Huge negative gearing losses revealed

ScreenHunter_04 Feb. 08 21.40

By Leith van Onselen

The Australian Taxation Office (ATO) has just released its 2011-12 Taxation Statistics, which once again revealed Australia is a nation of loss-making landlords, with 15% of taxpayers owning rental properties declaring a combined $7.86 billion of losses.

According to the ATO, there were 1,895,775 property investors in Australia in 2011-12, up from 1,811,175 in 2010-11 (see next chart).

ScreenHunter_2224 May. 01 07.28

Some more interesting (worrying?) facts that can be deduced from the ATO data includes:

  • Just over 1 in 7 (1,895,775) Australian taxpayers are a property investor (either negatively geared or positively geared), claiming a total of $7.859 billion in rental losses;
  • 1 in 10 Australian taxpayers (1,266,540) are a negatively geared property investor claiming a total of $13.799 billion in rental losses;
  • The average income loss for all property investors in 2011-12 was $4,146; and
  • The average income loss for all negatively geared property investors in 2011-12 was $10,895.

An in-depth report will be provided in the MB members report for May.

[email protected]

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86 Responses to “ “Huge negative gearing losses revealed”

  1. Gunnamatta says:

    Dear Joe, does it seem to you that possibly Negative Gearing has become a welfare support for 1.9 million Australians which could conceivably be looked at or targeted for greater policy effectiveness and a reduced budgetary impact?

    Wondering, Mount Moriac

    • Peter Fraser says:

      The extent of the losses is correlated to interest rates.

      Ask your accountant how much difference it would make to the national revenue if tax losses are carried forward into future years incomes instead of offset against current personal incomes.

      • Grattan has done that type of analysis and found that scrapping negative gearing would save the Budget around $2 billion a year over the long-run.

      • flyingfox says:

        @PF It may not make the same difference as the figure shows but it will dramatically change the property market. Carry forward only works if some time in the near future you expect to make profit form renting and not just from cap gains. Which in itself should mean that investors will start minimising losses.

      • Peter Fraser says:

        Sorry, but I don’t buy the research. If a landlord has a loss forward of $5000 into a future years tax instead of a claim in the current year, how is the net deduction any different?

        It delays the claim but it doesn’t negate it by one dollar.

        We already have several tax systems (5 year averaging for farmers etc) and loss forwards are a reality in all of them. If a deduction can’t be claimed this year it gets carried forward until it can be claimed.

      • Sorry PF, but your argument doesn’t hold. If NG was quarantined, as has been proposed by Grattan and everyone else, rental losses could only be claimed against future rental gains. Your whole argument hinges on the assumption that an investor holds their property into perpetuity and that it eventually becomes positively geared (so that accumulated losses are eventually offset by future gains). But we all know that most investors sell-up before their property ever becomes rental positive (collecting the capital gain instead). So in effect, most investors are claiming income deductions now against other income, without ever making a rental “profit” on the property.

        Hell, my dad owned loads of rental properties, all of which he sold before they ever became positively geared.

      • AB says:

        “It delays the claim but it doesn’t negate it by one dollar. ”

        Even if that’s true, it makes the carrying cost higher and hence would be likely to discourage or price out some investors.

      • Mav says:

        PF, didn’t you say the NG losses will go down as interest rates go down? Are you expecting that to happen for 2012-2013 figures?

      • Peter Fraser says:

        @ ff

        Oh yes it will change the climate for future landlords in Australia. they will become more professional instead of the mums and dads we now have as landlords. They will be more yield driven – that may be a good thing, but for a start current arrangements will be grandfathered, and professional investors with a good deposit and well structured tax vehicles won’t be concerned, and if anything the future loss forwards will be eventually claimed against any profit on a sale.

        There is some leakage there due to the 50% tax ruling on capital gains, but partly offsetting that is the higher margin rate in the years that sales take place.

        The often claimed benefits to the ATO just don’t pass a sniff test.

      • flyingfox says:

        @PF There is no way there are 1.9 M professional investors in Oz. Even if current properties are grandfathered, if investors becomes yield driven, at some point in the near future, the losses claimed will be significantly reduced.

        Even professional investors are wary of carrying forward losses if they can avoid it.

      • Peter Fraser says:

        @ Mav – yes I would expect the tax losses to go down significantly for the 2012/13 FY.

        Here are the SV rates – http://www.loansense.com.au/historical-rates.html

        Most borrowers were paying about 0.8% less than the SV rate. That means they were paying around 7% in 2011/12 compared to lower rates for 2013 and even lower rates for the current year.

        The interest cost is the major cost for a leveraged landlord.

        As I recall the revenue losses attributed to previous years of high rates was about $9B.

      • @PF of course there is a difference between tax refund today or in the future. If you owed someone $5k would you be better off paying them today or in 5 years (presuming no change to nominal amount owed)?

      • If the property is sold before it becomes rental positive (positively geared), then there would be no tax refund under a NG quarantined system.

      • Mav says:

        PF, from your loansense link,

        Jun-2011 7.79
        June-2012 6.99

        I.e. More borrowers were paying 0.8% less for 12 versus 11 and .. Yet, NG losses went up for that period!

        And fall in int rates for 12-13 is similar compared to 11-12..

        June-2013 6.15

        Please explain! ;)

      • You’re a spruiker, PF.

      • Peter Fraser says:

        Well I guess that if the research was only conducted on your parents properties the results may hold true. But they were flippers really, not investors.

        Do you think that the typical investor behaviour may change of NG rules were introduced/

        Do you think that current investors would not make some basic calculations and choose to hold longer because that gives them a better outcome.

        Why would the Grattan Institute not make some logical behavioural change assumptions?

        Why would you assume that loss forwards cannot be claimed against any capital gain? Do you know what a future tax change proposal might entail in detail – the Grattan Institute have made an assumption that may or may not be correct and it seems to fly in the face of normal tax protocols.

      • Peter Fraser says:

        Now David is that any way to behave?

        seriously can’t you conduct a normal conversation without that rubbish?

      • Mav says:

        Now, Now.. PF.. there is no shame in being a spruiker and being called out as such. Just ask 3d1k ;)

        Back on topic, can you explain again why you expect NG losses to go down in 2012-13?

      • “If the property is sold before it becomes rental positive (positively geared), then there would be no tax refund under a NG quarantined system.”

        @UE, though couldn’t the loss be offset against capital gains (presuming there was any)?

        Though it would certainly reduce the number of speculators if they knew they would only be able to claim current losses against future income (of same property) or future capital gains on sale.

        @PF, so no response to my post? Are you sticking with your line that a carried forward loss is no different to a claim against other income today?

        @HnH, seriously? Everyone here is spruiking their opinion.

      • Peter Fraser says:

        @ Mav – interest costs are not calculated on the rate as at 30th June each year, they are calculated over the whole year “retrospectively” each month.

        Learn some basic math skills please.

        @ UE – thank you for the amendment. Most investors are buying at 80% LVR with a 5% yield. At the current interest rates which are sub 5% they are either neutral or very lightly negatively geared.

        In a couple of years they will be positively geared

        This is not a philosophical discussion, it’s an accounting reality. I think you need to draw a line between flippers and investors, the two are not the same although they will both claim NG, but the behaviour is quite different.

        A Quarantining of NG would take some flippers out of the market – borderline buyers would not get finance.

        Why would you not expect investors to hold property for a longer term – they will see those loss forwards on their tax return, and their accountants will be telling them to hold and get the tax benefits.

        Seriously a behavioural change to a new environment is not only likely, it’s absolutely inevitable. Ask your accountant what would his advice to investors be. Within 6 months the internet would be full of advice to hold for longer on every blogsite.

        Investors don’t live in a vacuum.

        @ BB – sorry, I was distracted. Your point is absolutely correct, a tax refund now is always better than a tax refund in a few years time. The narrative however tends to suggest that a scrapping of NG would save the tax deduction on $7.86B per annum, which in reality it simply wouldn’t.

      • PF. Grattan modeled that it would save the Budget $2 billion per annum, which is very significant. More importantly, it would reduce housing speculation and give FHBs a much needed break, which is what good policy is all about (not just revenue). You continually ignore these basic points, all in the name of supporting your mortgage business.

      • flyingfox says:

        @PF and @UE

        PF is arguing form purely an accounting point of view. Both UE and I are arguing from a more holistic point.

        Carrying forward losses changes nothing from an accounting point and I agree. The difference is in the immediate cash flows. Like you said flippers, borderline investors and speculators go out. I believe this group is a very large one and your so called professional investors in the absolute minority.

        It’s very hard to sustain 10K losses (the 5% yield is a gross one) when you’re on 80K.

      • Mav says:

        @ Mav – interest costs are not calculated on the rate as at 30th June each year, they are calculated over the whole year “retrospectively” each month.

        Oh dear.. PF.. when you are in a spruiker black hole, you should stop digging.. the rate of change in the SVR are near identical over the two periods.

        Jun-11 7.79 Jun-12 6.99
        Jul-11 7.79 Jul-12 6.99
        Aug-11 7.79 Aug-12 6.99
        Sep-11 7.79 Sep-12 6.99
        Oct-11 7.79 Oct-12 6.99
        Nov-11 7.79 Nov-12 6.6
        Dec-11 7.54 Dec-12 6.6
        Jan-12 7.3 Jan-13 6.4
        Feb-12 7.3 Feb-13 6.4
        Mar-12 7.3 Mar-13 6.4
        Apr-12 7.36 Apr-13 6.4
        May-12 7.36 May-13 6.4
        Jun-12 6.99 Jun-13 6.15

        Learn some basic math skills please.

        I did. though not from a spruiker cum merchant of debt.. That’s the problem ;)

      • Peter Fraser says:

        @ Mav – there was a change in the volume by 84,520.

        Numbers being equal the NG claimed will reduce in 2013.

      • Mav says:

        Numbers being equal the NG claimed will reduce in 2013.

        Are you ffing kidding me?? That is a significant caveat to your original assertion. And being a merchant of debt, you are well aware that number of new investor mortgages shot through the roof in 2013.

      • Peter Fraser says:

        UE – the philosophical divide isn’t as wide as you imagine, and neither I nor my business is one bit affected by NG or the several hundred issues that the many here suspect will affect me. I swear there must be hundreds of people here more worried about my business than I am.

        PF. Grattan modeled that it would save the Budget $2 billion per annum, which is very significant. More importantly, it would reduce housing speculation and give FHBs a much needed break, which is what good policy is all about (not just revenue). You continually ignore these basic points, all in the name of supporting your mortgage business.

        Grattan modelled that including a cessation of the 50% reduction in capital gains tax which is where I suspect the majority of that $2B tax saving will come from in their model.

        Nothing in the above mentioned tax reforms to capital gains. You have since added that. In the end accounting is quite fixed – it can’t defy gravity.

        My original assertion that the removal of NG alone won’t result in a substantial tax savings is still correct.

        I agree that he removal of NG will promote a behavioural change with investors, and probably a positive change at that, but it is no silver bullet for housing. That would require a different set of tax changes.

      • Tassie Tom says:

        “Ask your accountant how much difference it would make to the national revenue if tax losses are carried forward into future years incomes instead of offset against current personal incomes.”

        This is exactly what I thought before I understood things a bit better.

        If this was the case, then the combined total of taxable rental income of all landlords in Australia would be a positive number because there would be more people making money (at a later and better capitalized stage of their property investment journey) than losing money (at the initial highly-levered stage).

        As it is though, more people are losing money than making money (and more of it). This includes all landlords at all stages of their property investment journey.

        As soon as somebody has enough capital in their property to make money, they sell it to somebody else who buys the property with less capital, and they lose money again.

        If any other industry lost a combined $7 billion every year, it would have gone out of business long ago, but this is exactly what the landlord industry does. They are only still in business because of subsidies from me and all other taxpayers.

      • Lonely Goat says:

        I won’t argue with the Gratton savings to the tax system by removing NG but what about the flow on effects to Gov revenue?

        Most tend to agree that the existing property investors would be forced to a) sell; or b) hold their properties and work hard to turn them into cash flow positive investments.

        What happens to construction of new properties when new investors aren’t incentivised to invest and the market is potentially flooded with supply?

        What happens to the stamp duty that state governments rely on so heavily when the number of property sales (existing houses) decreases?

        What happens to the income tax receipts of all the trade workers in the residential housing industry?

        What happens to the baby boomers retirement plans who are the major holders of investment properties (assuming house prices fall and rents increase to a new equilibrium)?

        What about those people that can no longer afford to rent their property after rents increase?

        These are all -ve impacts on fed and state gov revenues that aren’t consider when calculating the savings from the removal of the NG tax.

      • drsmithy says:

        What happens to construction of new properties when new investors aren’t incentivised to invest and the market is potentially flooded with supply?

        [...]

        What about those people that can no longer afford to rent their property after rents increase?

        Well there’s two that will mostly take care of each other.

      • flyingfox says:

        @ Lonely Goat

        All of those issues have been dealt with on MB and in MB discussions, repeatedly. To repeat again.

        1) Quarantine NG.
        2) Remove CG concessions.
        3) Replace SD with a broad based land tax.

        What happens to construction of new properties when new investors aren’t incentivised to invest and the market is potentially flooded with supply?

        Prices drop and renters become owners. The problem is the price of land, not the cost of construction. If anything it will be Macmansions for all that want them.

        What happens to the stamp duty that state governments rely on so heavily when the number of property sales (existing houses) decreases?

        Replaced with a consistent incomes source, land tax. Don’t need the people to keep flipping houses and I can buy in every city I move to knowing I won’t be penalized for moving so often.

        What happens to the income tax receipts of all the trade workers in the residential housing industry?

        Again land prices…. free up land and reduce land prices, the construction will take off.

        What happens to the baby boomers retirement plans who are the major holders of investment properties (assuming house prices fall and rents increase to a new equilibrium)?

        What happened to people’s super during the GFC? It’s an investment, not a get rich and retire early guarantee.

        What about those people that can no longer afford to rent their property after rents increase?

        I am sure they will work it out. Alternatively we will have the situation that we have in Perth and the landlords will just have to suck it up.

        These are all -ve impacts on fed and state gov revenues that aren’t consider when calculating the savings from the removal of the NG tax.

        Follow steps 1,2 & 3. I guarantee the state and federal budget will be much healthier. Can’t say the same for bank balance sheets though.

        We need to move away from houses and holes (well the holes are fast disappearing anyway).

      • dumb_non_economist says:

        PF,

        Some time back, prior to the talk of quarantining NG made it to the MSM and it was being put forward here, you stated in one of your posts it would make no difference to investors, so why are you are so defensive of it now?

      • Peter Fraser says:

        DNE – I was making the point that getting rid of NG simply won’t add much to the government coffers, certainly not in the order of $7B or $8B per annum. a tax deduction is a tax deduction. losing NG will change behaviour, that’s all.

        UE mentioned research from the Grattan Institute that calculates a gain of $2B per annum – significant yes, but only if the 50% CGT exemption is terminated – so I expect that is where the tax savings are.

        He intimated that loss forwards would be lost if the property is sold assuming that the loss forwards would not be applied against any capital gains tax applicable – I have never seen any suggestion where that would be applied, it certainly contradicts the accounting rules as I know them.

        I’m pretty ambivalent about NG, but when I see statements that imply that the the excess tax deductions would all be taken away from investors, as made below by ‘Strange Economics’ then it’s pretty clear that many people are not only very confused but they have bought a line of complete bullshit spruik. I’m not going to walk away from the truth no matter how much it upsets some people. I call it as I see it – I just wish others would as well.then people would be less confused on this issue.

      • chriso says:

        “Most investors are buying at 80% LVR with a 5% yield. At the current interest rates which are sub 5% they are either neutral or very lightly negatively geared.”

        The figures show that the average yield after non-interest costs was $9,860. If that’s 5% then the property cost $197,200.

        Are you telling us the average rental property cost $197,200?

      • Peter Fraser says:

        chriso – apart from the fact that you ignore several variables such as “are the numbers homes or tax payers” your maths are wrong.

        $363,013.22

      • dumb_non_economist says:

        PF,

        Sorry, but my memory isn’t the same on this. Your opinion was quite strong that it wouldn’t affect the way investors saw property investment and that they it would simply defer the deduction down the track to no effect. You did not cover the budget position on this.

      • Sweeper says:

        Peter,

        1. NG losses are not correlated to interest rates. Reason: rental yields fall when interest rates fall. More slowly (because house prices are stickier than bonds) but in the end it is a wash.

        2. NG is a permanent loss to budget revenues. Income tax and CGT are totally different things. Not sure if you realize but you are basically assuming 4 things there and none are realistic.

      • Peter Fraser says:

        DNE -if you have read what I have posted you will find that my view is mostly unchanged, but if you have a link to my earlier statements then please supply it and I will review my thoughts on this issue.

    • Strange Economics says:

      Remove negative gearing would eliminate all the “deficit” singlehandedly. Or limit to new construction /limit 1 property per taxpayer.
      Or spend the 7 billion on rental support for low income earners !

    • Strange Economics says:

      Because the losses are deducted against your current tax rate – e.g. 37% + 2% medicare, while the capital gains are discounted 50% and deducted against your (usually retired) low tax rate. Or result in the future income against your low retired tax rate.
      This turns tax into capital gains. The govt doesn’t get that tax back later.

  2. swizzy says:

    Can someone tell me why we can’t limit negative gearing on an asset to a set period of say 4-7 years? Then afterwhich, the tax payer should need to prove to the ATO that they are making genuine attempts to become cashflow positive, by either selling the asset, capital improvement or change of business plan?

    The current proposal of grandfathering existing negative gearing is at risk of causing an asset bubble as investors rush the market to get their last investment property. They will then continuously re-finance the properties with interest-only repayments to maximize the tax reduction.

    Similar to what occured in 1987-1988 before the Capital Gains Tax changes.

    I think the current proposal of grandfathering negative gearing has been chosen because it will cause the least unhappiness with baby-boomers, but it will royally complicate our taxation system further.

    • “The current proposal of grandfathering existing negative gearing is at risk of causing an asset bubble as investors rush the market to get their last investment property.”

      An announcement in May with changes as of July 1st this year wouldn’t leave much time to act… but you may be right regarding investors managing their loans on existing properties to draw out the benefit. Perhaps a 5 year limit on existing properties would be sensible.

      • swizzy says:

        Perhaps a 5 year limit on existing properties would be sensible.

        Absolutely!

        The message negative sends in it’s current form is: Be bad a managing an investment, we’ll cover you forever.

        Then, sell your unproductive investment for a gain.

        Way to grow an economy!

    • flyingfox says:

      @swizzy If anything I expect the opposite. If the game changes to one of yield, then either rents go up or prices come down. I suspect a bit of both which means for CG investors, this maybe pretty close to the top of the market and they would be better of selling put before the changes.

      • swizzy says:

        I don’t think they will be able to pass the legislation quick enough for July.

        Anyway, rent will go up, I think that’s the idea – it’s a proposal that’s doomed to not get through.

  3. thomickers says:

    Lol fun to know!

    Also to add is that there are also loser landlords in smsf taking a punt

  4. The Patrician says:

    Timing is everything

    Now where is Ken Henry with that short sharp piece on closing unproductive tax loopholes?

    • rob barratt says:

      He got warned off by no less an economic Titan than Julia Gillard herself in this, direct from the horse’s mouth quote:
      “For negative gearing we didn’t agree with the Henry Tax review, we ruled that out. We think an abolition of negative gearing would cause distortions to the property market we didn’t want to see.”

      • Pfh007 says:

        Don’t remind me!

        That was one of the most miserable and pathetic statements on economic policy in recent memory.

        And the ALP wonders why people stopped taking them seriously.

        Even if they supported the ponzi effects of the existing policy she could have at least ‘owned’ the distortions rather than deny them.

      • Mav says:

        We think an abolition of negative gearing would cause distortions to the property market we didn’t want to see.

        Unsurprisingly, the Q&A host let that non-answer slip through to the keeper. Someone should ask for the Treasury modelling that supports this absurd assertion.

      • TheJoneses says:

        There it is (and lets not forget “Big Australia Bill” Shorten).

        Both Labor and Libs are explicit supporters of the real estate ponzi.

        A pox on both their houses.

      • chriso says:

        “We think an abolition of negative gearing would cause distortions to the property market we didn’t want to see”

        as opposed to the distortions caused by negative gearing that we do see.

        By the way, I presume she meant “we don’t want to see”. Even Prime Ministers make grammatical errors.

  5. PrinceOfPersia says:

    Peter Fraser,
    It totally makes sense that you do not agree with any research that clearly show how bad the negative gearing is towards the overall economy. You are a typical spruiker and as such will constantly disagree with any factual data and detailed analysis that shows your methodology is incorrect. We do not expect less from individuals like you. By the way the planet earth is flat, lol.

    • Peter Fraser says:

      I give you facts, and in return you give me emotional drivel.

      Can I get a refund please?

      You are ripping me off.

    • bv2726 says:

      I hate mudslinging and abuse directed to someone who has a different opinion.

      Why can’t someone have a different opinion without being abused for it?

      Peter Fraser, there are some folks like me who have level heads and like reading informed opinion. I don’t agree with everything you say (or others) but I enjoy reading your comments.

      Oh and PrinceOfPersia – I don’t like abuse hurled at other members of MB either, from any side of opinion.

    • The Claw says:

      Peter Fraser is far from being a typical spruiker. I don’t agree with his attitude to negative gearing, but his comments are generally intelligent and respectful.

      • fitzroy says:

        +1. His comments about what is happening at the coal face are instructive for those like me who are outside his industry.

  6. Pfh007 says:

    Quarantining
    New builds only
    Grandfathering

    Three simple modifications that are reasonable and rational.

    Easy stuff Mr Hockey – demonstrate some ticker at the moment it sounds like the govt hasn’t a clue.

    Mr Bowen – if you wish the opposition to be taken seriously you have to sound serious about reform – here is your chance – beat Joe to the punch.

    Trying to do an ‘Abbott’ in opposition and hoping the govt explodes in one term is a poor strategy.

    Give them a push!

    • The Patrician says:

      +1 $2bn p.a. savings? $4bn p.a.? $5bn p.a.?

      Regardless of the exact quantum of the savings, they will be significant. The obfuscators and debt peddlers want us all to get tangled up in the minutiae.

      The real benefits lie in the boost to housing supply, the boost to employment and giving the RBA room to move as the heat is taken out of house price inflation.

      • Slambo says:

        “The obfuscators and debt peddlers want us all to get tangled up in the minutiae.”

        Exactly. Always trying to kill the big positives by squealing about the small negatives.

        No reason why they can’t introduce Pfh’s changes with effect from budget night. They’ve managed to do this with other policies in the past when it suited them.

        Of course it may require a big set, which no government in recent history has possessed (with apologies to Julia).

      • Big Note says:

        The heat taken out of house price inflation is not a benefit to the government – they want prices to rise!

      • The Patrician says:

        “The heat taken out of house price inflation is not a benefit to the government”

        Glenn will be telling Joe otherwise.

      • Big Note says:

        @The Patrician

        Incorrect.

        Glenn is comfortable with credit growth and house price appreciation. The only comment he made is that prices can go up as well as down – presumably to keep speculators at bay.

      • Mining Bogan says:

        To keep speculators at bay??

        Massive fail there Glenn.

  7. fewlish says:

    The big win for the taxman regarding tax payable on gains immediately vs. being allowed to carry losses forward also relates to the time value of money.

    $1000 tax paid on earnings today is worth substantially more than $1000 worth of deductions made in 10 years time.

    Hence, by forcing losses to be carried forward and made against specific gains on the investment, the benefit is substantially less.

    • Exactly & there is further benefit assuming the $1000 tax paid today was used to pay down or reduce need for an increase to public debt on which interest would be due.

    • AB says:

      “Hence, by forcing losses to be carried forward and made against specific gains on the investment, the benefit is substantially less.”

      Absolutely. And the carrying cost of holding the asset increases.

  8. Big Note says:

    The government will NOT implement any policy which puts pressure on house prices.

  9. Dr Fixit says:

    It might be too late discussing negative gearing as once prices start falling there could be a rush for the exits and with vacancy rates increasing across the country it’s not looking attractive for investors.

    Why anyone would buy a property in the current climate has me at a loss. With iron ore prices falling, and the capex cliff here, things are not looking good.

    • bv2726 says:

      Not everyone who buys a property looks at any economic indicators, rate of return, future growth etc. Anecdotal evidence – the friends of mine who invest in property believe it will go up over the long term.

      They do not know (or care) about their return. They intend to hold for years. That’s all. Really. They know nothing else other than “I just give all the receipts to the accountant” and just hold the property. They won’t sell.

      • dumb_non_economist says:

        bv2727,

        wait and see how they behave if prices start to tank like they did o/s, then your friends may see things a little differently when prices are falling on a daily basis and instead of all the media talk being about “get in now or else” it’s “get out now while you can”.

  10. Neville Gearless says:

    Its amusing the spruiker thinks a delayed deduction (10 years away) is the same as a deduction now. I mean a mortgage stops delayed purchasing (by 25years?), could we ban those on IP’s??

    What is sad is we have a government who are patting themselves on the back for saving $500m/year to lose 40,000 jobs in the auto industry while keeping a $2b to $7b/year (take your pick) rort which creates almost no jobs and no social benefit. Looks to me Abbott is THE entitlement prime minister.

  11. Meanwhile at PropertyObserver, the intrepid Terry Ryder defends negative gearing, repeating the myth about 1985-87 which has been repeatedly debunked here at MB. Yes, I’ve commented.

  12. brian560 says:

    The figures should be taken with a large grain of salt. It is easy to get home renovations booked against the investment property. The ATO has not got the investigative resources (as with other department’s with investigative functions) to properly investigate people claiming negative gearing losses.

    • chriso says:

      “It is easy to get home renovations booked against the investment property.”

      i.e. tax evasion

      “The ATO has not got the investigative resources”

      If the level of evasion is high enough, the penalties will make investigation self-funding.

  13. N.C. says:

    Yes – losses.

    And the main cost of being a landlord, by a country mile? Interest on loans.

    http://tunswblog.blogspot.com.au/2014/05/how-landlords-lost-nearly-12billion-in.html

  14. Willy2 says:

    Why even bother to become a landlord with NG when even WITH NG I make a loss ?

  15. chriso says:

    Interestingly, there are 7,635 taxpayers who claim rental deductions without collecting any rent.

  16. athalone says:

    None of this will matter when residential property crashes by 40%.

    • interested party says:

      athalone,
      I will be very surprised if it falls to that extent. TPTB will more than likely BAN selling your RE before the whole damn wagon goes belly up. The banks own the system, they own the politicians….see this…
      http://www.macrobusiness.com.au/2014/05/the-comission-of-audit-at-a-glance/#comment-355950
      ….so as much as a healthy purge is required I for one cannot see the bankers allowing that magnitude of a fall to occur.

      • athalone says:

        Well our big 4 banks were insolvent in 2008…and we didn’t even have a property crash.

        Imagine how they’ll go when people start losing their jobs and can’t pay there monthly mortgage.

      • interested party says:

        “Imagine how they’ll go when people start losing their jobs and can’t pay there monthly mortgage.”

        I suspect there will be a mass transfer of wealth at that point to the banks…..after they have helped themselves to our bank accounts through bail-ins. The buggers know what they are doing. They have plenty of time to adjust government policy to enable their plans to survive any financial fallout. I don’t agree with it at all, however, the reality is that the banks run this system, they make the rules of engagement, and have the capacity to direct policy to suit them.
        We the people will pay the cost….no doubt about that.