[red_squirrel]

I don't know if it's jealousy - perhaps/maybe not - but I do think many people here and elsewhere misunderstand what negative gearing is. It's not the ideal situation to be in and no-one should purchase an IP with the view to negatively gearing it! It just means you're losing money, and that's not a good thing on a day to day basis for most regular income earners. It's not a quick investment that returns a massive chunk of change with the flip of a house (despite the TV shows and despite the GFC).

I 100% agree on this. I'm not sure what country you are in at the moment but I think many people in Aus can benefit from looking at what happened in the UK and Ireland etc.

Many people I see in Aus think you MUST have an investment property to get ahead regardless of whether it is right for you or not. These people borrow as much as possible, aren't earning a huge amount to start with and have an almost religious belieft that property ONLY ever goes up - doubling every 7-10 years. They pay interest only and only ever intend to neg gear. Times have changed however. I guess these people will be trying to offload them soon enough whether or not neg gearing is repealed.

PS. - I wish I lived in a woodlands.

[Bek+3]

And the amount of tax deductions handed out as a result of NG and halving the capital gain on rental property is not a small amount but amounts to a huge amount of money foregone by some tax payers to others who own property.

This whole 'costing the tax payer a fortune' thing is getting old.

NG is win, win, win.... for the taxpayer, for the government (housing supply) and for the mum and dad investor.

Our IP is negative geared and as mentioned before in this thread, in 6 years we've not even received as much back in tax breaks as what we paid in stamp duty to buy the place!! Stamp duty on IP's is higher then residential purchases. Just there alone, the tax payer is ahead. Certainly no huge amounts of tax money foregone. The score so far is Tax coffer: 1 Us: 0!!!

One day when we do own it we will be saving the tax payer an absolute mint because we'll not only be be self funded in retirement but actually PAYING tax on the rent collected!! On top of the tax we'll pay, the government will SAVE more in 12 months worth of pensions we wont be receiving, then we would have ever benefited from tax breaks in the approx 12 years total our IP will be NG'd!!!!!!!!!!!!!!

Of course the point has already been made about how NG encourages people to invest in property, reliving pressure on the government to supply public housing where the costs are astronomical.

I hope that makes sense, it's been a long day. People should be celebrating NG'ing though, not whinging and carrying on!! It's existence encourages people to exist in housing and saving tax payers a ship load both short and long term.

[JAPN2]

This would more than make up for the measly lost revenue through negative gearing.

But the revenue lost is not measly to the government. And that is the issue. Its quite substantial. According to the Saul Eslake article I posted, it runs to several billion a year.

And sorry Bek3 but its not a simplistic argument. Do you have stats to show its a win win win when several leading economists say it actually is a disservice to the community as a whole.

Did it ever occur to you that more investors willing to pay ever more for property pushes the prices and then the stamp duty up??

[JRA]

In 08-09 which is the last public ATO stats the -ve geared amount was -6,528M, so $6B, of which most belonged to the 30% or less tax bracket, so that is about $2B in tax that was foregone.

Gross Rental income was $26B, interest -19B, capital work deductions $1.5B, and other rental deductions $11B, (rounded)

In other deductions there was 16B of work related expsens, 2B of cost of managing tax affairs, $6.6B of motor Vehicle expenses, $1.4B of uniform, and 5.7B of "other work related expenses"

[-Emissary-]

The question is it really a business? Apart from property agents its doesn't employ people as such.

And the amount of tax deductions handed out as a result of NG and halving the capital gain on rental property is not a small amount but amounts to a huge amount of money foregone by some tax payers to others who own property.

You are asking the wrong question. The question that needs to be asked is why should the government subsidise some people in owning property at the expense of wage and salary earners?

Isn't interest on a marginal/investment loan also tax deductible?

You can also run a business without hiring anyone. It's called sole trading (and we all know how legit their claims are.. ) .

I do wonder whether the attitude would be the same if interest from owner-occupied mortgages were also deductible as in the US and elsewhere?

Who said it wasn't?! Here - just to save you some time - http://www.irs.gov/pub/irs-pdf/p527.pdf

You can even deduct interest on the mortgage of your primary home.. (obviously strict rules applies..)

http://www.irs.gov/publications/p17/ch23.h...blink1000173221

Not familiar with the UK tax system but I do believe interest on IPs is also a deduction.

So is the issue still with negative gearing or claiming interest as a deduction?

This post has been edited by -Emissary-: 23/04/2012, 08:54 PM

[Bek+3]

So is the issue still with negative gearing or claiming interest as a deduction?

Honestly, I think the issue is with people investing in property in general. Shelter is a basic need after all so the government should provide us all a house for freeeeeeeee!!!

(Or so it would seem!!) ;) ;)

[greengoddess]

Great. Tents for everyone then.

Good lord - just make sure EVERYONE has the SAME tent, lest the "it's not fair - they have a nicer tent" brigade starts up!

[JAPN2]

Honestly, I think the issue is with people investing in property in general. Shelter is a basic need after all so the government should provide us all a house for freeeeeeeee!!!

(Or so it would seem!!)

Nah. Just wanting someone to show that NG is actually providing the benefits you claimed....

[Guest_holy_j_*]

Yes I'm interested here, particularly for those that buy and hold. What is the advantage of NG for years, over putting the principal repayments+ the amount out of pocket each year into an income producting investment, (heck you can get some decent rates of online savings account at the moment). Reinvest the earnings and when time is up go and get the investment property.

Even if you don't have enough to cover the entire purchase price of property due to property rising, you would most likely have more than enough to ensure that the property was positively geared from the start, thus never having to bear losses.

[JRA]

Yes I'm interested here, particularly for those that buy and hold. What is the advantage of NG for years, over putting the principal repayments+ the amount out of pocket each year into an income producting investment, (heck you can get some decent rates of online savings account at the moment). Reinvest the earnings and when time is up go and get the investment property.

You are not making money by putting money in an online saving account, you may not be losing money.

Sure it is very safe but

Let's assume you put $100K in a savings account which is paying 6%. After a year you get $6K plus a bit in interest. Great you say, NO.

You lose 33% in tax (give or take) leaving your $4K. So on that 100K you have earned $4K, which is 4%. Inflation is 3+ %, lets assume for the year it was 3.5% inflation. In fact you have only moved forward $500, the difference between what you kept in your hand and inflation.

By investing in shares/property etc, people are expecting/hoping to make money, not just keep up with inflation over time.