10. I thinks it is disappointing that the leader of the Labour Party seems to hate the working class so much. First he signs off on deals with employers that disadvantage workers. Eg. Spotless. Then he signs off on policies such as carbon tax and energy that will send electricity prices through the roof and then he tries to kill a path that allows many workers to build wealth over time through access to negative gearing provisions. Don’t tell me he’s a champion for the workers. The only class he defends is the bureaucracy class. He’s as genuine as a three dollar note

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  11. People want to live in their own home, not be entrenched into a rental house, for…….The impact of changing employment, right across all the sectors, has been one of the causal reasons for rising house prices, but it’s not the only one. Simply put, renters are humans too, who have the same, needs, to live in their- owned house, their home. Using land/property to be a income earner, isn’t in the design of life. Whilst each of us are here, we live to experience life in good, neither is more or less than the other. Having unstable employment, and unstable dominion leaves one eating worry for breakfast, lunch and dinner. Houses are not just houses, they are the living dominion for a human family, where they can hang their pictures on the wall, paint their home and the list goes on, renters are not less deserving of life, while they live on this earth, that belongs to nobody-who actually owns the earth, who actually takes their piece of real estate with them when they pass on? How much food can one eat in a day, how much house can one live in, in a day. Houses are not just, houses, they are for all, a place to call, home, part of the memory of ones life. And yes this doesn’t read the way this site wants it to, as the response try to rewrite. But the banks want someone to be in debt, they don’t care who, so the mortgagee is a tenant too. But surely it’s healthier and happy for the neighbourhoods and communities for those who want to own their own home, to have the chance to, by their decision, not have the decisions taken from them by lack of choices all the way round. And there is no good argument to say, life is what you make of it, say that to those, who have been displaced, or those who have returned from wars, or, those who are diagnosed, or those who have lost their job, then their house, or those who have lost, the business, careful with judgement. For it might be you next, only a fool thinks life is so predictable that they can count on it. I have meet, this week, two people, now homeless living in their vehicles, one an ex-solider the other a known, now ex-party member. So what is good about negative gearing, and truly who for? If you fear the idea of negative gearing rules changes, and you have a house (home) to live in, what are you worried about are you worried that you might end up broke, or not having rental properties to live off. Renters don’t want other people to buy a house for them, they would like to buy their own house.

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    1. HI Tracey, thanks for your post. We understand what you’re saying, but we can also say that its true that many people in today’s world don’t want to own their own home, for a whole variety of reasons. There is a sizeable chunk of Australian’s who want to rent and for those people, private investment in property is important. We’re not afraid of changes, but we are against poorly thought through policies that haven’t even been modeled by the parties suggesting them and that we feel will cause problems for not only the property industry but for every Australian. That’s what this site is all about – sharing information so people can make good decisions. Please, do take the time to read through it and hopefully it will be clear what we’re saying.

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      1. I stand by what I have written. I have read your responses,and your argument. I am a human who lives on the earth. I neither own or have more or less, than the other of this earth. I neither asserted that all human beings are to or want to own a house,to become their home. The casual effect and whom it make affect after these changes come through, is at best hypothetical, as was the cry the earth was flat. History is littered with, determined actions, based upon what a group decided I would add, there would be few whom, not to never, want to place their home-self into their own house. Share is determined by care. I do sense the uncertainty of this concern, you express, but go forth knowing, the world naturally balances an imbalance this is all this is, as it knows worry is not good for anyone. Life is good. Good-day to you all.

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  12. Surprise surprise – the real estate industry doesn’t like a policy which is likely to slow the growth in house prices and reduce activity in the existing housing market. The policy will encourage investment in new housing – which creates jobs (buying and selling existing housing stock merely boosts the incomes of those working in real estate).

    Everyone should read this – http://mckellinstitute.org.au/wp-content/uploads/pdf/McKell_Negative-Gearing_A4_WEB.pdf

    Can the real estate industry answer this – why is it fair that those who cannot afford a house – particularly younger people – should subsidise (through the tax system) those who have one or more investment properties?

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    1. You ask why those that do o have a house should support tax for those that own rentals? why is it that those that do not have children support taxes that pay for child support or other child care subsidies, Indeed why do those that work pay tax for those that do not? it is not about one person paying another it is about allocating tax to those that are providing a benefit to others and often suffer the consequences when renters do not pay or trash a house. it is a tax pool that also pays the bond and the rents of those that do not pay! I had one tenant in my rental for 6 weeks who did not pay bond and paid no more than one month rent claiming hardship so it was all paid by the government and then she left to wreak havoc on the next landlord. the tax system provides relief for many people in society. It is cheaper for the government to subsidise landlords who have to meet most costs than to have to provide government housing which is a very expensive business.

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      1. Well we can all sign with relief, the Libs look like obtaining control of the lower house & senate! NG debate no longer a concern, for at least another 3 years!😰

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  13. Hi All
    The governments are like drug addicts who are relying heavily on capital growth and solid turnover in the property market so the stamp duty revenues keep rolling in.
    The stamp duty rates for the base cut in at 120 k were put in place when the average homes were 15 k if the base rate was 600 k today at 2.2 and 6 percent above that it would be more attractive to all home buyers.
    The GST on all new homes plus the additional council open space contributions and Growth area infrastructure contributions all add additional costs to a project making new homes more unaffordable.
    The governments have a social responsibility towards assisting people on low income who cannot afford to purchase a home and maintain affordable rents. This responsibility has been placed on the humble investor of which there are thousands in this country who when they decide to exit the market can pay an additional 24.5 percent tax when they sell.
    The governments on the other hand are reckless with our money run up huge budget deficits and then collect a pension for a job well done, and leave a mess for our children to clean up.

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  14. For those defending NG, please have a look at North America & EU, where they do not have such a thing as Australia does. They have a much healthier economy & affordable housing, advanced science & technology. Australia is doing bricks only

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  15. I’ve noticed builders and developers want the cost of housing to be cheaper – at least they say that every time we people talk about mandating 7 or 8 star energy rating for housing construction. They resist all attempts to make housing more energy efficient on the grounds that people can’t afford to buy expensive houses – but apparently they can afford to run an electric heater all day….
    And first home buyers are demanding cheaper housing too.
    Meanwhile real estate agents and property speculators want to retain negative gearing so that prices can keep rising.

    Who is correct? Is the community better off if housing is cheaper or are we better off if the cost of homes continues to climb?

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    1. Hi Moof we can’t speak for the construction industry obviously but as for agents, we are also concerned about affordability issues. Negative gearing isn’t behind the latest boom, that’s down to historically low interest interest rates. There are also members of our group who do believe there should be negative gearing reform but that’s not what this debate is actually about – it’s about labor’s policy which is not a well thought through plan. We suggest you check out today’s report from SQM Research which models the policy – and is the only modelling that actually exists currently – http://sqmresearch.com.au/pdfs/Labor's%20Negative%20Gearing%20Policy%20%20-%20A%20Market%20Viewpoint.pdf

      It fairly aptly illustrates our concerns.

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    2. Hi Moof,

      Your final question is the crux of the whole matter but you use the term “housing” and not “home ownership” with regards to affordability and I think this is important. It is easily proved that the most affordable housing is rental accommodation. The fact that everyone is talking about “negative” gearing is testament to the fact that it costs more to buy a house than to rent one.

      Assuming that you are referring to affordable home ownership, in order to buy a house a person requires not just sufficient income now to save the deposit and cover the other costs that come with buying property, but some certainty that they will have that income for the duration of the loan (about 25 years) and expected growth in that income. This can only occur in a steadily growing economy.

      Since housing is a major contributor to the economy, it is important that the value of properties increases steadily with time. If the value of a house doesn’t grow at the same or higher rate than the interest on the loan, it loses money for the owner. On a large scale, this will slow the economy as people have less money to spend and business suffers.

      There are a lot of people who want tax concessions to investors to be scaled back or removed in the hope that this will cause housing prices to fall, thus making them more affordable. Removing capital from the economy has a destabilising effect and job prospects suffer. Housing is then still unaffordable.

      We don’t have to look back very far in history to see this happen. The bursting of the US housing bubble less than 10 years ago had a flow on effect that came to be known as the Global Financial Crisis. The housing bubble wasn’t created by tax concessions but by making housing appear affordable to more people. The massive devaluation of properties didn’t make housing more affordable there and I doubt it will here.

      Much is being made of Labor’s policy to still allow NG to apply to new properties to maintain the building industry. But what investor wants to invest a lot of money into an asset that may take 18 months or more before getting any return and have the value of that property fall immediately its construction is completed. It’s like buying a new car then trying to sell it the next day for the same amount. It doesn’t happen. If the value of existing properties fall, the cost of building new houses will also have to fall. You made a comment about builders protecting the cost of building. See how they go when expected to reduce costs by 20%.

      Naturally, these are only my ideas but it seems logical to me that anything that is likely to remove capital from the economy is likely to have a detrimental impact on all our lives in the future.

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  16. On the one hand you call for more affordable housing. On the other you acknowledge that NG only makes sense in the context of rising house prices. You can’t have both.
    You might have some research link to SQM but who paid for it? It is possible to have a model spit out any results you like depending on the input assumptions. So again, who paid for the link you keep quoting?

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    1. Hi Olaf, thanks for your comments. According to what we’ve read, SQM have stated clearly that they were not paid for the report. We have also linked to all the different report available in the debate on this website, although we do note that none of the other reports model the actual policy, only negative gearing more generally. We are very pleased that the SQM report broadly supports what we have been saying throughout this debate – especially because according to the Australian Financial Review, SQM are Australia’s most accurate property forecaster – that’s a pretty good reference!

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    2. Olaf, the rising house prices you refer to occur over a long period of time, no less than 10 years usually, that’s what investors look at, plus the rental income for retirement.
      So because the report says the opposite to what you want to believe, then you don’t think it’s independent. There’s no point in having reports then.

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  17. Even a recent Treasury reports that high income earners are the real benefactors of negative gearing. It is the opposite of what you and the government are getting across on this website. Someone is lying!?

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    1. Hi Theo please refer to Rp data report regarding this matter. Yes, someone is lying – it’s the party who’s selling this policy as the solution to our housing woes, supposedly going to stop wealthy property investors. In fact, it enables property investors (who will still be able to claim any losses against other investment income) to have a free run, without all the mum and dad investors who don’t have other investments and can’t afford to vary forward their losses. Please, read the SQM report (links page), Google adept economics (we are still trying to get a copy of this report) and read through our blogs page. Unfortunately politicians are not well known for telling the truth.

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  18. Here’s an idea to make money instead; get a real job! Innovate! Do something worth while with your time and money and help future generations. Very sad that we baby boomers were so lazy and caused younger generations so many issues. I want my kids to be able to buy a house (for my grandson especially) but they simply cannot afford it because we were too lazy to do any real work and instead sat back and bludged of our properties. We should have been working and creating real industry in this country but instead we did not; very sad and I am sorry for all you young people out there – we were wrong, we messed up and we need to fix it.

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    1. Hi Brent, sound like you might be in Sydney or Melbourne! We can assure you that property is affordable for first home buyers in many areas of Australia and even where there are affordability issues, this Labor policy is not the solution. You’ll also be pleased to know we are lobbying on real measures to address affordability and talking to advocates for this buyer segment.

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    2. And just how do these property investors sit back and “bludge off their properties” when they have significant costs to cover such as maintenance, rates, land tax, stamp duties etc… As a property investor myself I rely on having a good job in order to cover these costs for my tenants.

      Property investors are addressing a need for rental housing in the market that the government could not possibly afford to cover. Just look at the number of homeless and the number of people on the wait list for a government rental. How much longer do you think that list would be if fewer rentals were available in the market.

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  19. If net losses on investments are no longer to be tax deductible, does that mean net gains on investments are also to be tax free? It is not fair to disallow the deductions associated with investing while still taxing the income.

    I all too often hear the statistic quoted “negative gearing costs every taxpayer $316 a year” but nobody is factoring in the tax revenue bought in by those positively geared investors! Also, why single out the property industry, aren’t people using these principles also to invest in their small business or the share market? It seems extremely biased to single out a particular class of investor.

    Affordability of properties is a supply and demand issue, investors will still continue to buy properties with a view to turning a profit and making long term gains. There are far more factors at play in the affordability issue than simply negative gearing.

    In the ACT where I live, there are new apartments going up in Tuggeranong CBD from $239,000. You can go out to Queanbeyan and pick up a place within 10km of the City CBD for $150,000 to $200,000, how is that not affordable compared to the cost of rent? Just because you can’t get a renovated 4 beddie on a quarter acre in Ainslie as a first home buyer doesn’t mean there are not affordable properties out there. You have to start small and work your way up the ladder just as everyone else has done.

    And not to mention if you are negatively geared over the long term you are in fact making a loss and it is costing you serious $$ year on year, it is a strategy little better than gambling, relying on the assumption that the capital growth will outweigh these costs. I also hear too often that the government is “subsidizing” or “providing a rebate” to these negatively geared property investors. It is a tax deduction for genuine out-of-pocket expenses incurred in generating a taxable income, not a subsidy or a rebate! The terms are not interchangeable and in fact have very different definitions..

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    1. Hi Helen, no tax breaks for profits, just a removal of deductions for losses! Yes you’re right, it’s an ill-thought-through policy, hence our fight against it. We do hope it’s never enacted.

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  20. Totally manipulated material – lies and deceit. Publish this? I think not. Only complimentary or soft arguments. Keep up the good peddling if the great rort that NG and discounted CG tax means to the Commonwealth or more so to the RE industry… scam!

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    1. Hi will publish, yes we do publish both sides as well as clear information that supports and proves our position – this policy is not a good one and represents extreme risk to our economy. And we’re not the only ones who think so!

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  21. Buying a residential property as your principal place of residence is exempt from capital gains tax, and also the asset is not assessable for Centrelink purposes. Why doesn’t the government go after the concessions afforded to home owners in the spirit or ‘improving affordablity’? Because it’s political suicide that’s why! The ideal of owning your own home is a big part of our cultural identity. Far easier to make the investors into the bad guys, it is a political game to win votes nothing more.

    On another note, I have a question of those real estate professionals who run this site, am I wrong or was the CGT discount on investment properties bought in as a replacement for loan splitting provisions being abolished? The timing of these two events appears to be too close to be a coincidence. In which case, if the CGT discount is ever to be abolished, would the loan splitting provisions be reinstated? (e.g. ability to shift total liability % between principal residence / investment in line with fluctuations in property values). Just interested to know your take on this.

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  22. You should mention the Labour website comments. They say that the loss will be offset against the eventual
    capital gain.Points –

    1) So stupid Labour is not actually abolishing negative gearing acording to its website.
    Its only quarantining negative gearing until the “gain” upon sale year.
    2) Is the negative gearing loss this year available to be offset against a profit next year. No comment from stupid Labour on their website.
    3) Why do the stupid Labour Party state the “eventual capital gain” . In some years say Collingwood
    Park it took 9 years from 2006 to 2015 to regain the sale value from 2006.The bastards.

    Nobody on radio is getting this message out.

    Please advise your thoughts

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    1. HI David, quite right, there has been little discussion in the media about the finer details of the policy – details which actually do the opposite of what labor is promising. By allowing the deduction but just not against wage income, the policy effectively slices and mum and dad or young investors who don’t have the cash flow out of the market, while making it easier for the wealthy to amass even more properties. Some have described the positioning of the policy as deceitful – when you consider it carefully, it’s easy to understand why this would be so.

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