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The Great Big New Housing Tax ...
05-12-2019, 07:15 AM
Post: #1
The Great Big New Housing Tax ...
… isn't very big at all, or so says Treasury documents.

Quote:The Coalition’s claims that property prices will definitely fall under a Labor government are inaccurate, the federal Treasury has said, in an extraordinary rebuke to the incumbent government.

Documents obtained by the ABC under a freedom of information request reveal Treasury disagreed with the government’s claims that Labor’s negative gearing policy would lead to price falls for all homeowners.

The Coalition has told Australians that Labor’s policy would be like a “sledgehammer” for the housing markets.

However, Treasury wrote in the documents: “The … statement is not consistent with our advice.

“We did not say that the proposed policies ‘will’ reduce house prices.

“We said that they ‘could’ put downward pressure on house prices in the short-term depending on what else was going on in the market at the time, but in the long-term they were unlikely to have much impact.”

The federal Treasury was responding to a fact check request from the former Minister for Finance, Kelly O’Dwyer’s media team.

Her media team wanted to fact check future claims that Labor’s policy to limit negative gearing benefits would “reduce house prices”.


Wait – what is Labor’s policy, exactly?

Negative gearing is a tax arrangement where the rental income on an investment property is less than the outgoing costs like mortgage repayments. Negative gearing benefits allow the investor to offset the loss-making investment against their income tax bill.

Negative gearers generally bet on the likelihood that their property will raise significantly in value so they make a profit when they sell.

Labor wants to limit negative gearing benefits to investment in new dwellings, but current investors’ arrangements would be grandfathered.

Labor argues this will take some of the sting out of Australia’s expensive housing market by encouraging investors to invest in newly built homes, and will open up the property ladder for first home buyers.

But the Coalition government has argued it will prompt landlords to raise rent or exit the housing market entirely, which would take too much wind out of the property market’s sails.

So why does Treasury disagree with the Coalition’s statements?

According to the documents obtained by the ABC, Treasury forecast that house prices “could” go down, but that Labor’s policy manoeuvres were unlikely to have the long-term impact predicted by the Coalition government.

The majority (90 per cent) of taxpayers don’t use negative gearing. And according to Grattan Institute researcher, Danielle Wood, limiting negative gearing benefits will help the government’s budget bottomline.

In fact, the Parliamentary Budget Office predicts Labor’s policy will raise the government $32.1 billion over 10 years.

Shadow Treasurer Chris Bowen responded today by describing the Coalition as a “desperate government that will say and do anything”, and argued that this is the “latest in a long line of corrections to the dishonest scare campaigns by Josh Frydenberg and the Liberals”.

Frydenberg last month described Labor’s policy as its “big new housing tax”.

“Everyone who owns a home will see it be worth less, and under that policy, everyone who rents a house will end up paying more,” the Treasurer said at the time.

The elected official also quoted Property Council of Australia research to describe Labor’s plan as “economy wrecking”.

“The findings show that not only will Labor’s housing taxes not work as they claim, but they will have the opposite effect – driving down new housing supply and construction.”

https://au.finance.yahoo.com/news/treasu...51757.html

My daughter has bought an investment property. It is a two bedroom home unit at Kingswood, near Penrith. She bought it to provide housing for her eldest who is on a disability pension for a genetic disorder. Her finances are a bit precarious - she's a nurse and the family breadwinner with a sizable mortgage on her own home. The second mortgage is an interest only loan and is negatively geared.

I am reassured by this article. Grandfathering of Labor's proposed legislation will ensure that there will be no disruption to this arrangement. Nothing about it is retrospective.

Libertarians are like house cats. They are convinced of their fierce independence while utterly dependent on a system they neither appreciate nor understand.
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05-12-2019, 08:25 AM (This post was last modified: 05-12-2019 09:21 AM by maxhr54.)
Post: #2
RE: The Great Big New Housing Tax ...
Paul keating abolished negative gearing.
then bought it back.
Why? Blush
the 'top end of town' can still negatively gear
but only on new properties
chinese investors buy new places but keep them empty
no dirty drug crazed drunken tenants with cats and dogs defecating on the carpet
like buying a new car and keeping it the garage .

If i recall keating bought negative gearing back because the supply of rental properties dried up?
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05-12-2019, 10:26 AM
Post: #3
RE: The Great Big New Housing Tax ...
Quote:Warri:

“We said that they ‘could’ put downward pressure on house prices in the short-term depending on what else was going on in the market at the time, but in the long-term they were unlikely to have much impact.”

Well if it's unlikely to have much impact why are Labor so determined to to abolish it?? House prices are already falling just on the scare of it.

The 'big end' end investors story isn't right either, the big majority of neg. gearers are people in the position Warri and I were in when we used it. Working people taking the only chance of procuring some real estate for their future. Mine was an investment with the prospect of becoming my principal residence on retirement. I wasn't 'big end' investing, I was skint after paying it off. It was my only asset at the time.
Labor's agenda in this is a wolf in sheep's clothing. It looks to me to be an own goal. Stopping 'working strugglers' having a chance to accumulate a nest egg seems counterproductive to me. Many of them will now find it harder than ever to acquire a home because Labor's insistence on the banking RC has forced the banks to tighten up lending rules and the deposit has risen beyond the reach of many.

Those high cost appartments that the Chinese were buying up are not the kind of properties a young couple would be looking for to raise a family in.

Also, no investment properties being built means a drop in building construction jobs ... doesn't it? Or is the intent to extend the urban sprawl? Are the Feds going to stump up with the additional costs of also extending public transport to the further and further out commuters?

None of it makes much sense to me I'm afraid but there's definitely an agenda. What it is bears thinking about 'cos I'm betting the bridge on it not being as simple as made out, or else is so bloody stupid that it will be a disaster.

Quote:If i recall keating bought negative gearing back because the supply of rental properties dried up?

Yep. But Keating is only 'god' when he doesn't say or do anything that the current bunch of pixies don't want the public to hear about.

What he says is 'cute' but what he did is ignored when it suits them.

Something more afoot here than an appeal to 'the fairness' of neg gearing.
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05-12-2019, 06:34 PM
Post: #4
RE: The Great Big New Housing Tax ...
Quote:Well if it's unlikely to have much impact why are Labor so determined to abolish it?? House prices are already falling just on the scare of it.

Are we talking about negative gearing or capital gains tax income?

If it is negative gearing, as far as I know this is not being changed for properties that are being rented out. If you rent out the beach house for a certain number of days per year, you can claim expenses on your taxation return as always. I'm not sure whether you can do this for a property that is kept empty because it is not a source of income.

Capital gains tax is not being abolished either. It used to be that capital gain on a property was subject to taxation when sold (after inflation was taken into account) in the same way that capital gain on art works would be. Then, to help build more rental housing stock a discount was applied to housing. If the property was not sold within 12 months the capital gain was discounted to 50%, cutting the CGT in half. Labor is proposing to halve the discount i.e. tax will be calculated on 75% of the capital gain. This is still a 25% discount not available to other investments. Existing properties will be grandfathered and will still get the 50% discount.

https://www.ahuri.edu.au/policy/ahuri-br...gKXTvD_BwE

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05-12-2019, 06:57 PM
Post: #5
RE: The Great Big New Housing Tax ...
I had to pay cap gains on my investment house on the Goldy, from memory 15 grand on 100 K profit so not huge. But I'd held it for 10 years renting it out so can't recall if that was a factor, I just lobbed the paperwork to the accountant. Blush

The original intention was to move into it as principal residence for the required time but that plan got shelved.

I lost interest in the legislation changes when I was out of the game.
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05-12-2019, 07:25 PM
Post: #6
RE: The Great Big New Housing Tax ...
i think joycy has a point about the impact on prices.
the way the abolition of negative gearing was sold was that it would give young battlers a chance to own their first home.
by forcing out greedy investors gobbling up all the available stock that forced up prices.
but the government and the banks have already acted to cool down the market.
clearly that is working, -prices have fallen.
and ScoMo has announced a plan for first home buyers allowing them to buy with just 5% deposit.
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05-12-2019, 10:12 PM (This post was last modified: 05-12-2019 10:12 PM by dbeyat45.)
Post: #7
RE: The Great Big New Housing Tax ...
(05-12-2019 06:34 PM)Warri the Wombat Wrote:  
Quote:Well if it's unlikely to have much impact why are Labor so determined to abolish it?? House prices are already falling just on the scare of it.

Are we talking about negative gearing or capital gains tax income?

If it is negative gearing, as far as I know this is not being changed for properties that are being rented out. If you rent out the beach house for a certain number of days per year, you can claim expenses on your taxation return as always. I'm not sure whether you can do this for a property that is kept empty because it is not a source of income.

Capital gains tax is not being abolished either. It used to be that capital gain on a property was subject to taxation when sold (after inflation was taken into account) in the same way that capital gain on art works would be. Then, to help build more rental housing stock a discount was applied to housing. If the property was not sold within 12 months the capital gain was discounted to 50%, cutting the CGT in half. Labor is proposing to halve the discount i.e. tax will be calculated on 75% of the capital gain. This is still a 25% discount not available to other investments. Existing properties will be grandfathered and will still get the 50% discount.

https://www.ahuri.edu.au/policy/ahuri-br...gKXTvD_BwE

What is this capital gains tax income of which you speak?

The 50% discount was designed to encourage investment ... it was a carrot and all parties agreed. Why is it a bad idea now?

The capital gains reduction will also discourage share ownership in exactly the same way as the franking credits policy mistake.

Tailoring the world economy around the climate cult's demands is akin to demolishing your house to avoid the risk of it catching fire one day.
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05-13-2019, 08:40 AM
Post: #8
RE: The Great Big New Housing Tax ...
(05-12-2019 10:12 PM)dbeyat45 Wrote:  
(05-12-2019 06:34 PM)Warri the Wombat Wrote:  
Quote:Well if it's unlikely to have much impact why are Labor so determined to abolish it?? House prices are already falling just on the scare of it.

Are we talking about negative gearing or capital gains tax income?

If it is negative gearing, as far as I know this is not being changed for properties that are being rented out. If you rent out the beach house for a certain number of days per year, you can claim expenses on your taxation return as always. I'm not sure whether you can do this for a property that is kept empty because it is not a source of income.

Capital gains tax is not being abolished either. It used to be that capital gain on a property was subject to taxation when sold (after inflation was taken into account) in the same way that capital gain on art works would be. Then, to help build more rental housing stock a discount was applied to housing. If the property was not sold within 12 months the capital gain was discounted to 50%, cutting the CGT in half. Labor is proposing to halve the discount i.e. tax will be calculated on 75% of the capital gain. This is still a 25% discount not available to other investments. Existing properties will be grandfathered and will still get the 50% discount.

https://www.ahuri.edu.au/policy/ahuri-br...gKXTvD_BwE

What is this capital gains tax income of which you speak?
I dunno. It was a brain fart or perhaps I meant that when you sell something for a profit, it is considered to be income for tax purposes.

The 50% discount was designed to encourage investment ... it was a carrot and all parties agreed. Why is it a bad idea now?
Not investment so much as a stimulus to new housing. It favours housing over other forms of investment, unless the discount is applied to all capital gains. This is an adjustment, not an abolishment, and frees up some funds for other purposes.

The capital gains reduction will also discourage share ownership in exactly the same way as the franking credits policy mistake.
Are you sure that investment in shares is subject tp capital gains? Income from shares is taxed annually but I am not aware of capital gains tax on shares when you sell them. If they are subject to CGT, is the rate discounted the same as property? I have no idea and haven't time today to research.

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05-13-2019, 09:32 AM (This post was last modified: 05-13-2019 09:45 AM by dbeyat45.)
Post: #9
RE: The Great Big New Housing Tax ...
Warri said:
Quote:Are you sure that investment in shares is subject tp capital gains? Income from shares is taxed annually but I am not aware of capital gains tax on shares when you sell them. If they are subject to CGT, is the rate discounted the same as property? I have no idea and haven't time today to research.

Capital gains tax does apply to share profits. Actually, it should be described as a tax on capital gains rather than a Capital Gains Tax because it is not a tax entity. Rather, it is a tax applied at your marginal rate after the gain has been added to your other income. There is no specific rate of CGT.

When I was regarded by the ATO as a 'share trader' (mostly unsuccessful), I could offset capital losses against capital gains in the tax year. Now, I must pay CGT on profits (discounted by the 50% if held > 12 months) but capital losses can only be carried forward and applied against future capital gains.

Clear as mud?

This is how my tax calculation works: From an Earlier Post

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05-13-2019, 12:50 PM (This post was last modified: 05-13-2019 12:51 PM by Warri the Wombat.)
Post: #10
RE: The Great Big New Housing Tax ...
I understand. So from now on your discount would only be 25% instead of 50%?

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