Dodgy Turnbull drowning in negative gearing lies

By Leith van Onselen

Prime Minister Malcolm Turnbull appeared on ABC’s 7.30 Report last night where he kept the negative gearing lies flowing. Below is the extract of the exchange:

MALCOLM TURNBULL: Well let me just – let me give you the point I was – continue the point I was making about Labor. So at a time we need more investment, they’re increasing the tax on investments. Is that well thought out? I don’t think so. At a time when we want Australians to have a go and be enterprising, start new businesses, start small businesses, they are – they are – with their negative gearing policy they are going to prohibit anyone from offsetting an investment loss against their personal income unless it is a new residential property. So – so …

LEIGH SALES: There are countries overseas that have far less generous negative gearing policies than Australia. Their economics still tick over, their stock markets still grow, businesses still open up.

MALCOLM TURNBULL: Leigh … let me finish. So that means, under the guise of housing affordability, you would not able to not only buy an existing flat or a house and negative gear it against your personal income, you couldn’t buy a shop, you couldn’t buy a warehouse, you couldn’t buy an office suite. What’s that got to do with housing affordability? You couldn’t buy a portfolio of shares in public companies. What’s that got to do with housing affordability? You could not capitalise with a partner a private company to start a business and offset that against your income. Now, the reality is that most of us start off with only our human capital and we start off in life earning some money for ourselves in our profession, in a job and we leverage that – we borrow money and leverage that to start something else. Labor is saying you can’t do that anymore.

LEIGH SALES: But in your first interview with this program as Prime Minister you said that the first principles of the Turnbull Government would be the free market.

MALCOLM TURNBULL: Yes.

LEIGH SALES: So why are you now violating that principle by backing negative gearing, which is a government intervention that distorts the market?

MALCOLM TURNBULL: That is – that is so wrong, Leigh. I’m sorry to …

LEIGH SALES: It’s a government policy, it’s not free market.

MALCOLM TURNBULL: No – (laughs) Negative gearing is – is income tax 101. It’s not a tax concession at all. What it means is – it is a fundamental principle of tax law and has been forever that you can deduct from your income the interest expense of money that is borrowed to purchase an income-producing asset.

LEIGH SALES: It’s a government incentive.

MALCOLM TURNBULL: It is – it is a normal tax deduction.

LEIGH SALES: It’s not …

MALCOLM TURNBULL: The incentives – the incentives – there are incentives given. We’re providing incentives to invest in start-up companies. Superannuation is full of incentives. There are incentives to invest in certain types of projects – water projects, for example. Right across the country, there are tax incentives. Negative gearing is not an incentive, it is simply a basic income tax principle. Do you think …

LEIGH SALES: You’ve raised – you’ve raised housing affordability as well. You assume – you seem to assume Australians want housing prices to keep rising when housing affordability is an issue of great concern to many Australians who might like to see housing prices fall.

MALCOLM TURNBULL: Well, I don’t think it’s – well, I don’t think many Australians who own houses want housing prices to fall.

LEIGH SALES: No, but they want their kids to be able to afford them.

MALCOLM TURNBULL: Let me go on. The reason why housing is not as affordable or accessible as it should be is because we are not building enough houses. Now let me give you an example of what Labor’s policy would do. If you take – underlay this plan, the only housing that investors can invest in and deduct their losses against their income would be new housing. Now if you go out to the outer suburbs of Sydney or Melbourne you will find lots of new subdivisions and new houses and young couples will be buying house and land packages. And that’s – and they are the bulk of those buyers for that. Under Labor’s plan, they will now be competing with investors.

LEIGH SALES: Isn’t this going to my point that Labor is setting the agenda here because you are responding to their policy?

MALCOLM TURNBULL: But let me – Labor – well, they have put out a policy that is so ill-considered and so dangerous that it has to be responded to. But just let me come back into the city.

LEIGH SALES: Briefly ’cause I want to go through some other things.

MALCOLM TURNBULL: Yep. So we get into the city and we get close to the city and we have lots of apartment buildings. Most of those apartments are often tenanted, so people are renting them. The owners, naturally, are investors. Under Labor’s plan, those investors when they sell can only sell to home owners. So what will happen is the number of tenantable, rentable properties will contract. Rents will go up. People who can’t afford a home but need to rent will have fewer apartments to rent. And, of course, you will end up – because that will bring prices down, fewer new dwellings will be built. What we need is a comprehensive approach to cities, which is part of my government’s policy, which will ensure that when we invest in infrastructure in cities, we get outcomes that will deliver more housing availability – planning outcomes that will ensure more dwellings can be built, and hence, there will be more affordable housing.

Let’s debunk Turnbull’s lies one by one.

First, Labor’s negative gearing policy would only apply to “passive” investments, like owning an investment property or shares, so it would not impact direct business investment, which is “active” investment.

On this point, it is worth reminding readers yet again that in his 2005 tax policy paper, Malcolm Turnbull described negative gearing and the CGT discount as a “sheltering tax haven” that is “skewing national investment away from wealth-creating pursuits, towards housing”, and has caused a “property bubble”.

Therefore, it is highly contradictory for Turnbull to argue that Labor’s reforms to negative gearing would suddenly choke genuine productive investment, when this is already happening under the current rules. If you want proof, check-out the below chart:

ScreenHunter_11879 Mar. 07 10.09

Since the GFC, outstanding business loans have increased by only 10% in nominal terms whereas outstanding property investment loans have ballooned by nearly 80%. If there is one segment that is losing-out from the current tax structure it is productive business lending, particularly lending to small enterprises, which is being crowded-out by housing lending.

Turnbull is also conveniently silent on why current tax rules allow individuals to claim unlimited negative gearing deductions for property investments into perpetuity, but if they invest in a productive side business, they must meet all kinds of criteria in order to claim losses against their wage/salary earnings, including showing a profit in three out of five years.

Moreover, in his 2005 tax paper Turnbull admitted that “Australia’s rules on negative gearing are very generous compared to many other countries” and that “the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future”.

Second, Turnbull’s claim that the reason why “housing is not as affordable or accessible as it should be is because we are not building enough houses” is a direct argument for Labor’s negative gearing policy, not against it. It is also precisely why this Coalition Government has backed foreign investment into newly constructed dwellings, while banning it from established dwellings. Again, here’s the chair of the foreign investment inquiry, Liberal MP Kelly O’Dwyer, explaining the benefits of this ‘new homes only’ policy:

“Currently the framework seeks to channel foreign investment in residential real estate into new dwellings in order to increase the housing stock for Australians to build, buy or rent. Foreign investment is encouraged in new dwellings whether they be apartments, units or homes because in addition to creating more supply, it also creates more jobs for the building and construction sector – all of which helps to grow our economy”.

So Turnbull’s opposition to Labor’s policy directly contradicts its own stance on foreign investment

Third, Turnbull’s faux concern about first home buyers of newly constructed homes being crowded-out by investors is laughable given this is exactly what has occurred under the Government’s existing negative gearing policy (see below chart).

ScreenHunter_12057 Mar. 16 16.06

It is precisely first home buyers that have lost as investors have piled into established dwellings, crowding them out and forcing them to be tenants. Labor’s policy would reverse this trend.

Finally, Turnbull’s claim that “the number of tenantable, rentable properties will contract”, “rents will go up” and “people who can’t afford a home but need to rent will have fewer apartments to rent”, is nonsensical.

Sure, there would be less “investment” (read transfer of ownership) in existing dwellings, but those homes would not magically disappear from the supply-demand equation. Rather, those homes would be purchased by an owner-occupier, thus reducing demand for rental properties by the same proportion as the fall in rental supply. Turnbull has completely ignored the fact that the pool of tenants will similarly decline as they become owner-occupiers.

More importantly, because Labor’s policy would channel negative gearing towards new builds, overall dwelling construction would increase, as will the supply of rental accommodation. And this extra supply would obviously lower rents, other things equal. It’s economics 101.

Again, if Turnbull truly believes his spin, then why does his Government champion foreign investment in newly constructed homes, but preclude it from established dwellings?

Your arguments make no sense, Mr Turnbull, and contradict your Government’s own policy on foreign investment and your previous written views on negative gearing and the CGT discount.

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Comments

  1. Slimy fucker.

    Sometimes the ends justify the means and sometimes they don’t. He’s thrown integrity to the wind in pursuit of power and repaying favours. I wonder how his conscience is going…?

    • Peachy – I was with you until you mentioned ‘conscience’….then you lost me…..

    • Conscience? WTF?

      The guy is worth $200m. He’s the PM of Australia.

      I can guarantee you he got there by not having one.

    • He has no conscience – so, in answer to your question – it’s going very well.
      What is this “conscience” thing you’re talking about, pale-face?

    • LOl, not being a political animal and feeling every political party is composed of crony capitalists, I must say that having now read the dribble Turnbull has come out with I had no idea he was so full of, well. Bull.

    • While Nero Turnbull fiddles, I hope he has a little James Reyne stuck in his head:
      “Well I’ve been living a categorical lie
      ….
      Everybody said what’s that sound
      Put it in a skillet and a’slap it all around
      And everybody said I can’t stay home
      Still thinking ’bout the Fall of Rome”

  2. The figures show 1.26 million Australians negatively geared during 2013–14, around 1 in every 10 taxpayers. A further 707,000 rented properties for profit. The negative gearers lost $12 billion between them, roughly double the $6.7 billion made by landlords who rented for profit.

    How’s this for some home truths? from Peter Martins article.. http://www.theage.com.au/federal-politics/political-news/tax-stats-meet-the-56-millionaires-who-pay-next-to-nothing-20160321-gnndna

    • GunnamattaMEMBER

      Look at the sub 18K ‘incomes’ (post tax) with their high levels of net rental – tells you people are minimising their incomes below the threshold

      then see the % of individuals claiming net rent climb again after 90K

      • That is why it will be a huge correction becuase it makes no sense without capital gains. Currently they cope with an acutal 20K annual loss for a 40K paper gain. But time will turn that into a 60K loss and narry a buyer in sight ! Its fuckin poetry !

    • MArtin’s figures are wrong – those showing income was $8b, not $6.7b. So the net is a loss of $3.7b.

      And of course they ignore the $14b in capital gains made by property investors.

  3. If some had not got it yet the LNP and Tonofbull have industry mates to protect….

    Skippy… might as well change their name from liberal to fill in the blank _____ industry advocacy group.

  4. Jaqui Lambi on QA last night stuck the knife into the Dyson Hayden inquiry.(and it’s secret threats to the whole nation)
    That farce will be the undoing for the LNP. It is a true ticking bomb.

      • The loose cannons have publicly stated their greasing the deck on a troubled ship in rocky seas….

      • Today's Empire Tomorrow's Ashes

        Skippy – I am interested in your insight but it would immensely useful if you could speak in plain English.

      • Perhaps WW has this Lambie quote in mind?

        “I can tell you what is contained in those secret reports. There is nothing there that is not normal; that happens on the outside and in other places, whether that’s even what’s going on in our banking and finance sector, whether it’s going on in our sport.”

      • Today’s Empire Tomorrow’s Ashes…

        As Janet posted, Lambie is alluding to the network effects are equally distributed across all sectors, as such, too pin the ***corruption*** tail on Unions or the lower tier construction monkeys – is just the pot calling the kettle black.

        Skippy…. Sorta like as the fish rots from the head down… the head blames the tail for all the rot – rort… and some don’t think there is class war ongoing…. or that income is actually power… power to get others to do stuff for you…

      • ErmingtonPlumbingMEMBER

        “Negative gearing is not an incentive, it is simply a basic income tax principle”

        Sticking to the script like a true blood money, Sachs Man.

        Question, When did Mal have more Power to influence economic outcomes, Now as Prime Minister of Australia or before as Head of Goldman Sachs Australia?
        Its not like we can expect him to answer such a question Honestly.
        But this former Sachs Man does, @ 2.36mins in

        https://youtu.be/eEV3zJbahvM

      • ErmingtonPlumbingMEMBER

        @ MBogan

        Thanks for the link, That Jacqui Lambie just keeps on getting better and better, she is learning her Trade well. How are the senate changes likely to affect her?

    • @WW — Yes Jaqui Lambi is a great example of an ordinary person with little formal education growing into a worthwhile representative. I’m an admirer for sure. There are others too amongst the micro parties that have done a great job. The Libs may get a nasty surprise at the Election.

  5. FiftiesFibroShack

    So how many years of government intervention does it take before it’s no longer government intervention?

  6. and this blog…LVO et al cheered when saint mal took over

    they are ALL the same

    turnbull is worse..at least we knew abbott was a dill

    get over the cheerleading Leith…

    • Can’t fault their hopeful optimism.
      Me myself, iI still pick mal over tony. At least we’ve seen a reduction in massive gaffes.
      No John Oliver segment just yet. Thats something.

  7. Yes well we know who is in charge, and it’s not the Government but the entrenched rent seekers.

  8. My taxes are higher than otherwise because of Negative Gearing. Millions of Aussie families must rent their home because of the advantages NG confers on investors. Overseas debt is higher because of NG.

    It is about time government used the perpendicular pronoun and recognised where and how it taxes has a profound impact – and that change here is entirely within its grasp.

  9. question that Leigh Sales should have asked..

    Malcolm..you are a man of means .,…a self made man..what advice would you give young people on modest salaries in Sydney and Melbourne looking to buy, given that you stated that you don’t want to see the value of housing drop??

    Malcolm….do you think that pollies should declare an interest in housing if they have this for investment before commenting about it??

    Malcolm..you say that we need to build more houses…as there is a shortage…is it fair that some people should own multiple places when there is a shortage???

    • Australian politicians get a very easy ride at the hands of the Australian MSM, unfortunately.

      PMT and SloMo get to repeat their NG lies ad nauseum, putting up with a little pecking from the MSM on the sidelines. In the UK, they would be chewed up, spat out and left with no room to turn around and repeat their nonsense at the next available opportunity.

    • “No guy wants to cheat and hurt his woman. First of all, think about what cheating is for a second, ladies. Cheating is a man — he sneaks out of his own house to go and find some happiness behind your back. Just so your feelings aren’t hurt. Cheating is for you, it’s not for me.”

      — Patrice O’Neal

  10. Meanwhile the ATO is doing SFA about foreign investors. My friend’s husband who does real estate sales for Chinese had a short term bust but business is suddenly back now as they realise our government is happy to let it keep happening.

    • We have noticed a small turn in interest for Australian property too, but it has corresponded with a raft of lies told to potential Chinese buyers. Best one was for a Wanda property on the Gold Coast where the agent promised our friend 16 years guaranteed rental return, she could borrow the money in China, and resale would not be an issue as she can simply sell it to another Chinese investor. In Sydney, a mortgage broker who works solely with the Asian community has confirmed that their offices were advised by the big 4 banks that they would no longer accept mortgage applications with foreign income declared and a number of loans issued in the last 18 months were being “called” for immediate payment. At the upper end of the market, things are still ticking over but it seems that only Chinese with established businesses outside China are able to fund the actual settlements. Still hearing questions about how to sell off-the-plan prior to settlement as cash crunch is hitting a few we know in China.

      • Oooh – those little gems of truthiness are a keeper! Though – I can bet a couple of bucks that ultimately they will lead to a few of these story-telling agents going to do location-location-location research at the bottom of a lake somewhere, with no scuba-diving equipment, and weighed down by a really fashionable pair of concrete-boots.

      • Mate “fashionable pair of concrete-boots” is so last century – the boots of choice are Steel Blue safety boots in the Stainless Steel version – as endorsed by Dennis Lillee. Comfort and protection as you work the graveyard shift and guaranteed not to rust for 5 years!

      • SoMPLSBoyMEMBER

        Funny OJ!
        And like Strayan manufacturing being so last century, those Steel Blue boots are typically built overseas. Only Rossi boots are still all built here. And I’m sure they’d be happy to craft a custom set to fit the feet of those RE agents , brokers and their clientele (if you know what I mean?)

      • +1 Rossi Boots. Bought a pair of Rossi work boots (no steel cap) from Bunnings for general yard duties. Very happy with them…took a while to break in. Bought them specifically because they are Aus made, and around the same price of O/S made brands. Hopefully the TPU sole lasts…typically the achilles heel of all work/safety boots.

  11. tripsterMEMBER

    I watched this last night and it was painful. I had to switch it off before the end. Turnbull, who I had hoped would be principled and honest, is just another slimy politician beholden to special interest groups and more interested in mainraining power than doing what is in the best interests of the nation as a whole.

    • I had to turn off also but he really sounded rattled by Sales he is not suited to confrontation, should therefore stop his dishonest utterances.

      • he really sounded rattled by Sales

        Maybe. But she let Turnbull go on and on and on with his crap about how being able to deduct NG losses is one of the “great principles” of our tax system. Obviously she and her assistants don’t understand the principle of quarantining NG losses for use against future income and thus she wasn’t prepared to deal with Turnbull’s waffle.

        Political interviewing in this country is pretty mediocre but it could be worse I suppose.

  12. Turnbull does make a lot of contradictions and dumb comments, but Leigh doesn’t do that much better.

    “government intervention that distorts the market”

    Negative gearing has been around since at least the 1930s… Turnbull is right, it’s a normal tax deduction.

    “It’s a government policy, it’s not free market.”

    Any changes to NG would also be government policy…

    • Ronin8317MEMBER

      Tariff has been around since human civilization. It is still a distortion to free market.

    • Not entirely true, the character of the deduction has changed in recent times to allow capital speculation in line with looser monetary policy and changes to banking practice from government/policy backing. Revenue deductions for capital speculation were never part of the tax policy, the ATO lost control of the area and hasn’t been able, inclined or encouraged to reel it back in.

      • Exactly AJ. The law hasn’t changed but the interpretation (and widespread and ongoing usage) of it certainly has.

    • two plus twoMEMBER

      Are you kidding me BB? Offsetting losses from one asset class to artificially reduce taxable income should be a textbook example of a market distortion. Just because it has been around for a while doesn’t mean that it’s any less distorting.

    • BB. You’ve been around here long enough to know Leith has explained in great detail how NG contributes to capital flowing into property markets (as does CGT concessions etc) now government supply interventions that historically kept a lid on property price appreciation are gone. Given your calls for accuracy BB, your post is laughable. Almost made it to Troll status mate.

      • What specifically in my post is inaccurate?

        Yes changes to other policies have made negative gearing an attractive option for those speculating on price growth. However, given negative gearing has been around for 80 years, how is it an intervention?

      • It is an intervention because it was introduced to encourage investment in property. It worked, and worked so well that now the foregone cost of keeping negative gearing is enormous due to the disparity between price and rental returns. In other words, negative gearing has distorted the market so much that the cost of maintaining it is borne by those very people who are priced out of homeownership.

        Removing negative gearing would not be distorting the market – it would be removal of a distortion.

      • BB

        Try asking some real questions. Questions like:
        Have there been changes in either the policy or the context within which that policy operates that change the outcomes?
        Have there been changes in the outcomes of that policy that suggest the policy is not operating the manner for which it was prescribed?
        The point about how long a policy has to be in place before it ceases to become an intervention is either an attempt at obfuscation, cognitive dissonance gone mad or outright ignorance. For most any policy aimed at controlling the manner in which markets operate is a form of government intervention unless that policy is aimed at ending an intervention in a market in order for it to operate freely.

      • @ md: Absolutely incorrect. It wasn’t “introduced” to encourage anything, it has simply been a long standing feature of the Australian taxation law. Indeed, it’s been a feature of the the tax system probably for longer borrowing to invest property investment has been a thing for most people.

      • You’re quoting the ALP’s own private think tank as a source? In any case, the footnote in the McKell paper on the “policy intention” of NG references a Grattan Institute paper which itself gives no basis for such a claim.

        So I say again, NG can’t be failing it’s purpose because it has no purpose.

      • NG can’t be failing it’s purpose because it has no purpose.
        Really! Then there’s nothing stopping us from axing NG for IPs – right?

        PS: The McKell Institute actually cites evidence so for the contention so they are substantiated claims.

      • It doesn’t as far as I can see.

        As for abolishing it if it has no purpose, that’s fine so long as you aren’t making things worse. I note McKell themselves say “The fundamental principle that should govern
        tax deductibility of expenditures is that all asset
        classes should operate on a level playing field. The
        introduction of negative gearing adhered to this
        principle. ”

        (which confirms my view that NG doesn’t create distortions) but then go on to say why property is in fact deserving of a special rule. I am unconvinced by these arguments (and McKell is hardly gushing when it concludes “in light of this, arguably does not provide a level playing field”) but even if they were correct, they can be addressed by other means (macroprudential for instance) rather than taking a sledgehammer to a fundamental tenant of our tax system.

        Interestingly, the McKell paper seems to exclude the need to stop NG on other investments but the ALP policy ignores this.

      • … I am unconvinced by these arguments (and McKell is hardly gushing when it concludes “in light of this, arguably does not provide a level playing field”) but even if they were correct, they can be addressed by other means (macroprudential for instance) rather than taking a sledgehammer to a fundamental tenant of our tax system.
        …and that “tenant” (note: interesting play on words 😉 ) shall be that those with the means shall be given more scope to reduce their tax regardless of the consequences. This principle is not the Holy Grail Jason and I (like others) refuse to believe an essential need like shelter can be treated the same way as something like shares. We’ll just have to agree to differ on that one mate. Particularly as the tax system has been far from a “level playing field” for decades.

      • Some more evidence of the “enhanced supply arguments” for you Jason:

        http://www.propertycouncil.com.au/Web/News/Articles/News_listing/Web/Content/Media_Release/National/2016/Labor_s__32_billion_hit_on_property_owners.aspx
        “The ability of average Australians to save for their future by investing in housing will be put at risk by proposed changes to negative gearing and capital gains tax, according to the Property Council of Australia.”
        “You can’t increase taxes on housing by $32 billion and not affect rents, housing construction or prices.”

        http://reiwa.com.au/about-us/news/negative-gearing-report-debunks-myths/
        ” The provision of negative gearing in conjunction with the capital gains tax (CGT) promotes investment in rental properties and increases the supply of new housing.”

    • You mean from 1915.
      Did banks offer 80% IO loans to investors with equity mate deposits in 1915?
      The key difference now is 1) we have a capital gains tax regime and 2) capital gains are taxed concessionally.

  13. Leigh should have addressed his last sentence “they can only now sell to a home owner” (if negative gearing is removed) is false.
    The reason investors wouldn’t want to buy it is because it’s a worthless turd. Not that they can’t buy it. Big difference.
    So you would have a free market then, not one that incentivises gambling by offering Capital gains and in the meantime you can offset your losses against other tax payers.

    It seems like the same people started a company called Lad Brokes. “If you bet and you lose, we’ll give you half our money back. Better betting!” (What stupid Australians don’t realise is they still lose money either way)

    • Precisely. Investors can buy as many established properties as they like, they just can’t negatively gear them.

      Turnbull is hoping we won’t read between the lines of what he’s saying, and draw the obvious conclusion: ‘investors’ have been paying way too much for ‘investment’ properties – more than what the fundamentals (ie. rental income vs expenses) justify.

  14. Its not Turnbull, nor Abbott. It’s a rotten party that essentially has not done any work related to the governing thing. When the coalition was elected in Victoria in 2010, they were stunned at their victory. And they had no idea what to do because their time in opposition had been wasted by not doing any work. So they flailed about for over 2 years, changed leaders, and then bet the house on a poorly planned road tunnel proposal. By 2013, many of the clowns advising them had moved to Canberra, getting on the federal pony and sticking it to the lefties.

    The result was utterly predictable – because Abbott and co had not actually done any work in opposition, just like the Vic Libs in 2010. So their time in Government was mostly fooling about and wondering why it was going so wrong.

    Asking a hollowed out APS to come up with ideas is a bit late, and Turnbull, whatever his talents, can’t turn the ship around. So now we are heading to a DD election where the trigger is a building commission? Try explaining that vindictive little barrow to the general public.

    What ever one thinks of the ALP, at least some of them are doing some homework. Evidently, the penny has dropped. And given they will be outspent considerably come election time, they might as well have something of substance to sell rather than empty slogans.

    • ErmingtonPlumbingMEMBER

      Its a dificult issue MB (work place deaths)
      Im terrified to employ an apprentice with the amount of domestic roof work that I do, if the little bugger trips and falls off the roof and dies, Ill lose my house and there is no insurance for a work cover fine, as an owner operator and with a bureaucratic safty system thats designed to always have someone to blame and fine
      (Insursnce company directed legislation, just as stifling as anything produced by a socialist burocracy)

      The Criticisms of Gillards “Million dollar school halls” and Garretts work place deaths is an interesting contrast of industry safty standards.

      The number of deaths under Garretts multi billion dollar spend was probably around the average, for the volume of work performed during the home insulation programe (It was impossible for Garrett to point this out without looking like a heartless prick)
      Even with installer “training” a number of them would still have been fried (ive been “hit” and “tickled” electrically a number of times from earth faults in the water service under houses and in roof spaces)

      Ex industrial lawyer Gillards arse was always going to be covered with a myriad of layers of responsibility, inductions and training.

      I worked on several “Schools programe” jobs and was amused that, unlike home insulation contractors who got paid directly by Government, I was being paid through no less than 6 layers of contractors and sub contractors, If I died, Gillard arse would have been covered by my oun personal unsafe action
      Then the plumber I sub Contracted to,
      Then the Comercial kitchen contractor,
      Then a small builder providing labor to the job
      Then a larger company with an area oversight
      Then an even bigger company keeping an eye on the above.
      Then the Government who is paying for all this coporate Beurocracy. No one died, but if they did, Gillards ares would have been Clean.

      This is why Catholic schools were getting the same kind of building work done for a third of the price paid by taxpayers.

      Note. At a recent “Safe working at heights” course I attended, the lecturer (a Firefighter) told us that due to work cover legislation/laws, there is not a single Roof truss installed in Australia legally! It can not be done Legally! So if your a small owner operator builder you have No Protection at all! from 6 figure fines if someone trips and falls.
      No wonder people are not employing Apprentices anymore.

      • I used to write the worksafe procedures for working at height for plant shut downs, Refineries, mines smelters stc. With the new regulations, harnesses and hard points etc, the manhours for a shutdown went up 4x and the cost 11x. So the owners shut the plant. eg QNI nickel.
        All this power infrastructure coming up for sale to the public is not capable of being maintained cost effectively. Regulations have finally choked the projects.

      • EP…

        Oh Trusses you say, wellie thank you gang nails and pre-assembly thank you industry driven short cut. Do we have to go back all the way to Carnage to understand the methodology wrt skilled trade and fingering out a/or way to go around that labour cost, even when labour is way down on the list of costs.

        BTW subbing is a great way to also reduce the risk profile and barging power of labour.

        From my early days in construction – master, journeymen to apprentice ratios have now inverted. Hell Lucky to have a journeyman on site rather than running multiple sites.

        Skippy…. I would never touch the big jobs anymore, hard to get variances signed off or payed for, let alone the inevitable cram down at the end. Sole operator or small gang is better off doing short jobs with a full calendar e.g. cash flow.

      • ErmingtonPlumbingMEMBER

        This Shit is causing more damage to Australias Productivity than anything the Union ever could ever achieve,..even when at its most malicious.

      • WW…

        There are higher costs in admin and internal policy marry go round formation. Yet noone is going to compete with regions with low environmental or regulatory environments and that’s more a question of whom is controlling the capital formation. Yet even then the entire market can be screwed by dodgy product costing huge over runs and remediation, crap I can still remember that zinc from China about 10 years ago.

      • Skippy, As a sharp eyed builder you will be on to this.
        When Gang Nails first came out they were made from a soft steel and galvanised wiht proper zinc before being punched into the gang nail profile.
        Then the rot set in. Harder steels were used and cadmium and other platings, zinc alum were used.
        With the original gang nails when they were punched there was sufficinet zinc near to the exposed steel of the nail to protect it from corrosion
        With the later versions, the galvanic coating is not sufficient to prevent corrosion on the exposed steel, and the corrosion starts in the region of highest stress in the pin, ie where the pin is punched out and folded at right angles to the backing plate.
        In regions away from the coast, the gang nails are holding up ok, but in coastal regions, 3km from the beach there is (unsafe) corrosion on many of the gang nails. A good puff from a cyclone will do a fair dinkum Wolf Trick on many of these houses.20 plus years old.

      • WW…

        You completely gloss over the thrust of my comment to focus on the QC of gang nails, bit silly and not engaging in the totality of the industry agenda. FFS if firemen won’t trod on it what does it say about structural integrity, let alone the loss of skill sets…. then industry cry’s about skill shortages… then we get imported labour w/ a lower tax base… and then cry’s about funding it all…

        Skippy… mate I remember working with super board feet to dial in a project….

  15. Nobody ever seems to mention that it will be new apartments that are gobbled up by investors rather than outer suburb new houses for the same reasons they’re marketed to investors now: lower prices; closer to CBD; less maintenance and fashionable.

  16. Great point about foreign investors being restricted to new housing – exactly the same as the negative gearing proposal.

  17. Great work leith
    Why hasn’t that PCA stooge Jason posted a comment yet? Must have the day off

  18. CharlieChaplinMEMBER

    I think you should email this article or even better hand post it. I reckon this will be a big thing in the upcoming election. It would be nice to see you as a talking head on the issue.

    • CharlieChaplinMEMBER

      Sorry, edit: email/post to Leigh Sales. Wasn’t Leith on The Business as an expert guest at some point?

  19. I’m not sure I understand a lot of you. Yes, we need a “government”. The law cannot in itself run transport, police and health. That said, you really have to remember that politicians are not doing ANYTHING for your sake. They’re there for the money and the chance of a dose of the greatest aphrodisiac of them all – power. To that aim, they will ALL say one thing on a Monday and diametrically the opposite on the following Friday as a matter of course. Sensible policy is only trumpeted if it coincides with their personal agenda of the moment. It in no way directs their agendas.

    It’s no good calling them [email protected]@@@s , that’s a bit like calling a blackbird Black. Simply adopt the policy of changing your government frequently and thank God it’s not a one party state. Your vote is the only thing they fear. Democracy is totally inadequate, but the best the human race can achieve. Remember, at heart, your politicians reflect yourselves.

    • The one way you might improve the situation would be to regularly hold a non-partisan(ie monitored carefully) opinion poll on the most prominent subjects of the day and then force the speaker, once a week or so, to read out the results and demand a response from the major parties respective representatives. The Swiss are good at getting together to shove their politicians in the right direction. There’s no reason why we can’t be more democratic.

  20. The real question is how many people Turnbull alienates when he defends NG. That would be an interesting survey.

  21. “Now if you go out to the outer suburbs of Sydney or Melbourne you will find lots of new subdivisions and new houses and young couples will be buying house and land packages. And that’s – and they are the bulk of those buyers for that. Under Labor’s plan, they will now be competing with investors.”

    Can you believe this mind-numbing drivel! Yes, they are out buying out in Methland because all the speculators/rentseekers are buying out every established house in the country. What a joke…

  22. What is he on about?? According to Ian Verrender, Paul Keating as Treasurer introduced Negative gearing in the 1980s.. So is the Turncoat saying that NG is a great labor policy helping the moms and small business?

    EDIT: From wiki
    In July 1985, the Hawke/Keating government quarantined negative gearing interest expenses on new transactions so that they could be claimed only against rental income, not other income. (Any excess could be carried forward for use in later years.) What is less appreciated is that Hawke/Keating had introduced negative gearing only six months earlier. Previous to their initial decision, the Income Tax Assessment Act 1936 had quarantined all property losses from deduction against income from personal exertion (other business or salary and wage income). Any losses incurred in any year would be accumulated on a register and be allowed only as a deduction from income from property in succeeding years. Property income and property losses were in one ‘bucket’, and personal exertion income and losses were in another ‘bucket’.

    While we are on the topic, PJK is a great orator, but now I can see the damage he has done with his neo-liberal policies (AUD free float, setting up an “independent” RBA, NG).

    • Good info Mav – I certainly didn’t know that. You’d think that Labor would be shouting this from the hilltops.

    • Verrender should be doing ABCTV interviews with Turnbull on economic/tax policy.
      Sales has had three goes and she is not up to it.
      or why not have John Daly interview Turnbull?
      or get Andrew Leigh/Turnbull head to head

      • TP,

        I agree, most cannot take them on when it comes to economics etc, they just don’t know enough.

      • Better still; I’d like to see LVO go head-to-head with Turnbull. And I’d like it to be on every TV station and every newspaper.

    • Wiki is incorrect.

      You are better off checking out the Tax White paper process undertaken in the early years of the Hawke govt for background on this.

    • I’m not sure that is correct Mav. The 1936 Act (ITAA 1936) historically allowed the offset of revenue losses to revenue gains. It wasn’t until 1985 that specific provisions were introduced to quarantine revenue losses from investment property to revenue gains from investment properties. Provisions shortly removed as you know.

      Someone out there probably has the provisions here.

      edit. The more important thing here is that historically the provisions were associated with interest for investment on revenue account, not a speculation on capital account.

      • That’s not quite right either aj. Investment in rental property was always on capital account. That was why they needed to introduce CGT because the 1984 White paper had pointed to NG for losses but tax free gains as an emerging issue, especially in the days of 60% MRTs.

        Check out 4.9 of the attached: http://recordsearch.naa.gov.au/SearchNRetrieve/Interface/ViewImage.aspx?B=31427390

        Costello essentially reinstated that (albeit less tax effectively) with his blanket 50% CGT discount.

      • You are mistaking a capital asset with capital account. Property was always a capital asset but the interest was deductible because it was on revenue account… investing to earn income. An investment that was intended to pay revenue. There is no conflict with a gains tax on the asset. However, modern property investment is mostly asset speculation, like buying gold or antique cars or art etc, there is no intent to earn income from the asset other than in form (rather than substance) to come within the provisions to bring the interest expense to revenue account.

        If i developed a product that allowed the purchase of physical gold with a stapled lease agreement that stated the buyer was also lending the physical gold to my other clients (who obtained no title) at a nominal rate of interest, and then sought a tax-ruling for my buyers that the loans were deductible against other revenue, the ATO wouldn’t give me the time of day.

      • I think you would get a deduction in that case because gold is generally on revenue account.

      • Any interest expense for borrowing to buy gold can only be included in the CGT calcs at the time of sale – in the cost base – not deducted on revenue account. In the example i use the ATO would say the purpose of the nominal lease was form only and characterise the interest accordingly.

      • No, I am saying that the prospect of a revenue gain on the gold (ie it is not a capital gain) is enough to justify a deduction.

      • I’m pretty sure those that originally contemplated the NG provisions in the 1936 Act had no intention of incentivising loss making speculative investments. Particularly as the experience of the great depression was fresh in their minds.

      • modern property investment is mostly asset speculation

        “Modern” property investment has been around at least since the high inflation beginning in 1973.

    • I don’t think Verrender is right about that. As far as I know the rental costs (incl. interest) have always been deductible as a general deduction under s 8-1.

  23. PrinceOfPersia

    I think Turnbull is a barrister! How can some one who is educated talk so much crap?! I guess lawyers and Politicians are the master liar! And guess what, there are some stupid people who also believe these carps, LOL. The whole time I was listening to the interview I kept laughing and knew there are people <100 IQ who will totally believe it. We just love it 🙂

  24. Have to say that what this made me realise is how culpable our financially illiterate / compromised MSM is for the current state of affairs.

    • Spot on. Leigh Sales is a good example. As an interviewer, about as competent as a Yr10 debater. And compromised – used to have private dinners with Abbott when he was PM. No doubt the same with Mal. Pity the handful of journalists in the MSM who still try and do quality journalism, must be miserable.

  25. UrbanWastelandMEMBER

    The other night, I went out for dinner with a lawyer who used to work at ASIC. When I asked her why the agency wasn’t doing much about loose mortgage lending and illegal property purchases, her word-for-word answer was: “Yeah, I don’t think there’s anyone in there who knows much about that stuff.”

    • Defund and Deskill the public sector and then complain…. then pay the private sector manifold to do the same job w/ higher admin costs and profit skimming… all whilst cramming down wage earners and crapifing everything else…. give bonus to architects…

      Review…

      The main points of neo-liberalism include:

      1. THE RULE OF THE MARKET. Liberating “free” enterprise or private enterprise from any bonds imposed by the government (the state) no matter how much social damage this causes. Greater openness to international trade and investment, as in NAFTA. Reduce wages by de-unionizing workers and eliminating workers’ rights that had been won over many years of struggle. No more price controls. All in all, total freedom of movement for capital, goods and services. To convince us this is good for us, they say “an unregulated market is the best way to increase economic growth, which will ultimately benefit everyone.” It’s like Reagan’s “supply-side” and “trickle-down” economics — but somehow the wealth didn’t trickle down very much.

      2. CUTTING PUBLIC EXPENDITURE FOR SOCIAL SERVICES like education and health care. REDUCING THE SAFETY-NET FOR THE POOR, and even maintenance of roads, bridges, water supply — again in the name of reducing government’s role. Of course, they don’t oppose government subsidies and tax benefits for business.

      4. DEREGULATION. Reduce government regulation of everything that could diminish profits, including protecting the environment and safety on the job.

      5. PRIVATIZATION. Sell state-owned enterprises, goods and services to private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water. Although usually done in the name of greater efficiency, which is often needed, privatization has mainly had the effect of concentrating wealth even more in a few hands and making the public pay even more for its needs.

      6. ELIMINATING THE CONCEPT OF “THE PUBLIC GOOD” or “COMMUNITY” and replacing it with “individual responsibility.” Pressuring the poorest people in a society to find solutions to their lack of health care, education and social security all by themselves — then blaming them, if they fail, as “lazy.”

      Skippy…. summation…. monetize society by the tyranny on numbers which are just at the end of the day reflections of some ex niliho supported philosophical agenda….

      • All very fine Skippy. With regard to the “free” market, I note every household appliance we buy is made in China. That’s because, subject to quality, people will always choose to buy at the cheapest price irrespective of the implication for worker’s pay and conditions. Evolution in action unfortunately. No jobs to be had here in that market. Hugo Chavez comes to mind. You might have liked him, but Venezuela now has food rationing.
        I differ with regard to our condition. Neither the mill owners nor the gift bearing socialists with their vast lobbies of paid hangers-on are to be trusted. When I look at the human condition I see evolution governing our every move. You HAVE to compete, just like the lion or the Zebra in the Serengeti. The degree to which government spending favours the less gifted or fortunate must always be limited by the degree to which taxes (which are often a barrier to jobs and productivity) are imposed to pay for it. I’m a political centrist. No children & canaries down the mine, but no tidal wave of disability fraud and money paid to feed an Ice addiction either.

      • Robb are you an animal or human being… or just subject to your own self interest above all other things…

        Skippy… mate sociology and psychology don’t support your rhetoric…

      • Amazingly Skippy, my partner is a Psychologist. She could lecture you on Entitlement Culture. I once collected 26 pounds unemployment benefit in the UK in the 70s. That’s it on the handout front for me. If you’re not mentally or physically disabled, get a job or do something at the Salvos. You won’t regret it.

      • That your partner is a psychologist is not relevant i.e. what school of psychology does she ascribe to and what are her personal biases. I have friends with decades of work in the field and lament the corporatism which has come to dominate the academic field of inquire.

        Skippy…. I could lecture you too Rob, lets get specific eh….

      • Specializes in traumatic brain injury but also does mental health work. As a matter of further interest, my previous wife was also a Psychologist who specialized for a period in adjudicating Work Cover claims. Somehow, I don’t think you will be able to lecture me on the subject of psychology. I’ve had (perhaps you could criticize me for this, I’m often told I’m a lifetime study..) 32 years of experiencing it through them.
        My views on Entitlement vs Social Responsibility are to a great degree colored by the experiences (albeit second hand) of my partners and their colleagues, not to mention 3 uncles who were GPs and a brother in Law currently doing work (as a GP) with refugees in The Netherlands. No, I’m not an animal and no more selfish (I suppose) than the next man. I find your comments typical of an immature gen X/Y (whatever your age). Disagree with someone? Well, they must be selfish or an animal because I’M NEVER WRONG. .

      • Sorry Rob I have acquaintances with people like Whiteford and Molnar instate, plus my associates in both the States and Europe, the ones in the states are VA sorts wrt CHI and DAI clinical experience both post WWII, Nam and the ME.

        As far as your previous work goes it sounds like you were a hired gun, especially with the workcover admission. Would you be the sort like on Faux News that states poverty is a mental disorder?

        Skippy… I asked you to be specific wrt the field of inquire and all I got was you equivocating your shingle….

        PS. want to show your acumen wrt the whole ICD vs. DSM 10 conundrum?

      • What’s this, disappearing into acronyms again Skippy? I’ll answer some of your points:
        1) RULE OF THE MARKET
        Unfortunately the market has a habit of being competitive.
        2) CUTTING PUBLIC EXPENDITURE
        Everyone would agree that education & health care need to be given a high priority in government spending. However, health in particular is a difficult issue specially in Australia, given we now have the highest incidence of Ice addiction in the world and a population whose degree of obesity is increasing by the minute. The only thing not increasing is the funding. Can’t see an easy solution there. As a matter of fact QLD Health in particular is still somewhat backward in its understanding of how important mental health is in the overall picture of treatment. You should hear my partner’s view on THAT!
        3) DEREGULATION
        There are more than 900 government departments in Canberra (list was published in the press in June 2013). What this tells you is that there needs to be a lot of work done on efficiency and duplication of effort, both at federal and federal/state level. To blandly state that deregulation is bad is a gross oversimplification. Being a centrist does not make you a mill owner.
        I won’t go on about the other points, except that “individual responsibility” is a very important part of all our lives. You can’t pour money at people if they have no desire to get off the drip feed. It’s a 2 way street.
        Your views that “liberalism” is the same as cynicism and greed are a classic example of reductio ad absurdum. You also have something of a tendency to pontificate.

      • For someone that professes an accuse wrt psychology you have a weird way of showing it.

        1) RULE OF THE MARKET
        Unfortunately the market has a habit of being competitive.

        Um no… sociology and evolutionary biology disagrees with that philological perspective.

        2) CUTTING PUBLIC EXPENDITURE

        Um no… economic factors front load that endemic, opium trade comes to mind.

        3) DEREGULATION

        See financial sector…

        Skippy…. good day wing nut….

      • drsmithyMEMBER

        Hmmm.

        From

        I find your comments typical of an immature gen X/Y (whatever your age). Disagree with someone? Well, they must be selfish or an animal because I’M NEVER WRONG. .

        To

        Over and Out Vladimir Ilyitch

        In just a few posts.

  26. Anyone want to challenge personal services legislation? Makes it very hard to start a company, and very annoying when i have multiple clients, but because of one providing 80% of my revenue I get shafted. Oh I know i’ll just buy another house with no hope of monthly income and only a vague hope of capital gain. But that’s a business and working your a*se off for clients isnt.

    • HFW
      Trying to start a company employing people in Australia is probably not a good idea. You will be up against every inch of resistance the Fair Work/Union/Tax /H&S bureaucracy can come up with, and that’s enough to stop most would-be entrepreneurs in their tracks. The good news is, there are still a lot of countries who don’t yet feel that the world owes them a living.

  27. Sorry this might have been mentioned already but has the opposition or media asked Malcolm Turnbull about his 2005 tax policy paper that mentions NG and why he is now contradicting his own recommendations? I haven’t seen it raised anywhere but MB and I’d be very interested to hear what he has to say.

  28. 2big2failMEMBER

    Man.. this is not like a PM is talking.. it’s more like someone from the housing vested interest is talking. Can’t believe he can get away with this.. and he keeps repeating the following which is an absolute non sense: “Under the labor policy, investors will be able to sell their property only to owners”. I am surprised no one has questioned this false statement. He’s implying here that investors buy property only if they can negative gear it which is complete rubbish. Tax deductions is one of the factors in buying a property, not the only factor. Furthermore, pretty much anywhere outside of this great country of ours, property investors do not get the tax benefits that we have here and despite that they still invest in property. Somehow, we think we’re special and we invented a special formula for property investing that no one else in the world has managed to find.

    It’s a sorry state of affair when a PM is left to defend the vested interest of the property lobby day in and day out instead of focusing on what a PM should be doing.

    • this is not like a PM is talking.. it’s more like someone from the housing vested interest is talking

      Prime Ministers ≣ Spokespersons for the property lobby

      Welcome to the real world.