Morrison: Once and for all time a property parasite?

By Leith van Onselen

Last week, the Property Council of Australia (PCA) took rent-seeking to another level, threatening MPs with electoral carnage if they dare tinker with Australia’s negative gearing laws. The PCA also repeated the oft-told myths that negative gearing “keeps a lid on rental costs and house prices” and is utilised primarily by “ordinary workers”.

The PCA’s lobbying seems to already have paid dividends, with Treasurer Scott Morrison yesterday all-but ruling-out negative gearing reform, arguing that it is a “real opportunity for middle income earning Australians” to get ahead:

Negative gearing has been and continues to be a real opportunity for middle income earning Australians. Nurses and doctors and whether it is a policeman or others, these are people working every day and trying to get ahead, they’re not the problem. We need to look at all aspects of how our tax system works but what we are not about, we are not about taxing and spending. That’s not what we are about. We are not about raising taxes to support higher spending. That’s Labor’s approach. That’s Labor’s approach – it’s not ours.

Treasurer Scott Morrison’s ongoing defence of negative gearing is not surprising. After all, between 1989 and 1995 he was the National Manager, Policy and Research, at the PCA. So understandably he has fallen into line.

We also know that the Coalition Government has not ordered Treasury to undertake any analysis of options to limit negative gearing, choosing instead to use the advice from the property lobby rent seekers – the PCA in particular – to craft its policy on negative gearing.

I am not usually someone that favours ad hominem attacks. But there is just too much industry capture on Morrison’s part to ignore. Instead of looking objectively at the facts on negative gearing, he has time and time again resorted to the PCA play-book to defend it.

This time, it is the claim that negative gearing is the domain of “middle-income earning Australians”, which is false. Let’s look again at the data.

In August last year, the Reserve Bank of Australia (RBA) comprehensively debunked the Coalition’s claim that negative gearing is being used primarily by middle income earners, with head of financial stability, Luci Elliss, noting the following before the parliamentary inquiry into home ownership:

The Property Council has cited Australian Taxation Office statistics to prove cutting negative gearing would hurt many people on low and middle incomes. It says 66.5 per cent of investors who made a loss on a rental property had taxable income of $80,000 or less.

But Dr Ellis said the RBA analysis was based on the Household, Income and Labour Dynamics survey which covers all income and all households while the Tax Office data cited by the Property Council only looked at the taxable incomes of people who lodged tax returns.

Dr Ellis said because of these limitations the ATO figures do not capture the fact that many negatively geared properties are owned by people with low taxable income but high “actual income”, mostly because they were drawing untaxable income from superannuation [or reducing taxable income via negative gearing].

The chart Ellis referred to comes from the RBA’s submission to the home ownership inquiry, and shows that nearly 80% of investment property debt is held by the top 40% of income earners:

While the incidence of property investment increases with the level of income, the Household, Income and Labour Dynamics in Australia (HILDA) Survey also suggests that most investor households are in the top two income quintiles. These households hold nearly 80 per cent of all investor housing debt…

ScreenHunter_8353 Jul. 15 16.50

In October last year, the Australian Bureau of Statistics (ABS) hammered another nail into the coffin of negative gearing lies via the release of its two-yearly housing occupancy and cost data. The Guardian’s Greg Jericho dissected this data and found that investment property ownership is clearly skewed towards the highest income earners, with the richest 20% of households accounting for 39% of all housing investors:

ScreenHunter_9889 Oct. 22 11.58

Finally, modelling last year from the National Centre for Social and Economic Modelling (NATSEM) revealed that one third (34.1%) of the benefits of negative gearing were captured by the top 10% of income earners, whereas 15.7% of negative gearing benefits goes to the next 10% of income earners (see next chart).

ScreenHunter_7244 Apr. 28 13.45

So that’s the top 20% of income earners receiving around half of the negative gearing benefits, according to NATSEM.

The data is emphatic: investment property ownership – and negative gearing – is overwhelmingly a rich person’s game. It is not the domain of “middle-income earning Australians”.

If Treasurer Morrison used to head the Property Council’s research team and is still today spouting their myths then what choice have we but to conclude that he is captured by the lobby?

Today we have some slim hope that that may not be the case. Various media articles suggesting that reform of property taxes is, in fact, still on the Government’s agenda, suggesting that I may have been premature in lambasting Treasurer Morrison’s position.

According to The Australian’s David Crowe, the Coalition is considering applying “caps of $30,000 or $50,000 on the amounts that workers can claim on their investment properties, in order to target the changes at those who gain the lion’s share of tax breaks worth $8 billion a year”. This way, benefits for wealthier investors would be trimmed, without affecting ordinary workers.

Fairfax’s Mark Kenny and Peter Martin have also noted that the Coalition is considering cutting the capital gains tax (CGT) discount to 40% (instead of 50% currently) and extending it to all investment income including rents, dividends and bank interest – as was recommended under the Henry Tax Review. Such a reform would make the tax treatment of different income classes more neutral, and therefore make negative gearing of rental properties less attractive without needing to outlaw it.

Applying a cap to the amount that can be claimed on investment properties has some merit. However, one wonders why the Coalition would choose such a high threshold of between $30,000 and $50,000.

As shown in the next chart, which comes from the FY2013 Australian Taxation Office Statistics (latest available), the average negative gearing loss was around $9,600, with the highest income earners (i.e. those with taxable income over $250k) claiming just over $24,100 in property losses:

ScreenHunter_11431 Feb. 09 08.02

Therefore, any cap would need to be set at a much lower level, say $10,000 per annum, to have much impact on Budget revenue or equity. As it stands the threshold would really only act as a fig leaf to cover ongoing rorting of the tax system.

I will be first to congratulate (apologise to) Scott Morrison if he manages to shake his PCA roots off and produce a meaningful reform package.

Unconventional Economist

Comments

  1. “So that’s the top 20% of income earners receiving around half of the negative gearing benefits, according to NATSEM.”

    Is that because the top 20 (especially top 10) percentile are subject to the highest tax bracket?

    Also, conversely the chart shows that the 0-80 percentile have half the total benefit…. meaning that half are low to middle income people that avail themselves to negative gearing benefits?

    Therefore more people at the lower end (0 to 80%) use negative gearing.

    Have I understood that right?

    • Negative gearing undermines the progressive tax system, it’s why it’s so popular with the wealthy.

    • Yes you’ve understood correctly. Though I’m not sure you can lump the first 8 deciles of income earners together into a single category called ‘the lower end’. What if we (arbitrarily) categorised like this: first 3 deciles == low income, next 4 deciles == middle income, last 3 deciles == high income. Then the distribution of the investment property tax subsidy is:

      Low income: 9.7%
      Middle income: 28.1%
      High income: 62.2%

      There are probably more rational ways to do the groupings though (e.g. use the ATO taxpayer sample data to determine ranges).

      EDIT: And to be completely precise, yes 80% of a population is larger than 20% of that same population. 4 times larger to be exact 🙂

      • Ted

        Agreed.

        But (to me) the bottom percentile would be the bottom of those people that are (maybe) middle class and claiming negative gearing or are perfectly middle class and have had a property for a while and therefore has less negative gearing benefit as the property gets closer to being positively geared.

        All sorts of things we could imagine.

        Therefore as 80% of this group have 50% of the benefit – I’d struggle to believe that many are low income earners. They are probably middle class and above.

        That’s my guess.

    • Also I believe the income are taxable income. So these are income distributions after NG has being deducted from pay. So someone on $1mil p.a. income could potentially show up as the 1st 10 percentile if they have enough investment losses.

  2. Honestly – why can’t we get this information out to the mainstream media and make these people look like the liars that they are!

    • TheRedEconomistMEMBER

      Call talkback radio then … Get the conversation started.

      I am sure Ray Hadley in Sydney would like it after ScoMo knifed his boy Abbott.

      But I reckon most of 2GB listeners and advertisers would not like to hear such honesty from a caller as most are wedded to the property investment game on one form another. So getting past Hadleys producers might be an issue.

      You maybe have to try and slip it in during the conversation that how can ScoMo be impartial when he was employed by the property industry.. A bit like the “Manchurian Candidate”

    • That would be the MSM that accepted payment for the lobby advertising for overturning the MRRT; that helped sink FBT car packaging reform; that earns more money from their property divisions than their news divisions?

      Lol.

      • This.

        MSM and property ponzi are joined at the hip. Just as our entire financial system is dependent on the property ponzi moving onward and upward. But time is running out. Tick tock tick tock…

        There will be no broad change of tune when it comes to NG, CGT discounts and anything else that supports the property ponzi from the MSM until everything has totally melted down.

  3. Hey, wow, Australia’s federal government is corrupt. Who’da thunk it?

    Nothing will change; over half the Australian population own assets, so they think this is wonderful. It’s pushing up the price of their precious assets, and confirming that they are investment geniuses, you see.

    Best thing for the young to do is up and leave. Let them have their overpriced housing and part pensions and hollowed out economy. Nothing will change until a crisis hits, and my guess is that the chaos will be used by the corrupt to further entrench their power.

    Not electing Tony Abbott was Australia’s last chance, and you failed to do that. People who would have otherwise looked terrible look like golden gods in comparison to Tony. I call it ‘The Tony Effect’.

    So now you’re stuffed. Enjoy!

    • Agree 100%.
      Only crisis will force people to accept change. Problem is when crisis comes normally we have parasites running the country so any changes they make will be to the benefit of the super rich.

    • Not electing Tony Abbott was Australia’s last chance, and you failed to do that. People who would have otherwise looked terrible look like golden gods in comparison to Tony. I call it ‘The Tony Effect’.

      Can you clarify what you mean here? Are you suggesting Labor had us on a good path?

      • A better path.

        They were not perfect by any means but at least did things like got rid the fringe benefits rorts and scaled back some superannuation concessions. In addition they had some worthwhile reforms and programs like the NBN (who after Malcolm’s excellent guidance will now cost more and deliver less).

      • Nope, but when youse mob voted Testosterone in, you went politically full retard. You’ve pushed the Overton Window into 1931 Germany territory. Believing what scientists say and being against institutionalised child abuse is now considered an extreme left position in Australia. Basically you’ve had it; you’ve collectively gone bonkers and are now so detached from reality that evidence based progress has become impossible. Well done.

      • I agree bobalot and LD. I definitely believe Australia needs a new party. All three at the top are just too conflicted, too micro issued, too corrupted and too self interested. That’s what anyone with an interest in Australia’s welfare should be busying themselves with. Dismantling this useless festered filthy political tripod.

    • Your Lordship, you are one of many on this site promoting the notion that the youth of Australia should raise a white flag. “Best thing for the young to do is up and leave”.
      NO, NO, NO.
      Australians between the ages of 18 and 40 represent about one-third of our population, and near 45% of eligible voters. That has good potential for a meaningful political force for change. Hell, there’s even a few of us over 40s – those who don’t have their mouths around the teat of inter-generational theft – who would give them support.
      History beckons, for there is near universal consensus that the current political system system is broken, and the crisis looms. Choose to stay, not run. Choose to fight the good fight.

      • Nope, I’ve got a family to raise and earn about triple in the US compared to a tech salary in Oz. I don’t like Australians much; a bit too keen on concentration camps for my liking. I prefer the route of denying you access to all the wealth I create. As you can tell, I’m not a Nationalist, nor do I consider myself a ‘patriot’ (almost everyone who does is a narcissist).

        Australians are unteachable. They’ll only learn after they have driven the country into a ditch.

      • Auld K

        We need a Bernie Sanders type with a free education platform.

        Then you’ll see change.

        I’m not saying it the be good change.

        It maybe Rudd Gillard on steroids.

    • LordDudley I pretty much agree with everything you say except your position on refugees.

      Have you got a better idea to concentration camps?

      • How about NOT having concentration camps. That would be better.

        At some point people will realise that “stopping the boats” is the answer to the wrong question. If you start to look at refugees as a symptom rather than the problem, then you can start discussing meaningful alternatives.

        That might mean a combination of:
        – some sort of regional agreement to help them safely get to somewhere where they have lives
        – treating them like people – teaching them English, training them for employment, educating their children. Things that will mean they are an asset to society.
        – not using refugees as a political pawn

      • DT, I like what you’ve said

        If you start to look at refugees as a symptom rather than the problem, then you can start discussing meaningful alternatives.

        I can definitely see though giving asylum to people that are not from an organised program will lead to huge numbers arriving with associated problem of working out who’s who, and it will encourage others to make the same trip.

        If you give asylum to people that just arrive, how do you overcome the draw factor that Rudd caused occurring all over again?

      • That’s where a regional (or global) solution comes in. Providing an alternative that means people don’t see risking their lives in a dodgy fishing boat as the best alternative. I don’t think anyone has an answer yet, but I can’t think of any situation where what we are doing is justified. There are broader issues too – reassessing our involvement in the middle east, for example.
        My own moral compass tells me that treating real people in real situations properly is better than treating them poorly as a deterrent to other, hypothetical people in the future.

      • If you give asylum to people that just arrive, how do you overcome the draw factor that Rudd caused occurring all over again?

        Asylum is not “just given” to boat people. They have to demonstrate the same need as any other asylum seeker (be they local arrival or in overseas camps) and are granted refugee status (or not) and prioritised, based on that need.

        Despite what the Daily Terror tells you, they don’t “jump the queue”, they’re not “economic migrants” and they in no way represent a “border security” problem.

      • Have you got a better idea to concentration camps?

        Programs to integrate refugees – including education in things like English, cultural norms, political processes, etc – into a wide range of communities across the country.

        Like we’ve done in the past, and other, saner, countries do.

      • The issue is third worlders seek the governance of civilised people.

        They look at such prosperous countries, the safety, the generous transfer payments and say ‘Gimmedat!!

        It’d perfectly rational for Gimmedats to get something more than what they have now, but what we have is too many softcocks believing a magic dirt theory, where if you transplant a critical mass to a country, they’ll assume the behaviours and cultural mannerisms of the hosts. Empirically, that falls down.

        Hundreds of thousands of Giimedats turned Gothenburg and Malmo into rape happy, third world sh*tholes, it didn’t turn hundreds of thousands of Gimmedats into productive Swedes.

        What the solution is, is to have the civilised world move into the countries of origin with an armed force and disarm the local populace, install a government comprised ONLY of civilised people, and to pay for it, exploit the local economy.

        Therefore, no Gimmedat never has to hop on a boat, they can be in receipt of a transfer payment in their origin countries, and governed safely by civilised people.

      • blacktwin997MEMBER

        RP +100. You’ve shown another facet of LD’s experiential learning >> kumbaya circlejerk view. Contrary to those views propagated by many comfortably insulated parties as realistic solutions.

        Out of interest drsmithy, what was your PhD?

      • Drsmithy. Here we go again with your condescending bullshit. The left are the only educated intelligent people able to understand the depth of the issue are they? FFS mate I despise you.

        “Despite what the Daily Terror tells you, they don’t “jump the queue”, they’re not “economic migrants” and they in no way represent a “border security” problem”

        How do you come up with this garbage?

      • Of course, smithy is right. And this brain vomit from RP just proves that it’s impossible to have an intelligent debate without the racists piling in. It’s easy to label a whole region, or to cherry pick your proof from clearly dysfunctional anecdotes. Saves having to think and work out actual solutions. It wouldn’t be a problem if it was just some cowboys on a blog, the problem is we get the same thing from our political parties.

      • DT

        “Despite what the Daily Terror tells you, they don’t “jump the queue”, they’re not “economic migrants” and they in no way represent a “border security” problem”

        I’m not sure how anyone can justify that statement.

        If we take refugees that arrive outside a program it draws more. I didn’t ask for abuse from smithy or a suggestion I read the Telegraph.

        She is incapable of intelligent debate.

      • “And this brain vomit from RP just proves that it’s impossible to have an intelligent debate without the racists piling in.”

        yes darling of course it is…..

        “It’s easy to label a whole region, or to cherry pick your proof from clearly dysfunctional anecdotes”

        Anecdotes?

        I’m not going to label a culture averse to rape because of a tiny minority who aren’t raping people all across Germany and Sweden right now.

        What makes it ‘easy’ to label a whole region is things like an epidemic of rape occuring right now, with the media begrudgingly discussing incidents like NYE in Koln due to civil outrage.

        What makes it ‘easy’ is the utter hopelessness and despair in addressing it that we’re now gone full SJW retard circle, and blaming the victims…The feminist mayor of Koln says “Women should be careful who they get close to”.

        http://www.zerohedge.com/news/2016-01-06/cologne-mayor-slammed-after-telling-german-women-keep-would-be-rapists-arms-length

        What makes it ‘easy’ is that the parents of pre-pubescent girls are told to dress their daughters more modestly as to NOT sexually provoke the rapefugees in the hostel next door.

        http://www.dailywire.com/news/3085/german-mayor-victim-blames-elementary-school-girls-michael-qazvini
        We also know there is active suppression of reporting these events, with Facebook deleting entries and Editors-in-Chief across Germany being instructed they cannot report on it.

        It isn’t isolated to third worlders harrassing European women, the scale of refugee women being raped in hostels hasn’t been seen since the Soviet movement and occupation into Germany in 1945/6.

        Not hard, nor surprising, seeing as 75%+ of these ‘refugees’ are fighting age males.

        However, that’s the insanity of SJW’s for you, and I’d rather it be German women raped than Australian women. Nor do I want things like this….

        http://www.news.com.au/world/europe/10yearold-raped-by-iraqi-migrant-at-swimming-pool-in-vienna/news-story/69abed188e157e2f425d8c204fa50f17

        But this is a real rape culture invading Europe, not some piss-ant that Fairfax was talking about last week about a dude who espouses ‘legalising rape on private property’

        “Saves having to think and work out actual solutions. It wouldn’t be a problem if it was just some cowboys on a blog, ”

        The lack of thinking here is the likes of dimwits like yourself, adhering to a failed ‘equality’ doctrine.

        Pathetic individuals like yourself are so desperate to signal moral superiority, adhering to a dogma your betters instruct you, that you’re sacrificing large numbers of women, and even 10 year old boys like described above.

      • I’m not sure how anyone can justify that statement.

        It’s pretty easy. You’re parroting rhetoric.

        If we take refugees that arrive outside a program it draws more.

        They’re not “outside the program”. Boat arrivals are part of “the program”, just like people that arrive on planes, magic carpets, or anything else.

        The only reason for the laser focus on boat arrivals, to the exclusion of nearly all other aspects of immigration and visa control and despite their near irrelevancy to the big picture, is to provide a convenient political scapegoat and focus of rage for people like you.

        She is incapable of intelligent debate.

        As usual, you are immune to facts and reason.

      • What makes it ‘easy’ is the utter hopelessness and despair in addressing it that we’re now gone full SJW retard circle, and blaming the victims…The feminist mayor of Koln says “Women should be careful who they get close to”.

        Your umbrage is rather curious given you’ve previously expressed beliefs that women who are in abusive relationships have only themselves to blame. I would have thought you’d be fully onboard with women having to take responsibility for their own safety when out and about.

        Guess it’s different when there’s scary brown people to be blamed.

      • “Your umbrage is rather curious given you’ve previously expressed beliefs that women who are in abusive relationships have only themselves to blame.”

        My umbrage is that you’r a liar, and expressing a distorted view with a retardation only an SJW can manage.

        I’ve never blamed a person who is a victim of an abusive relationship. I said there are better way to manage their circumstances.

        If I leave my wallet full of cash on a bar, go away and come back to see it’s stolen by a thief….I blame the thief, the perpetrator..I do console however that I can do things to mitigate the risk and suffering.

        “I would have thought”

        You have a track record of that.

        Thinking….I wouldn’t do so much of it if I were you.

        ” you’d be fully onboard with women having to take responsibility for their own safety when out and about.”

        Going home drunk with a rapefugee can be viewed as poor risk management, per-pubescent girls wearing skirts to school is not.

        Getting of a Koln central station and spewing vitriol at masses of men is poor risk management. Getting off to stroll to a NYE with no prior contact only to be molested and raped is not.

        In both, the former are measures where they can exert responsibility for their behaviour, in both instances, the latter has no bearing on their behaviour.

        “Guess it’s different when there’s scary brown people to be blamed.”

        Only in the mind of an SJW is a rape epidemic due to cultural conditioning a ‘white racism’ issue.

      • drsmithy

        “It’s pretty easy. You’re parroting rhetoric” No I’m applying simple psychology and logic. You should try that.

        “They’re not “outside the program”. Boat arrivals are part of “the program”, just like people that arrive on planes, magic carpets, or anything else” outside the program

        ” is to provide a convenient political scapegoat and focus of rage for people like you” If it weren’t in the media I’d be stirring it up.

        “She is incapable of intelligent debate. As usual, you are immune to facts and reason” I think I’ve got it pretty right.

      • drsmithy

        “Guess it’s different when there’s scary brown people to be blamed”

        What a ridiculous comment. Why would you purposely expose Australian women to people that clearly have different values when it comes to women. Mate, wake the fk up.

      • No I’m applying simple psychology and logic. You should try that.

        LOL

        outside the program

        Boat arrivals are part of the humanitarian visa program. This isn’t an issue of opinion or discussion, it’s an issue of fact.

        If it weren’t in the media I’d be stirring it up.

        Yes. I’m sure you would be focusing more tightly on the immigration rounding error of refugees. Obsession does that to you.

        What a ridiculous comment. Why would you purposely expose Australian women to people that clearly have different values when it comes to women.

        I wouldn’t.

      • I’ve never blamed a person who is a victim of an abusive relationship. I said there are better way to manage their circumstances.

        That’s not how I remember it, but I can’t be arsed trawling back through years of posts for an example. I certainly remember you arguing quite strongly that women who leave absuive relationships should not receive any social support because it’s their fault for getting into them in the first place. From memory you were railing about how “the feminists” were running public policy, or something like that.

        You certainly make no secret of your contempt for women who seek to make more of their lives than being pretty and raising children.

        Only in the mind of an SJW is a rape epidemic due to cultural conditioning a ‘white racism’ issue.

        Speaking of lying, I didn’t say anything of the sort.

      • “That’s not how I remember it, but I can’t be arsed trawling back through years of posts for an example. I certainly remember you arguing quite strongly that women who leave absuive relationships should not receive any social support because it’s their fault for getting into them in the first place. From memory you were railing about how “the feminists” were running public policy, or something like that.”

        I made an argument that from a link in a thread, that we should not be increasing support services that the feminist in the link proposed, and the burden of proof as proposed by said feminist. I asserted it was not the duty of society to make a carte blanche provision for those that flee from allegedly abusive relationships PARTICULARLY in light of there being virtually zero funding, services or even acknowledgment of females committing domestic violence, and there already being gender bias with respect to domestic violence.

        “You certainly make no secret of your contempt for women who seek to make more of their lives than being pretty and raising children.”

        An SJW’s interpretation.

        I personally place greater value in fertility, nurturing of the family and a woman keeping in shape. I find little value in sacrificing these to be cubicle slaves to acquire more handbags and shoes.

        I whole heartedly encourage every man to feel the same way, and if such men come around to this more enlightened way of thinking, then to ‘next’ a woman who won’t commit to such an arrangement.

        But as a proponent of freedom and choice, I don’t endear to coerce women to adhere to such, they are free to make such choices. Just as men are free to omit incompatible partners.

        “Only in the mind of an SJW is a rape epidemic due to cultural conditioning a ‘white racism’ issue.

        Speaking of lying, I didn’t say anything of the sort….


        DrSmithy: “Guess it’s different when there’s scary brown people to be blamed.”
        RP: “Only in the mind of an SJW is a rape epidemic due to cultural conditioning a ‘white racism’ issue.”

        Yeah, I made an almighty leap of faith in interpreting your analogy….

        Stop being disingenuous, you were pulled up by another poster for the same comment.

      • Tassie TomMEMBER

        For what it’s worth Richard I don’t have a better idea to concentration camps either. I hate them, I’m ashamed of them, I was relieved and very happy when Rudd decided to treat these people like people. But everyone knows of the unintended consequences of compassion that took place between 2007 and 2013.

        As Turnbull said about a year ago when the whole Gillian Triggs “burn the witch” thing was going on: “We had 1980 children in detention when we came into office and we’ve got 160 there now.” I’d call that an improvement.

        There’s no reason that we can’t make our concentration camps more humane though – conditions are pretty appalling there I’m led to believe. I doubt that providing decent housing, water and sanitation, health care, and security and protection in our concentration camps would act as much of a “pull factor” for the potential clients of people smugglers.

      • Tassie Tom

        That’s a very cool candid comment Tassie Tom.

        I agree, there is no reason they should be treated so inhumanely in detention. I doubt many Australians would disagree. I think if they come by boat, never getting to Australia, is enough deterrent.

        That’s the whole problem with nutter left like drsmithy, they want them to have it all, to open borders with wholesale arrivals given citizenship. The result is most Australians are just not listening causing the terrible situation they’ve got on Nauru. So essentially people like drsmithy are the problem.

      • That’s the whole problem with nutter left like drsmithy, they want them to have it all, to open borders with wholesale arrivals given citizenship.

        Why lie ? What’s the point ? Anyone can read my posts and see I’ve never said anything of the sort.

      • An SJW’s interpretation.

        No, I’m pretty sure anyone who reads the next few paragraphs would reach the same conclusion.

        But I’m guessing “SJW” has a pretty circular definition in your mind.

        Yeah, I made an almighty leap of faith in interpreting your analogy….

        LOL. You apply scalpel-like pedanticism whenever anyone dares to “interpret” the quite obvious intent of your comments, yet feel free to read completely irrelevant meanings into others.

        Nothing I said bears any resemblance to your “interpretation”.

      • But everyone knows of the unintended consequences of compassion that took place between 2007 and 2013.

        Is there a reason, do you think, why those same “unintended consequences” did not manifest in the days before the foreign concentration camps ?

        There’s no reason that we can’t make our concentration camps more humane though – conditions are pretty appalling there I’m led to believe. I doubt that providing decent housing, water and sanitation, health care, and security and protection in our concentration camps would act as much of a “pull factor” for the potential clients of people smugglers.

        In the minds of “pull factor” believers, even the camps we have now are clearly too accommodating. After all, there are still some trying to get here !

    • Great stuff LordDudley totally agree. As someone with a young family I have almost given up hope that things will change here, almost every way you turn its either some rent seeker sucking the life out of you or some business run by mates of mates of buddies of pals. It feels like some sick joke living here.

      • I was talking to a bloke who does some tree clearing and he gets work from a Chinese doctor who owns about 140 properties around Gladesville in Sydney. That is 140 people/families with their life being sucked out of them in a real world game of Monopoly.

      • I was talking to a bloke who does some tree clearing and he gets work from a Chinese doctor who owns about 140 properties around Gladesville in Sydney. That is 140 people/families with their life being sucked out of them in a real world game of Monopoly.

        Report it to the ATO if he’s a foreign Chinese doctor who bought existing properties….

    • I wonder how Obama did certain things like shut down coal power stations by cracking down on mercury emissions:

      Got GE to make Chevy Volt.

      Increased the fuel economy standards of cars.

      Funded high speed rail.

      Gives a big tax break to electric cars.

      Puts a big tax on every 457 visa (called H1-B in USA).

      Is the AUS federal government really so corrupt that it will do none of the above?

  4. He is the quintessential corporatist politician, more transparently corporatist perhaps, but the same as all on the Laberal payroll.

    Policy is set by the corporate lobby that buys the outcome they need.

  5. It simple.
    If rents are going to fall because of oversupply of apartments etc ( which appears to be happening ) then the Property Council should back the removal of NG if they truly believe that by doing that rents will rise. The rise in rents when NG is scrapped will offset the fall in rents that’s very apparent today.
    Scrap NG Property Council to save your market!

      • Mining BoganMEMBER

        Good-looking investors, want more cash in your pocket every week? Need more relations? Well, here’s something for you! Just remove Negative Gearing. Yes, that’s all. Watch your rental income skyrocket. No more waiting 12 months for that little tuck. Yes, you too can make a visit to gloriousness every week with one simple move…

        Remove Negative Gearing to make Australia beautiful, week by stunning week.

  6. “Let’s look again at the data.”

    You should catch phrase that Lieth. Also we need a counter to see how many time you have to repeat yourself before any meaningful change is in place. And as our resident let’s bring on a recession to start the change lord dud is beginning to sound right on his one…

  7. I have no doubt that both Morrison and O’Dwyer will do their best to avoid modifying the negative gearing rules in any way whatsoever. The problem that they’ll face is that Turnbull is desperate to cut income and corporate tax rates and he needs a large new revenue source to balance out these cuts.

    I wouldn’t necessarily bet on substantial changes to NG rules (maybe limiting the deductions to an annual amount that only 10-20% exceed) but it’s possible that there may be changes to the CGT discount like reducing it to 40% (as I believe Henry recommended) or returning to annual indexing (which would be the most sensible way). Reducing the generosity of the discount would have the effect of making property investment less attractive at the margin, particularly if savings interest is included in the discounted rate as Henry recommended.

    Either way, the massive amount of debt that Australians hold and the need for it to keep rising to infinity make me think that a massive crash is coming no matter what the government does.

  8. Tassie TomMEMBER

    How much does NG cost the government in tax foregone? Is it something like $3 billion/ year?

    That’s a lot of money to “help middle Australia get ahead”. Why not just tack this $3 billion onto the Family Tax Benefit program if you want to help middle Australia get ahead, instead of forcing them to gamble on massive leveraged assets.

    PS: “The Guardian’s Greg Jericho dissected this data and found that investment property ownership is clearly skewed towards the highest income earners, with the richest 20% of households accounting for 39% of all housing investors:”

    Greg Jericho – great writer, but gets horribly muddled between high-income and high-wealth (rich). UE – you’ve re-quoted his muddlement. Sorry – had to pick up on that one – NG to wealth deciles would probably be even more spectacular.

    • “…gets horribly muddled between high-income and high-wealth (rich).”

      Completely agree and it’s something that you see very often. We should be aiming to tax wealth more heavily, not income – it’s much harder to avoid and it’s more equitable as well.

      • Even StevenMEMBER

        I don’t agree that it’s much harder to avoid. A wealth tax would require reliable measurement of all sorts of valuable assets: cars, artworks, jewellery, gold, overseas assets. Many of these can be hidden or simply not disclosed. Huge implementation difficulties.

        In comparison, income is paid in cash (measurable) and is generally linked to TFN – bank accounts, share dividends, ordinary wages.

        But I do like the idea of a wealth tax – just not sure it’s feasible.

      • Tassie TomMEMBER

        Hi AB – thanks – they’re my feelings too.

        I’m biased because I earn a decent income (and I’ve worked bloody hard and sacrificed a lot to get qualified and I still work bloody hard for it) and I didn’t come from wealth. At the end of the year I look at people who were born into money and their wealth at the end of the year has increased far more than mine has – largely unrealised capital gains, and they contribute stuff-all tax.

        @ Even Steven – I agree that taxing wealth is difficult, but it shouldn’t be insurmountable. The easy things to tax are often the most inefficient things – transfer taxes, insurance policy taxes, payroll taxes, customs duties, and of course income.

        50% of all of Australia’s combined wealth is land alone and you can’t hide land. A land tax would solve 50% of the wealth tax problem and would also help solve the foreign investment problem. ie, if the Chinese want to own $170 million worth of land being Cubbie Station or if Moon Lake Investments wants to own $250 million worth of land being The Van Diemens Land Company, then at least they’ll be contributing $1.7 million and $2.5 million each year (at a flat rate of 1%) to the Australian Government.

        As for the other 50% of Australia’s total wealth (assets minus debt), it gets complicated but the structures are already there for the 2 million pensioners having their assets test assessments.

      • I agree with basically everything you’ve both written.

        @Even Steven, you’re right that it is possible to avoid a wealth tax but I’d argue that the rate would be so low that you’d be better off picking investments with a better rate of return and pay the tax than trying to avoid the tax by buying lower-returning assets.

        e.g. The French wealth tax highest rate is 1.5% for assets above €10,000,000 so you’d have to be confident that your undisclosed asset would be going to earn pretty close to what your disclosed one would for that to make sense.

        @Tassie Tom, a LVT would be a great start, particularly for Australia. Even though I’d prefer a more general wealth tax so as not to distort investment choice, an encouragement away from land speculation wouldn’t be such a bad thing for Australia.

      • I don’t agree that it’s much harder to avoid. A wealth tax would require reliable measurement of all sorts of valuable assets: cars, artworks, jewellery, gold, overseas assets. Many of these can be hidden or simply not disclosed. Huge implementation difficulties.

        Certain aspects of wealth are very easy to identify and assess. Property, cash, investments. Generally the more “useful” wealth is, rather than decorative, the easier it is to find.

        That others are harder should not be a barrier to addressing those that are easy. The perfect does not need to be the enemy of the good.

  9. Everything should be left the way it is, so that nothing can be blamed as the cause of the crash.

    The global external event is coming and Australias foreign credit addiction will lose its dealer.

    “Australia’s Housing Market goes Cold Turkey”

    • I’m on the fence with this one. How will the argument be spun. Even if the msm correlate a crash to the removal of NG what would the headlines read? They’re pretty good at making good news look bad already so prepare to be incensed.

    • It doesn’t seem like there’s spine enough to alter anything now anyway. We are the deer in the headlights of GFC 2.0.

    • Yes, yes he has. Although to be fair, it is actually Malcolm who has gone rogue, since he is the one departing from the IPA & LNP rhetoric.

  10. Guys, that report that Treasury has done no modelling on limiting negative gearing clearly states that it was in relation to the Abbott government only. There have been several articles recently that mention limits to negative gearing being incorporated in modelling that they have been reviewing. I am not a coalition fan boy by any means, but I worry when you overlook details to make your point.

  11. Once again, no mention by the PCA (or ScoMo or Leith) of “NG for new builds only”.
    This simple tweek neutralises all the FIRE/PCA/HIA supply scare nonsense in one sentence
    Why don’t you raise it as an option Leith?

    • “This simple tweek neutralises all the FIRE/PCA/HIA supply scare nonsense in one sentence”

      They’d still argue that rents for existing properties would rise until landlords no longer make (currently) tax-deductible losses.

      • There is actually less chance that rents could rise due to the increased rental competition/supply from the surge in new builds. (that is one reason they don’t want it.) There is a good chance rents would actually fall.
        One of the key selling points is that they can’t say “we tried this in 86/87 and it failed”.
        “NG for new builds only” has never been tried before.

    • That would simply be a gift to developers who could justify charging a premium on new developments because of their special tax status.

      • …and new supply would flood the market pushing down rents and prices
        Boosting construction employment
        Boosting govt revenue
        Win win win

  12. Everything is on the table in terms of tax reform, except of course negative gearing and half capital gains tax concessions. But we are definitely looking at GST. Yeah…

  13. Terror Australis

    “A proposal which originated in the Henry tax review would cut the discount to 40 per cent and extend it to all investment income including rents, dividends and bank interest”

    (Franked) Dividends are effectively already tax free or at least the tax is greatly reduced by their franking credit. So is Morrison going to eliminate dividend imputation? That passage doesn’t make much sense.

      • Terror Australis

        Either way, dividends are effectively untaxed or very lightly taxed in the hands of individuals and that won’t change. I’ve got no problem with that as tax has already been paid when earned at the company level.
        It’s one of the things that we’ve managed to get right in this country.

        A tax break on bank interest COULD be a good idea but I’d like to see some analyses on this because I suspect that the lions share of the tax benefit will go to the rich. I’d rather see a rebate, capped at a limit of say $5000 for tax paid on term deposits, to encourage people to save and not speculate.

        A tax break on rent income should send alarm bells ringing to everyone here at MB. I don’t know what percentage of rental properties are “positive yield” but I suspect it is less than half.
        Even so, to the extent that any change makes rental yields more attractive (post-tax) it succeeds in pushing up investment property prices. Exactly what we DONT need.

  14. In The Australian today, there was yet another chart showing NG broken down by TAXABLE income rather than GROSS income. This is really annoying! In no other context do you see net incomes reported. Childcare benefits, for example, are (quite rightly) based on income BEFORE any NG deductions.

  15. “After all, between 1989 and 1995 he was the National Manager, Policy and Research, at the PCA. So understandably he has fallen into line..”
    Fallen into line? He wrote the book

  16. I think it’s a stretch to say that the Kenny article confirms the govt is looking at the Henry proposal. They seem to just be saying that Henry’s solution is just one thing they could look at.

    If the Henry proposal was brought in, that would be a massive change to the taxation of investments in Australia. There has been little or no discussion on this with industry to date so I would astonished if it was dropped on us in the budget.

  17. I expect nothing to change with regard to Negative Gearing, just like the way foreign ownership laws are flouted. Some may recall in the weekend links I talked about adverse possession of a vacant property, been that way since 2005 as far as I can tell…

    I did a title search today which cost me $12 AUD, it shows that the owner’s name is XIAO PING SHI and it is a joint ownership with a ROBERT EVERALL RUSSELL – I looked up both, it appears ROBERT EVERALL RUSSELL is a pseudonym do a Google Search you’ll see what I mean…

    At this point it doesn’t take a genius to figure out what’s going on… Anyone walking neighborhoods and seeing boarded up homes in affluent areas would / should be able to take a reasonable guess…

    For all the talk of foreign buying clampdown, it’s just that talk.

  18. scotthochgesang

    Any changes to negative gearing will bring in at most $1B of tax revenue. We are facing $40B deficits. For those who can do math.

    If negative gearing changes slow the build of new properties, as it almost certainly will, and immigration continues at near current levels. you can expect lines of renters at home opens. Enjoy…