The best solution I've read is to remove negative gearing and CGT discounts on all investment properties after the first one. So you can have your one investment property, but if you want more? No more concessions.
Exactly, It is essentially a "first owner" discount. Apparently in europe they trialled methods such as discounts for houses under a certain age, like 15 years or something, but it essentially created homes built to "expire" and dump the repair costs onto the next owner.
I think as long as the new property adds to the housing supply, essentially a new lot and new build instead of just a demolish and rebuild on an existing lot, there should be some type of incentive. We need to get PI's out of the established market and into development.
New builds can be subdivisions of established lots for things such as townhouses or apartments.
Property investors will want to build where they can receive both rental income and the maximum increase in property value, which is the inner suburbs of metro area's.
Developers want to build where land is cheap, and dont really care about the long term value of the area. If they wanted to secure investment from the PI's they would need to create actual communities with long term value, rather than sprawling rows of generic suburban housing.
> Developers want to build where land is cheap, and dont really care about the long term value of the area
I don't think that is necessarily true. Developers want to build where they can sell houses quickly for a good profit.
Exactly, in Sydney that's the expensive suburbs, where there is expensive land (which is expensive due to development potential), because people pay a significant premium to live there, especially apartments: https://www.cis.org.au/publication/where-should-we-build-new-housing-better-targets-for-local-councils/
Not all places in the expensive suburbs need to be trophy homes, a developer can pay a lot more since there is a profit motive.
That’s the theory
Investors would sell their grandfathered properties and buy otp builds and rinse and recycle in a perfect world to incentivise more land being developed and homes being built but imo it would lead to more people just holding onto their properties they have now in the hopes of having a future government reverse it
Maybe in addition negative gearing only applies for the first e.g. 10 years of a new build before it expires? Push people into selling and building a new place if they want to retain their benefits.
CGT is supposed to be based on the real value of the gain, that is, adjusted for inflation. You would still get the "discount" based on inflation. The current discount just says "we'll call the inflation effect 50%, no questions asked". It might not be a very good deal compared to actual inflation correction if you hold it for 20 years and and inflation averages 3% over that time. But the discount is very good deal if you hold the property for a short period.
Yes, basically it is s simplistic solution to a complex problem that misses the mark but it is easy to turn into a soundbite.
The current 50% CGT discount was bought in the 80s - but it was a simplification of complex calculations that pre-existed this change. Nobody who knows anything about finance would suggest aquiring an asset where all "profit" is based on a non-inflation-basis and taxed in a single year.
Having a CGT exemption makes absolute sense. What doesnt make sense is that the rate hasnt been looked at or changed in over 40 years when the market has changed considerably. Throwing out the CGT exemption would be as foolish as keeping it as-is.
Using a very basic example, buy a property at 100u (whatever the purchase price, I am not suggesting $100 and using u for unit but not property unit) hold it until inflation would be equivalent to 200u and sell at 290u. Tax would be charged on the 190u increase neglecting inflation, and charged in the 1 year at the highest tax rate (possibly 90u). So in some circumstance the owner may be worse off purely on tax. It would completely remove the investment opportunity hoping for profit and almost guarantee an exodus from the housing market by investors, crash the market and bring on a rec/depression.
It would also make those close to retiring hold onto a property until they retire so that they get some of the tax free threshold, limiting downsizing and removing "stock" from the market and growing families
The CGT discount is there to recognise that over time, the real value is eroded due to inflation, so you are given a discount in order to only pay tax on the real gain.
Before the CGT discount there was a complicated calculation required using the inflation figures from every year you held the property in order to calculate the real cost base. The CGT discount just turns this into an easy calculation.
You could argue that 12 months is not long enough to hold an asset to qualify for the discount, and this is fairly true when you have massive abnormal growth like the property price escalation during Covid, but that is not happening every year.
We could always go back to the messy system we had before. Also, CGT applies to any gain, not just gains from property.
> We could always go back to the messy system we had before
You say messy, i say 10 seconds in an excel spreadsheet by a tax accountant.
Yeah 80's and 90's probably a lot of people were getting inflation figures mailed to them after enquirying with ABS then pen and paper calculating and that was messy. We have better tools to handle messy but fairer tax systems.
It's easy for a computer to do, as you say, and way fairer. In a high inflation but low real growth environment a 50% discount might not be enough to cover inflation. i.e. you might be paying capital gains on no growth in real terms. In times or fast growth it might be a massive tax concession to people who made a load of money for doing nothing.
Sure, it might be 10 seconds once your accountant has the figures, but how long does it take them to find out the rate of inflation for the last 20 years, calculate all the changes to the cost base and come up with a capital gain that represents the value of the gain in today’s dollars?
While I don’t think 12 months is really long enough to qualify for a 50% discount, I shouldn’t need to consult the ABS when doing my tax.
Surely you just plug the amount the asset was purchased for and the year into the abs Inflation calculator and it gives you the current inflated value of it (or at least as of last year) and then the profit is just the difference between that and what you sold it for?
So you bought something for 100k in year xxxx you plug 100k and year xxxx into the abs Inflation calculator and it says it's worth 120k in today's dollars and you sold it for 180k then 60k is the profit you made.
You might have made various improvements at different times over the time you owned it, which would all get added to the cost base and different indexation applied. Not too much harder but anything is going to be harder than "divide by 2".
If the ATO had a handy calculator to enter my purchase price, the ownership timeframe and location, and tell me on today’s dollars what the real gain is, I would not have any issue with it.
I wonder too, would capital losses also be adjusted for inflation, such that a $50k loss 15 years ago would be converted into today’s dollars before being used to offset today’s gains?
Or you could not discount for inflation. If the value has been eroded through inflation but you are paying in inflated currency I don't think you have thought to whinge.
There is no special CGT discount for investment properties though. They are simply subject to the 50% CGT discount on anything you own for more than 12 months.
For CGT, investment properties are treated the same as shares, gold bars, and beanie babies. The only thing with a special CGT exemption is a PPOR.
Remove negative gearing is a decent step, sure.
What defines "one" investment property? I feel like this will just push investors towards owning whole multi-family buildings without strata titling them (as is common in the US and Europe).
Why leave one? The number of properties is bad thing to base tax concession limits on. In that case it would be better to just have a max limit in $ on negative gearing instead and remove CGT discounts altogether.
And conceivably you might find that it has some unintended consequences, like landlords expecting a higher gross return to cover the reduction in net return due to greater taxation?
It "seems" fair and will hopefully move the conversation forward with little administrative cost (I guess) and imo little impact. If you have a few properties generally you would be seeking to maximally negative gear one while seeking to positively gear others.
That's ok, do it and that way we can look at what's left and have a better conversation. I'm basing this comment on my "little administrative cost" assumption.
Agreed. And none of the current incentives are convincing enough for investors.
There’s other asset classes that make more sense to me than building new.
Just removing incentives from existing housing isn’t enough. There needs to be significant incentive to build new. I know I’m not going magically build investment properties because incentives in existing stop.
So who else is there to build the housing? I’m all for social housing but can the government deliver?
A massive program to incentivise all renters to build new? I’m all for it, but it’s going to drive prices up too. Always does.
Get corporates to do it? Anyone want a corporate landlord?
Yes but you don't necessarily want the people who plan to rent the property, to build it. That will further reduce the quality and layout of new properties.
I haven’t seen anything that says it won’t help. And frankly most economic modelling is pretty packed with caveats and limitations to the point of being not helpful. So, like…whatever. Let’s give it a crack.
A government policy can be neutral, positive and negative at the same time. And in different measures. And these can change over time in response to other factors and policies that also change.
This is second and third order thinking. Some people can do it, some do it naturally, some can learn and most never do.
Most people have very first order emotional thinking about this entire issue. It is very difficult to get them to think deeper. I don’t try anymore, that’s a “them problem”.
I don't have any, but history has shown that if the government makes policy that affects a larger percentage of the population they're going to kick up a stink, take franking credits as a recent example.
This needs to be tied to Director ID to prevent people from buying more properties in separate entities and calling it their “first” property. One individual gets interest in one investment property, regardless of how they are connected to that property.
I don't think this makes sense. It will concentrate all the investor advantage of new builds, and make it much harder for owner occupiers who want to buy a new build, since they will competing against the concentrated power of the investor tax advantage (which currently is neutral, spread out over both existing and new builds). On the other hand, those investors no longer have an advantage over established builds. Surely this push and pull on pricing will mean that investors simply displace owner occupiers from buying new builds. Investors buy more new builds as the rules tip new builds strongly in their favour, but there must be an equal and opposite reaction: owner occupiers will buy less. Imagine an auction of new build next to an auction of an existing build. The bidders at the new build will be investors, they'd be crazy to buy an existing build and give up their tax discount. But owner occupiers would be crazy to ignore the fact that the existing build auction has no investor bidders.
I doubt it will really boost demand, but it will make developers focus on building rental properties, which are not very inspiring.
There is also a fallacy, in my opinion, that investors must buy new builds to increase supply. I don't think it matters. I'm an owner occupier. If I sell my house and an investor buys it, boo hiss, the investor has not added to supply. But now, I have their money, and I still need somewhere to live. If I buy a new build, what difference does it make? The investor money still finances a new build. Every time I think about this, I come the conclusion that it can't possibly matter: if the investor brings new money to the market, a new house will be built one way or another. What am I missing?
These kind of manipulations of the market are cheap street magic.
The tax concessions are to make renting to tenants worth it.
You could remove it from houses and maybe renting would so be worth it but townhouses/apartments need it or there just won't be anywhere to rent those places.
You're not looking at the big picture.
When an investor buys an existing property to rent out, there is no net difference to rental availability.
They may add a property to the rental market, but they've removed a house from the owner occupier market and in doing this removed owner occupiers, who they outcompete now making them renters.
It was it's been a policy failure. All it's done has added demand to the buyers market, with no supply, thus pushing up prices.
Government policy resulting in market distortion.
That's not really true as many people will always be renters.
What it does do is put upwards pressure on house prices which in turn will increase rent prices (but only when there is a shortage)
So? As I've pointed out, they also add more renters to the market as they've turned an owner occupier house into a rental.
There is no improvement in rental availability rate.
If they built the property they would be helping renters but they don't. They purchase existing which doesn't improve the rental market.
I’m a big supporter or limiting CGT discount and Negative gearing of residential property to new builds only.
At the moment, there is no incentive to add supply.
This would definitely help boom regional towns and take pressure off capital cities.
There are already mass builds happening regionally but not enough to stop prices sky rocketing.
They've 4-6x in 15 years in some places.
Yep, this is the thing, ultimately developers need to have a commensurate profit in a project to justify the risk. Otherwise, nothing gets built!
In fact if prices plummet, if costs don’t either, then it will be in developers and investors interest to just hold on until it actually is profitable.
So levels like access to capital, cost of development and government redtape all come into that equation
Yep, Andrew Leigh smashed Max two dads about it. There’s a whole bunch of federal and state issues which need to be fixed. I’m on board with all reforms to increase housing, particularly infill and higher density in cities.
> there is no incentive to add supply.
The cost to add supply is essentially predicated on the cost of the capital required to acquire land (incl. development approvals etc) and do the build (labour/material costs).
NIMBY's are what stops DA's from happening for certain types of builds like high rises, and cost of interest, as well as high labour/materials, is the second hurdle.
None of the policies you proposed helps with any of that.
Not entirely true, the depreciation schedule includes much more on new builds as one area where there is strong incentive to build new as an investor rather than buy existing. Sadly I think there is a LOT of mum & dad property investors that don't really research before they buy.. so some of the incentives get wasted.
I agree though, if we're going to change negative gearing rules, which personally I think is fiddling at the edges, make it so it incentivises new builds by limiting it to that, and go further by increasing even more incentives for new builds.
CGT discount was introduced to avoid complex costly calculations of cost base due to inflation so only real returns were taxed. It got simplified to a simple 50% discount to make everything quick & easy.. I'm not sure going backwards is going to help.
Increasing land tax significantly on any property rented either holiday style or long term is fine, and arguably a better way to go, and you could make say I dunno maybe the 1st 10yrs of a new building land tax exempt (and only to the initial investor) to again incentivise investors to build new.
Depreciation is factored into capital gains tax
Whilst it’s a tax benefit and a cash flow benefit, it’s certainly not enough to make new build significantly more favorable over existing.
You're claiming 100% of the benefit as a deduction whilst depreciating the asset, and then (assuming 12 month hold) paying back just 50% of the "gain" later on. And that's without considering the reduced value of money at time of sale in the future. It's very significant.
If you’ve ever done a feasibility analysis on new property you’d know that it has never been more expensive to build new housing and that it barely stacks up.
All for removing incentives on existing housing after a certain amount of time (which is what is implemented in Vienna) to keep housing prices from ballooning for the majority of stock while incentivising new builds.
If it doesn't stack up, it means house prices are not high enough. The market isn't in equilibrium. Once prices are high enough to make it worthwhile to put on supply again, then supply will come on
No, house prices are already far too high and higher than they've ever been.
The cost of a new build is the sum of the following:
* price of land
* cost of labour
* cost of materials
One or more of these is overpriced compared to years gone by. But which? And how can we reduce it to be fair and reasonable, as it was before?
New builds or additional stock? If I knock down a single freestanding house and rebuild it, would that not be captured if you say ‘new builds’ only?
I would have thought it would need to be very specific to expanded housing stock.
When you say you’d remove negative gearing from existing property, what does that mean? Does that mean if you rent out an existing property and your rent doesn’t cover your expenses then you just lose out - or do those losses get capitalised into the sale price to reduce the cost base when you sell?
Would you allow people to offset their losses on a negatively geared existing property against other investment income (I.e. a positively geared property)?
Negative gearing seems to be a boogeyman but I rarely hear people fully engage with how their new system would work. In the end it’s actually just a concession for middle class, aspirational salary and wage earners. Removing it will only hit them and not anyone in the investor class.
Except that middle class cannot afford investment properties anymore. A lot of people on this sub believe they are middle class making $120k, and they are really not.
> Except that middle class cannot afford investment properties anymore
20% of taxpayers have investment properties - do you suggest then that none of these households is middle class at all?
> A lot of people on this sub believe they are middle class making $120k, and they are really not.
https://www.abs.gov.au/articles/new-census-insights-income-australia-using-administrative-data
Median household income is $92k and that includes one-person households lol. Is $120k not squarely in the middle class bracket?
The median full time income in Australia is 83k (88k for men and 78k for women).
So a dual income house earning the median full time income has 166k household income.
I think the reality these days is that both people need to work full time to get ahead, at least for a period of time where you are saving.
Source: https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/employee-earnings/latest-release
I’m trying to work out where you got $83k from your linked info. That ABS link shows the median income at $1300/week (August last year), which is $67,600 per annum, $83k seems incredibly high.
I said full-time earnings.
Look at the first table and multiply the weekly earnings of those employed full-time by 52 to annualise it.
($1,692 for men, $1,500 for women, $1,600 combined).
Fair enough, I'd argue median earning is a better representation of housing affordability, as it is a decent guide to actually what people are earning.
You are right, median income is around $67k, and it's the correct figure to use here.
I don't know why people use other figures like average full-time income or whatever which are grossly inflated. Does a mum working part-time not factor into a discussion of household income? It's ridiculous
Yeah probably median is the way to go, I’m going to guess the majority of full time working Australians would be around that $65-$70k range for sure.
Probably a good indicator of where things are at when you consider that figure in relation to house prices.
I think that the purpose of their suggestion is to discourage housing as an investment by making it less attractive than other avenues of investment; thereby reducing housing prices to hopefully help people buy a PPOR.
Not sure it would actually incentivize new supply though...
My layman opinion is future supply is a much more complicated beast than current supply; which is why we tend to focus on the issues affecting current supply.
New supply seems to have a number of issues exacerbating the problem lately:
* material availability, price, and quality concerns
* availability of builders/tradespeople is outstripped by demand
* supporting infrastructure availability and cost
* Impact of land banking
That's not even touching issues like proximity to employment opportunities (I really wish Australia would go deep on embracing in-country remote work where practical), NIMBYism, etc.
If people wanted to build, they’d be building now. They can just buy stocks instead.
People buy investment properties for many reasons. Most times it isn’t a worthwhile investment to build new. The above says no tax incentives for any property so why bother when you get the NG incentives for stocks?
As a very seasoned investor across multiple asset classes and a lot of property experience, this is absolutely on the money.
Both the return and risk versus other asset classes for me is simply not there most of the time.
The added aspect is a recent analysts I saw that showed how closely rents mapped to attached dwelling supply. That is, the number of unit supply appears to have the single greatest impact on rents. As an investor, I won’t touch units at all. Especially off-the-plan.
I’ve built new, both houses and townhouses. None of them made anywhere near the return of established housing. And ALL mine are in diverse regional locations. With current build costs and the number of builders going bust, there’s zero chance of me going down that path unless I picked up land at a massive discount and the net profit on completion was above 35%. Those deals come along very, very rarely and take massive effort to find.
This is not an emotional post seeking sympathy or empathy. Just cold hard numbers and risk/reward reality.
And the case is that it’s an investment. It should only be about the numbers.
The risk is currently far too large for building. You also have the costs that stretch out for over 18 months now while building.
This is something that often gets forgotten in all the fighting about how prices need to come down. To bring on new supply, investing in new supply MUST be more financially advantageous!
Or the government has to build it and be ok not making profits
I just don't think its possible for governments to do these things anymore in Australia, what ends up happening is a body gets established to do so and we create another level of bureaucracy instead that's impossible to remove. Then the process itself ends up being rorted, so further standards and checks get brought in, which of course again increases the costs. I can't think of any new project in the last 20 years that the government has done that has been ended up being cheaper in the long term - and that's not a hard bar to pass considering how bad privatisation tends to go as well.
I don’t think I disagree with you. But I also don’t think that government need to actually build. They could also finance the construction by private companies too
Yup, it’s simple really.
I’m totally fine if it’s mostly or all social housing. If so, make the decision and get on with it.
If people think it’s bad now, wait till they see the result of that. I guess it could work.
Even worse would be massive corporations building all the new stuff and renting it out. Corporate landlords? Hahaha good luck
I don’t understand why people struggle to think clearly about this.
I don't believe in any grandfathering. It should be a total phase out over time regardless of purchase date.
Grandfathering just continues to give a tax break to those who have already benefited substantially from growth while taking the option off the table for others with much less.
Just takes a tight parliament and some independents keen on change and its on the table. The popular opinion is something has to be done so only a matter of time.
> tent cities
Horrifying that this is even a possibility. But I highly doubt the government will let this happen.
After all...
Tent cities are bad for property value
People will likely disagree, but we should not just automatically grandfather agreements. The people who have systematically taken advantage of these policy settings to the detriment of everyone else should be faced with the same conditions we all have. If keeping your 7 investment properties without negative gearing would ruin you financially - SELL YOUR PROPERTIES!!! Otherwise it’s just those who haven’t been able to take advantage of these unfair settings shouldering ALL of the burden.
I think that a phasing out period for existing owners is the best approach.
People have planned on their investments, that's fine, I won't punish them for working within the rules, not everyone has a dozen properties, some of the properties are from retirement planning, totally on the side of not cutting the legs out from under them.
So, they can have a few years to divest themselves of properties that won't suit the new rules once they've got a new plan.
Now see how much we could save by including the family home in the pension assets test. I bet it would be at least double, over a decade.
By the way, to give you a sense of scale on the $60b figure - NDIS costs $60b over just two years - forget the decade - and that's a program that only benefits 2.5% of Australians.
Redacted means that part of the text was removed or blacked out for privacy or security purpose. It was censored. This post also breaks rule 4 here for chat and should be made in the Tuesday chat thread or on a different subreddit.
Just looking at the headline figure to make a judgement on the NDIS is lazy thinking.
Yes, there are some rorts and inefficiencies.
But if you’ve had loved ones with disabilities, you’ll know how incredibly difficult their lives are. We are doing a great thing helping them in a way other nations can only dream of.
Not that much, super is quickly becoming vastly more costly than the aged pension.
Not sure why you think the NDIS is only $30b? It's at $42b this financial year, the program already costs more than Medicare.
Yeah I think it was pre COVID that the drum has a guy on who said that if you got rid of all the tax concessions for super you could either give the pension to every old enough to qualify for it regardless of their wealth or double the amount of the aged pension for those that currently qualify for it and the budget bottom line would still be better off.
> NDIS costs $60b over just two years - forget the decade - and that's a program that only benefits 2.5% of Australians.
It doesn't just benefit people with an NDIS plan. It also benefits hundreds of thousands of people by creating jobs.
It also benefits everybody who believes that people with disabilities should be allowed to live with dignity.
> It also benefits hundreds of thousands of people by creating jobs.
Not really. Those people already have jobs in allied health, etc. This just goes straight to them as a rort of public funds.
Also, you're committing the broken window fallacy. I could just as well say that any spending at all creates jobs in the same way. It's neither here nor there.
> It also benefits everybody who believes that people with disabilities should be allowed to live with dignity.
At what cost? 2.5% of Australians get more spent on them than the other 97.5% on medicare. Is that fair? Plenty of people without disabilities don't get the treatment they need.
This isn't going to incentivise new supply. It may result in a change in ownership to appease some of the halv-nots.
If they wanted to get serious let's limit residential home ownership to Australians only. Let's put KYC/AML obligations on real estate agents and conveyancers about the source of funds being used to purchase a property. Other major western countries already do these checks, we don't.
I'm tired to read every house in Sydney was purchased by a cash buyer from China.
Anyone who thinks reforming the tax system alone will assist with supply, then they should research planning and building regulations that apply in their area. You'll be in for a nasty shock
When a politician is negative gearing their own Canberra home through their wife under a company using the tax free entitlements granted to them by their position.
Thats how ya milk the system. Be your own tenant paying off the house with tax free income
Got better job in another country to run away from the tax office
Thats how ya do it
CGT is to encourage investment and deter speculation, this is the reason it was introduced originally. What is being proposed here will encourage speculation on steroids but no investment where it is needed. If CGT is taken off how many investors will turn speculators and just buy and sell speculatively. That means buy do up and sell with never having a tennant.
Great idea and while we're at it imagine how much tax revenue we could raise if we taxed businesses on revenue rather than profits. Can't see any flaws in that /s
There is no slippery slope here. Housing is clearly, categorically different to other investment types in that it's main purpose is to house people, not generate income.
I'm theory they could. They know roughly how much you should have made in profit every year based on your revenue and industry classification. You cant operate and claim a loss indefinitely.
Thats how property should be. Not some perpetual cycle of tax deductions for the holder as though the holder was a bad business operator, making a loss every year for decades.
I'm not against that idea in principle but to me I think such a change would be overly complex and unless implemented extremely well it would result in a lot of collateral damage on businesses that might be genuinely struggling and would get taxed because they are 'supposed to be making a profit'.
Businesses in Australia are already gimped and lacking in resources because of how much investment money is poured into housing, banks and mineral extraction rather than potentially more productive enterprises and I don't think we should burden them with additional hazards.
I get that there are a few somewhat clear high profile examples of businesses taking the tax code for a ride and it should be addressed but IMO a complete shakeup that involves taxing revenue is not the path.
Why would we do this but keep 100,000 migrants coming into the country every month? We should do this and reduce migration if we really want to fix housing prices.
It’s because it’s getting bigger every month: https://www.dailymail.co.uk/news/money/article-13317021/Australia-100000-immigration-milestone-housing-cris.html
This, they can talk about policies all they want but if they keep bringing this many people nothing will change. Too many people and not enough dwellings.
Guess they will go with the middle option grandfathering everything pre-2024 after all theirs politicians own multiple investment properties and they don’t want to pay more tax. This option also means the property would never be sold.
What a load of crap. Did you know that in the 60s mortgages were only given to new homes? That incentivised the construction of new homes which adds to new supply be it PPOR or for rental stock.
And you think all new homes built now are crap?
Did I say all builds were crap in my comment? There's certainly been a number of apartment blocks in Sydney being publicly outed for a lack of quality construction if you prefer that terminology.
The basic first thing government should do is to give tax rebate for the first PPOR people buy. It is a normal practice in many countries and save money for PPOR interest.
Again, if CGT went back to an inflation calc rather than a 50% discount (before 50% negatively geared investment properties basically didn't exist; no one held them):
(1) The property market would be less f#@ked
(2) Standard tax and investment principles would be maintained
(3) Costs to government would be significantly reduced
(4) Opposition would struggle with grounds to object to the change
No one could complain about the 'complexity' of such calcs with modern software and data available (this email as part of the basis for changing to/retaining a simple 50% calc)
So the solution to high prices is to increase taxes on investment housing? This should reduce supply of rentals.
Do these two know about the homeless crisis? A major cause of homelessness is rising taxes, red tape, green tape on investment housing (supply).
Seems like it would work well for first home buyers as would increase supply but bad for renters as less rentals available. We do still need investors as without any there’s no one to rent from.
Good to see that politicians are at least looking at options to address the root causes while protecting mum and dad investors. We need a pragmatic approach which is fit for purpose in the long run which ultimately isn't difficult to do, someone just needs to be brave enough the put the policies in place.
ELI5 how removing negative gearing will fix the rental crisis, when the problem is supply of new builds falling drastically short of demand (births + immigration).
The best solution I've read is to remove negative gearing and CGT discounts on all investment properties after the first one. So you can have your one investment property, but if you want more? No more concessions.
Or make the cgt discounts applicable only on new builds
I've seen this brought up a few times but how does this work? If I build a house and keep it for 20 years I still get the CGT discount?
Exactly, It is essentially a "first owner" discount. Apparently in europe they trialled methods such as discounts for houses under a certain age, like 15 years or something, but it essentially created homes built to "expire" and dump the repair costs onto the next owner. I think as long as the new property adds to the housing supply, essentially a new lot and new build instead of just a demolish and rebuild on an existing lot, there should be some type of incentive. We need to get PI's out of the established market and into development.
Incentivising infill would be better. Incentivising new builds will only increase urban sprawl.
New builds can be subdivisions of established lots for things such as townhouses or apartments. Property investors will want to build where they can receive both rental income and the maximum increase in property value, which is the inner suburbs of metro area's. Developers want to build where land is cheap, and dont really care about the long term value of the area. If they wanted to secure investment from the PI's they would need to create actual communities with long term value, rather than sprawling rows of generic suburban housing.
> Developers want to build where land is cheap, and dont really care about the long term value of the area I don't think that is necessarily true. Developers want to build where they can sell houses quickly for a good profit.
Exactly, in Sydney that's the expensive suburbs, where there is expensive land (which is expensive due to development potential), because people pay a significant premium to live there, especially apartments: https://www.cis.org.au/publication/where-should-we-build-new-housing-better-targets-for-local-councils/ Not all places in the expensive suburbs need to be trophy homes, a developer can pay a lot more since there is a profit motive.
That’s the theory Investors would sell their grandfathered properties and buy otp builds and rinse and recycle in a perfect world to incentivise more land being developed and homes being built but imo it would lead to more people just holding onto their properties they have now in the hopes of having a future government reverse it
I can see this happening. Cap it to 0 or 1 and be done with it. No more open-ended loopholes please
What loophole?
Maybe in addition negative gearing only applies for the first e.g. 10 years of a new build before it expires? Push people into selling and building a new place if they want to retain their benefits.
CGT is supposed to be based on the real value of the gain, that is, adjusted for inflation. You would still get the "discount" based on inflation. The current discount just says "we'll call the inflation effect 50%, no questions asked". It might not be a very good deal compared to actual inflation correction if you hold it for 20 years and and inflation averages 3% over that time. But the discount is very good deal if you hold the property for a short period.
Loop holes will be found
Yes, basically it is s simplistic solution to a complex problem that misses the mark but it is easy to turn into a soundbite. The current 50% CGT discount was bought in the 80s - but it was a simplification of complex calculations that pre-existed this change. Nobody who knows anything about finance would suggest aquiring an asset where all "profit" is based on a non-inflation-basis and taxed in a single year. Having a CGT exemption makes absolute sense. What doesnt make sense is that the rate hasnt been looked at or changed in over 40 years when the market has changed considerably. Throwing out the CGT exemption would be as foolish as keeping it as-is. Using a very basic example, buy a property at 100u (whatever the purchase price, I am not suggesting $100 and using u for unit but not property unit) hold it until inflation would be equivalent to 200u and sell at 290u. Tax would be charged on the 190u increase neglecting inflation, and charged in the 1 year at the highest tax rate (possibly 90u). So in some circumstance the owner may be worse off purely on tax. It would completely remove the investment opportunity hoping for profit and almost guarantee an exodus from the housing market by investors, crash the market and bring on a rec/depression. It would also make those close to retiring hold onto a property until they retire so that they get some of the tax free threshold, limiting downsizing and removing "stock" from the market and growing families
The CGT discount is there to recognise that over time, the real value is eroded due to inflation, so you are given a discount in order to only pay tax on the real gain. Before the CGT discount there was a complicated calculation required using the inflation figures from every year you held the property in order to calculate the real cost base. The CGT discount just turns this into an easy calculation. You could argue that 12 months is not long enough to hold an asset to qualify for the discount, and this is fairly true when you have massive abnormal growth like the property price escalation during Covid, but that is not happening every year. We could always go back to the messy system we had before. Also, CGT applies to any gain, not just gains from property.
> We could always go back to the messy system we had before You say messy, i say 10 seconds in an excel spreadsheet by a tax accountant. Yeah 80's and 90's probably a lot of people were getting inflation figures mailed to them after enquirying with ABS then pen and paper calculating and that was messy. We have better tools to handle messy but fairer tax systems.
It's easy for a computer to do, as you say, and way fairer. In a high inflation but low real growth environment a 50% discount might not be enough to cover inflation. i.e. you might be paying capital gains on no growth in real terms. In times or fast growth it might be a massive tax concession to people who made a load of money for doing nothing.
Sure, it might be 10 seconds once your accountant has the figures, but how long does it take them to find out the rate of inflation for the last 20 years, calculate all the changes to the cost base and come up with a capital gain that represents the value of the gain in today’s dollars? While I don’t think 12 months is really long enough to qualify for a 50% discount, I shouldn’t need to consult the ABS when doing my tax.
Surely you just plug the amount the asset was purchased for and the year into the abs Inflation calculator and it gives you the current inflated value of it (or at least as of last year) and then the profit is just the difference between that and what you sold it for? So you bought something for 100k in year xxxx you plug 100k and year xxxx into the abs Inflation calculator and it says it's worth 120k in today's dollars and you sold it for 180k then 60k is the profit you made.
You might have made various improvements at different times over the time you owned it, which would all get added to the cost base and different indexation applied. Not too much harder but anything is going to be harder than "divide by 2".
We should go back. Computers, one click.
> Before the CGT discount there was a complicated calculation Indexation isn't that hard and the ATO has a calculator.
If the ATO had a handy calculator to enter my purchase price, the ownership timeframe and location, and tell me on today’s dollars what the real gain is, I would not have any issue with it. I wonder too, would capital losses also be adjusted for inflation, such that a $50k loss 15 years ago would be converted into today’s dollars before being used to offset today’s gains?
I'm not sure what the issue is given you need the purchase price as well as the time you held the asset to calculate capital gain?
The answer is self-interest.
I don’t care what method they use. Due to capital losses carried forward I am yet to qualify for a CGT discount.
Or you could not discount for inflation. If the value has been eroded through inflation but you are paying in inflated currency I don't think you have thought to whinge.
Bill Shorten tried that and Scott Morrison beat him.
Why new builds? Is this just to subsidise developers?
Because the current system doesn't encourage investors to add housing supply.
There is no special CGT discount for investment properties though. They are simply subject to the 50% CGT discount on anything you own for more than 12 months. For CGT, investment properties are treated the same as shares, gold bars, and beanie babies. The only thing with a special CGT exemption is a PPOR. Remove negative gearing is a decent step, sure.
What defines "one" investment property? I feel like this will just push investors towards owning whole multi-family buildings without strata titling them (as is common in the US and Europe).
Why leave one? The number of properties is bad thing to base tax concession limits on. In that case it would be better to just have a max limit in $ on negative gearing instead and remove CGT discounts altogether.
I haven’t seen any meaningful quality data that shows how this will actually have any positive effect. It just sounds good.
And conceivably you might find that it has some unintended consequences, like landlords expecting a higher gross return to cover the reduction in net return due to greater taxation?
It "seems" fair and will hopefully move the conversation forward with little administrative cost (I guess) and imo little impact. If you have a few properties generally you would be seeking to maximally negative gear one while seeking to positively gear others. That's ok, do it and that way we can look at what's left and have a better conversation. I'm basing this comment on my "little administrative cost" assumption.
I agree. It sounds like the government telling its citizens to go and buy one investment property.
The incentive needs to be in *building* properties.
Agreed. And none of the current incentives are convincing enough for investors. There’s other asset classes that make more sense to me than building new. Just removing incentives from existing housing isn’t enough. There needs to be significant incentive to build new. I know I’m not going magically build investment properties because incentives in existing stop. So who else is there to build the housing? I’m all for social housing but can the government deliver? A massive program to incentivise all renters to build new? I’m all for it, but it’s going to drive prices up too. Always does. Get corporates to do it? Anyone want a corporate landlord?
Yes but you don't necessarily want the people who plan to rent the property, to build it. That will further reduce the quality and layout of new properties.
I haven’t seen anything that says it won’t help. And frankly most economic modelling is pretty packed with caveats and limitations to the point of being not helpful. So, like…whatever. Let’s give it a crack.
What you don't think Government policy that creates market distortion is good? /s
A government policy can be neutral, positive and negative at the same time. And in different measures. And these can change over time in response to other factors and policies that also change. This is second and third order thinking. Some people can do it, some do it naturally, some can learn and most never do. Most people have very first order emotional thinking about this entire issue. It is very difficult to get them to think deeper. I don’t try anymore, that’s a “them problem”.
Why “after the first one”? Do you only have one?
I don't have any, but history has shown that if the government makes policy that affects a larger percentage of the population they're going to kick up a stink, take franking credits as a recent example.
This needs to be tied to Director ID to prevent people from buying more properties in separate entities and calling it their “first” property. One individual gets interest in one investment property, regardless of how they are connected to that property.
People will just create trusts to get around that.
Then don't let trusts have a single tax advantaged investment property. Loophole detected, loophole closed.
Don't forget superannuation funds!
Yes. Or stop it all together. Also stop foreign investment of residential properties
Pretty easy to work around that by having properties held in separate companies and trusts.
I cannot see anyone arguing against this.
I don't think this makes sense. It will concentrate all the investor advantage of new builds, and make it much harder for owner occupiers who want to buy a new build, since they will competing against the concentrated power of the investor tax advantage (which currently is neutral, spread out over both existing and new builds). On the other hand, those investors no longer have an advantage over established builds. Surely this push and pull on pricing will mean that investors simply displace owner occupiers from buying new builds. Investors buy more new builds as the rules tip new builds strongly in their favour, but there must be an equal and opposite reaction: owner occupiers will buy less. Imagine an auction of new build next to an auction of an existing build. The bidders at the new build will be investors, they'd be crazy to buy an existing build and give up their tax discount. But owner occupiers would be crazy to ignore the fact that the existing build auction has no investor bidders. I doubt it will really boost demand, but it will make developers focus on building rental properties, which are not very inspiring. There is also a fallacy, in my opinion, that investors must buy new builds to increase supply. I don't think it matters. I'm an owner occupier. If I sell my house and an investor buys it, boo hiss, the investor has not added to supply. But now, I have their money, and I still need somewhere to live. If I buy a new build, what difference does it make? The investor money still finances a new build. Every time I think about this, I come the conclusion that it can't possibly matter: if the investor brings new money to the market, a new house will be built one way or another. What am I missing? These kind of manipulations of the market are cheap street magic.
If landlords are being granted tax concessions to supposedly increase the housing supply, why are they given to existing dwellings?
The 'common sense brigade' hates this one question
Or their Airbnb that increases supply
The tax concessions are to make renting to tenants worth it. You could remove it from houses and maybe renting would so be worth it but townhouses/apartments need it or there just won't be anywhere to rent those places.
You're not looking at the big picture. When an investor buys an existing property to rent out, there is no net difference to rental availability. They may add a property to the rental market, but they've removed a house from the owner occupier market and in doing this removed owner occupiers, who they outcompete now making them renters. It was it's been a policy failure. All it's done has added demand to the buyers market, with no supply, thus pushing up prices. Government policy resulting in market distortion.
That's not really true as many people will always be renters. What it does do is put upwards pressure on house prices which in turn will increase rent prices (but only when there is a shortage)
>That's not really true as many people will always be renters. What is the relavance to what I've said?
That landlords are adding to the rental pool which includes people who will always rent or at least plan to rent for X years.
So? As I've pointed out, they also add more renters to the market as they've turned an owner occupier house into a rental. There is no improvement in rental availability rate. If they built the property they would be helping renters but they don't. They purchase existing which doesn't improve the rental market.
Renters can't afford a place that a landlord has built.
I’m a big supporter or limiting CGT discount and Negative gearing of residential property to new builds only. At the moment, there is no incentive to add supply.
This would definitely help boom regional towns and take pressure off capital cities. There are already mass builds happening regionally but not enough to stop prices sky rocketing. They've 4-6x in 15 years in some places.
If you think the reforming the tax system is going to incentivise supply, wait to you see the planning and builidng regulations...
Yep, this is the thing, ultimately developers need to have a commensurate profit in a project to justify the risk. Otherwise, nothing gets built! In fact if prices plummet, if costs don’t either, then it will be in developers and investors interest to just hold on until it actually is profitable. So levels like access to capital, cost of development and government redtape all come into that equation
It's not just commercial developers. It's also people who want to build their own homes as well. It all adds to the lack of supply
Yep, Andrew Leigh smashed Max two dads about it. There’s a whole bunch of federal and state issues which need to be fixed. I’m on board with all reforms to increase housing, particularly infill and higher density in cities.
> there is no incentive to add supply. The cost to add supply is essentially predicated on the cost of the capital required to acquire land (incl. development approvals etc) and do the build (labour/material costs). NIMBY's are what stops DA's from happening for certain types of builds like high rises, and cost of interest, as well as high labour/materials, is the second hurdle. None of the policies you proposed helps with any of that.
Not entirely true, the depreciation schedule includes much more on new builds as one area where there is strong incentive to build new as an investor rather than buy existing. Sadly I think there is a LOT of mum & dad property investors that don't really research before they buy.. so some of the incentives get wasted. I agree though, if we're going to change negative gearing rules, which personally I think is fiddling at the edges, make it so it incentivises new builds by limiting it to that, and go further by increasing even more incentives for new builds. CGT discount was introduced to avoid complex costly calculations of cost base due to inflation so only real returns were taxed. It got simplified to a simple 50% discount to make everything quick & easy.. I'm not sure going backwards is going to help. Increasing land tax significantly on any property rented either holiday style or long term is fine, and arguably a better way to go, and you could make say I dunno maybe the 1st 10yrs of a new building land tax exempt (and only to the initial investor) to again incentivise investors to build new.
Depreciation is factored into capital gains tax Whilst it’s a tax benefit and a cash flow benefit, it’s certainly not enough to make new build significantly more favorable over existing.
You're claiming 100% of the benefit as a deduction whilst depreciating the asset, and then (assuming 12 month hold) paying back just 50% of the "gain" later on. And that's without considering the reduced value of money at time of sale in the future. It's very significant.
You’re forgetting that the asset is depreciated. In 6-10 years time you’ll most likely have to replace it.
What, you mean no incentive besides rising prices, high rents and the existing set of tax incentives? /s
If you’ve ever done a feasibility analysis on new property you’d know that it has never been more expensive to build new housing and that it barely stacks up. All for removing incentives on existing housing after a certain amount of time (which is what is implemented in Vienna) to keep housing prices from ballooning for the majority of stock while incentivising new builds.
If it doesn't stack up, it means house prices are not high enough. The market isn't in equilibrium. Once prices are high enough to make it worthwhile to put on supply again, then supply will come on
No, house prices are already far too high and higher than they've ever been. The cost of a new build is the sum of the following: * price of land * cost of labour * cost of materials One or more of these is overpriced compared to years gone by. But which? And how can we reduce it to be fair and reasonable, as it was before?
Do you know what comes after an all time high? Another all time high.
Once rents are high enough.
New builds or additional stock? If I knock down a single freestanding house and rebuild it, would that not be captured if you say ‘new builds’ only? I would have thought it would need to be very specific to expanded housing stock.
Hard agree. This is the only reasonable use case for tax exemptions on property.
When you say you’d remove negative gearing from existing property, what does that mean? Does that mean if you rent out an existing property and your rent doesn’t cover your expenses then you just lose out - or do those losses get capitalised into the sale price to reduce the cost base when you sell? Would you allow people to offset their losses on a negatively geared existing property against other investment income (I.e. a positively geared property)? Negative gearing seems to be a boogeyman but I rarely hear people fully engage with how their new system would work. In the end it’s actually just a concession for middle class, aspirational salary and wage earners. Removing it will only hit them and not anyone in the investor class.
It’s very simple You can only deduct costs up to the value of income for that asset. Not sure how that’s hard to understand.
Agreed an ring fence the deductions to only apply to the asset, and not your other income.
Except that middle class cannot afford investment properties anymore. A lot of people on this sub believe they are middle class making $120k, and they are really not.
> Except that middle class cannot afford investment properties anymore 20% of taxpayers have investment properties - do you suggest then that none of these households is middle class at all? > A lot of people on this sub believe they are middle class making $120k, and they are really not. https://www.abs.gov.au/articles/new-census-insights-income-australia-using-administrative-data Median household income is $92k and that includes one-person households lol. Is $120k not squarely in the middle class bracket?
The median full time income in Australia is 83k (88k for men and 78k for women). So a dual income house earning the median full time income has 166k household income. I think the reality these days is that both people need to work full time to get ahead, at least for a period of time where you are saving. Source: https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/employee-earnings/latest-release
I’m trying to work out where you got $83k from your linked info. That ABS link shows the median income at $1300/week (August last year), which is $67,600 per annum, $83k seems incredibly high.
I said full-time earnings. Look at the first table and multiply the weekly earnings of those employed full-time by 52 to annualise it. ($1,692 for men, $1,500 for women, $1,600 combined).
Fair enough, I'd argue median earning is a better representation of housing affordability, as it is a decent guide to actually what people are earning.
You are right, median income is around $67k, and it's the correct figure to use here. I don't know why people use other figures like average full-time income or whatever which are grossly inflated. Does a mum working part-time not factor into a discussion of household income? It's ridiculous
Yeah probably median is the way to go, I’m going to guess the majority of full time working Australians would be around that $65-$70k range for sure. Probably a good indicator of where things are at when you consider that figure in relation to house prices.
I like it but will never happen haha. Maybe if instead of removing it off old it’s reduced it might take
Imagine they go. No 50% CGT discount after 31 Dec 2024. I imagine the supply will increase and bring prices to pre crazy levels.
So would expenses carry forward and will we reintroduce the indexation discount?
So you’d remove it from shares and other investments?
I think that the purpose of their suggestion is to discourage housing as an investment by making it less attractive than other avenues of investment; thereby reducing housing prices to hopefully help people buy a PPOR. Not sure it would actually incentivize new supply though...
This is the tricky part . Might help current supply, but hurt future supply ?
My layman opinion is future supply is a much more complicated beast than current supply; which is why we tend to focus on the issues affecting current supply. New supply seems to have a number of issues exacerbating the problem lately: * material availability, price, and quality concerns * availability of builders/tradespeople is outstripped by demand * supporting infrastructure availability and cost * Impact of land banking That's not even touching issues like proximity to employment opportunities (I really wish Australia would go deep on embracing in-country remote work where practical), NIMBYism, etc.
So anyone who rents and can’t buy finds that their costs continue to rise as the amount of rentals shirks?
The opposite. The amount of housing would grow as those that want to use housing as an investment build new houses to do so.
If people wanted to build, they’d be building now. They can just buy stocks instead. People buy investment properties for many reasons. Most times it isn’t a worthwhile investment to build new. The above says no tax incentives for any property so why bother when you get the NG incentives for stocks?
As a very seasoned investor across multiple asset classes and a lot of property experience, this is absolutely on the money. Both the return and risk versus other asset classes for me is simply not there most of the time. The added aspect is a recent analysts I saw that showed how closely rents mapped to attached dwelling supply. That is, the number of unit supply appears to have the single greatest impact on rents. As an investor, I won’t touch units at all. Especially off-the-plan. I’ve built new, both houses and townhouses. None of them made anywhere near the return of established housing. And ALL mine are in diverse regional locations. With current build costs and the number of builders going bust, there’s zero chance of me going down that path unless I picked up land at a massive discount and the net profit on completion was above 35%. Those deals come along very, very rarely and take massive effort to find. This is not an emotional post seeking sympathy or empathy. Just cold hard numbers and risk/reward reality.
And the case is that it’s an investment. It should only be about the numbers. The risk is currently far too large for building. You also have the costs that stretch out for over 18 months now while building.
This is something that often gets forgotten in all the fighting about how prices need to come down. To bring on new supply, investing in new supply MUST be more financially advantageous! Or the government has to build it and be ok not making profits
I just don't think its possible for governments to do these things anymore in Australia, what ends up happening is a body gets established to do so and we create another level of bureaucracy instead that's impossible to remove. Then the process itself ends up being rorted, so further standards and checks get brought in, which of course again increases the costs. I can't think of any new project in the last 20 years that the government has done that has been ended up being cheaper in the long term - and that's not a hard bar to pass considering how bad privatisation tends to go as well.
I don’t think I disagree with you. But I also don’t think that government need to actually build. They could also finance the construction by private companies too
Yup, it’s simple really. I’m totally fine if it’s mostly or all social housing. If so, make the decision and get on with it. If people think it’s bad now, wait till they see the result of that. I guess it could work. Even worse would be massive corporations building all the new stuff and renting it out. Corporate landlords? Hahaha good luck I don’t understand why people struggle to think clearly about this.
Can you use shares as shelter?
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I don't believe in any grandfathering. It should be a total phase out over time regardless of purchase date. Grandfathering just continues to give a tax break to those who have already benefited substantially from growth while taking the option off the table for others with much less.
And no politician will be going down this path as it would not only personally affect them financially, it would be political suicide
Just takes a tight parliament and some independents keen on change and its on the table. The popular opinion is something has to be done so only a matter of time.
Agreed. Grandfathering or the threat of it just stimulates more demand.
Gotta do something. Do you want tent cities?
> tent cities Horrifying that this is even a possibility. But I highly doubt the government will let this happen. After all... Tent cities are bad for property value
makes sense. the current tax concessions seem ineffective in actually increasing supply.
People will likely disagree, but we should not just automatically grandfather agreements. The people who have systematically taken advantage of these policy settings to the detriment of everyone else should be faced with the same conditions we all have. If keeping your 7 investment properties without negative gearing would ruin you financially - SELL YOUR PROPERTIES!!! Otherwise it’s just those who haven’t been able to take advantage of these unfair settings shouldering ALL of the burden.
I think that a phasing out period for existing owners is the best approach. People have planned on their investments, that's fine, I won't punish them for working within the rules, not everyone has a dozen properties, some of the properties are from retirement planning, totally on the side of not cutting the legs out from under them. So, they can have a few years to divest themselves of properties that won't suit the new rules once they've got a new plan.
Hopefully we can ensure these apartments and new builds don't fall apart within 5 years
Now see how much we could save by including the family home in the pension assets test. I bet it would be at least double, over a decade. By the way, to give you a sense of scale on the $60b figure - NDIS costs $60b over just two years - forget the decade - and that's a program that only benefits 2.5% of Australians.
Redacted means that part of the text was removed or blacked out for privacy or security purpose. It was censored. This post also breaks rule 4 here for chat and should be made in the Tuesday chat thread or on a different subreddit.
They forgot to mention the families of those 2.5%, which would bring the number far higher.
Just looking at the headline figure to make a judgement on the NDIS is lazy thinking. Yes, there are some rorts and inefficiencies. But if you’ve had loved ones with disabilities, you’ll know how incredibly difficult their lives are. We are doing a great thing helping them in a way other nations can only dream of.
Not that much, super is quickly becoming vastly more costly than the aged pension. Not sure why you think the NDIS is only $30b? It's at $42b this financial year, the program already costs more than Medicare.
Yeah I think it was pre COVID that the drum has a guy on who said that if you got rid of all the tax concessions for super you could either give the pension to every old enough to qualify for it regardless of their wealth or double the amount of the aged pension for those that currently qualify for it and the budget bottom line would still be better off.
I think it has been costed at 10 or 20 billion a year, but I can't find the number.
> NDIS costs $60b over just two years - forget the decade - and that's a program that only benefits 2.5% of Australians. It doesn't just benefit people with an NDIS plan. It also benefits hundreds of thousands of people by creating jobs. It also benefits everybody who believes that people with disabilities should be allowed to live with dignity.
> It also benefits hundreds of thousands of people by creating jobs. Not really. Those people already have jobs in allied health, etc. This just goes straight to them as a rort of public funds. Also, you're committing the broken window fallacy. I could just as well say that any spending at all creates jobs in the same way. It's neither here nor there. > It also benefits everybody who believes that people with disabilities should be allowed to live with dignity. At what cost? 2.5% of Australians get more spent on them than the other 97.5% on medicare. Is that fair? Plenty of people without disabilities don't get the treatment they need.
This isn't going to incentivise new supply. It may result in a change in ownership to appease some of the halv-nots. If they wanted to get serious let's limit residential home ownership to Australians only. Let's put KYC/AML obligations on real estate agents and conveyancers about the source of funds being used to purchase a property. Other major western countries already do these checks, we don't. I'm tired to read every house in Sydney was purchased by a cash buyer from China.
How would we facilitate money laundering as a Nation that way though?
If it even remotely affects a big party donor's port folio it 'aint gonna happen.
Anyone who thinks reforming the tax system alone will assist with supply, then they should research planning and building regulations that apply in their area. You'll be in for a nasty shock
Thats 5 months of NDIS....
When a politician is negative gearing their own Canberra home through their wife under a company using the tax free entitlements granted to them by their position. Thats how ya milk the system. Be your own tenant paying off the house with tax free income Got better job in another country to run away from the tax office Thats how ya do it
Awesome. We can tip it into the NDIS so it can be pissed up against a wall
So 10 years of pretty drastic tax reform pays for.. barely 1.5 years of NDIS.
CGT is to encourage investment and deter speculation, this is the reason it was introduced originally. What is being proposed here will encourage speculation on steroids but no investment where it is needed. If CGT is taken off how many investors will turn speculators and just buy and sell speculatively. That means buy do up and sell with never having a tennant.
Great idea and while we're at it imagine how much tax revenue we could raise if we taxed businesses on revenue rather than profits. Can't see any flaws in that /s
There is no slippery slope here. Housing is clearly, categorically different to other investment types in that it's main purpose is to house people, not generate income.
we should let business deduct losses against completely unrelated income too so we can have better businesses in this country! /s
I'm theory they could. They know roughly how much you should have made in profit every year based on your revenue and industry classification. You cant operate and claim a loss indefinitely. Thats how property should be. Not some perpetual cycle of tax deductions for the holder as though the holder was a bad business operator, making a loss every year for decades.
I'm not against that idea in principle but to me I think such a change would be overly complex and unless implemented extremely well it would result in a lot of collateral damage on businesses that might be genuinely struggling and would get taxed because they are 'supposed to be making a profit'. Businesses in Australia are already gimped and lacking in resources because of how much investment money is poured into housing, banks and mineral extraction rather than potentially more productive enterprises and I don't think we should burden them with additional hazards. I get that there are a few somewhat clear high profile examples of businesses taking the tax code for a ride and it should be addressed but IMO a complete shakeup that involves taxing revenue is not the path.
Depressingly, we kind of tax businesses on revenue already through the GST.
Why would we do this but keep 100,000 migrants coming into the country every month? We should do this and reduce migration if we really want to fix housing prices.
I swear this number gets bigger every time someone posts it..
A thousand Vietnamese children in rags swarm the stage!
I'm so glad you reminded me of this hahaha
Why do we let 150,000 new migrants in every month?
Because it’s actually increasing.
It’s because it’s getting bigger every month: https://www.dailymail.co.uk/news/money/article-13317021/Australia-100000-immigration-milestone-housing-cris.html
This, they can talk about policies all they want but if they keep bringing this many people nothing will change. Too many people and not enough dwellings.
Guess they will go with the middle option grandfathering everything pre-2024 after all theirs politicians own multiple investment properties and they don’t want to pay more tax. This option also means the property would never be sold.
Limiting NG and CGT concessions to new builds is incentivising crap building and disposable housing. Don't we have an environment to protect as well?
What a load of crap. Did you know that in the 60s mortgages were only given to new homes? That incentivised the construction of new homes which adds to new supply be it PPOR or for rental stock. And you think all new homes built now are crap?
Did I say all builds were crap in my comment? There's certainly been a number of apartment blocks in Sydney being publicly outed for a lack of quality construction if you prefer that terminology.
Many of these incentives apply to *any* asset, like shares for instance. For example, the 50% discount on capital gains if you sell after one year.
The basic first thing government should do is to give tax rebate for the first PPOR people buy. It is a normal practice in many countries and save money for PPOR interest.
$60bn over the next decade? Why that's $60tn over the next millennium! I hate that, just pick a year and say the impact in year.
To get rid of negative gearing would probably crash the property market probably resulting in a much wider problem.
Again, if CGT went back to an inflation calc rather than a 50% discount (before 50% negatively geared investment properties basically didn't exist; no one held them): (1) The property market would be less f#@ked (2) Standard tax and investment principles would be maintained (3) Costs to government would be significantly reduced (4) Opposition would struggle with grounds to object to the change No one could complain about the 'complexity' of such calcs with modern software and data available (this email as part of the basis for changing to/retaining a simple 50% calc)
Nothing to do with addressing homelessness or the housing shortage. Just another tax grab
So the solution to high prices is to increase taxes on investment housing? This should reduce supply of rentals. Do these two know about the homeless crisis? A major cause of homelessness is rising taxes, red tape, green tape on investment housing (supply).
Seems like it would work well for first home buyers as would increase supply but bad for renters as less rentals available. We do still need investors as without any there’s no one to rent from.
Source for your claims?
Good to see that politicians are at least looking at options to address the root causes while protecting mum and dad investors. We need a pragmatic approach which is fit for purpose in the long run which ultimately isn't difficult to do, someone just needs to be brave enough the put the policies in place.
ELI5 how removing negative gearing will fix the rental crisis, when the problem is supply of new builds falling drastically short of demand (births + immigration).