Grattan annihilates Turnbull negative gearing lies…again

From John Daley at the AFR comes another slaying of our increasingly lost and hapless PM.

In his blogged response to the Grattan paper, Turnbull argued that:

The paper claims that negative gearing “goes beyond generally accepted principles for offsetting losses against gains”.  But this is factually incorrect.  The ability to deduct interest and other costs from personal exertion income has been a generally accepted principle in Australia’s tax system for more than a hundred years. While there are some exceptions to this principle, they have been strictly limited to instances of flagrant abuse (as was claimed to occur with ‘hobby farms’) or to situations where taxpayers might use losses to gain welfare benefits.

Daley responds:

As our report documents, we could find no developed country save for New Zealand that allows taxpayers to deduct the interest costs of investment from their wage and salary income.

Turnbull argued that:

The paper argues that negative gearing and the CGT discount create significant distortions in the housing market, but then directly contradicts this when it says that changing them will have little impact.  Really?  How can changing the policies that Mr Daley says are supposed to create such huge distortions have no impact?

Daley responds:

The explanation is simple: a new tax regime will significantly affect on the mix of investment, but have less impact on the total.

Tax changes would lead to more home ownership, more investment in assets other than property, less investor leverage, and increased tax collections of about $5 billion a year.

Turnbull argued that:

The paper argues that negative gearing benefits wealthier taxpayers. However, in countries which have adopted the ‘quarantining’ approach, the result has been to drive middle and low income earners out of the investment market, as they cannot afford to carry the loss-making periods when costs are high relative to rentals. In contrast, under both Daley’s proposal and Labor’s, wealthy Australians would continue to be able to deduct net rental losses from their other investment and property income. How can a change which would actually make the tax system more advantageous to those on higher incomes be fair? How will it improve wealth inequality when it will make it more difficult for those on lower incomes to build up wealth?

Daley responds:

Although investors with only one asset will not be able to offset their losses against gains on other assets, overall the reforms will affect high incomes earners far more.

Turnbull argued that:

The paper ignores the fact that reducing the CGT discount to 25 per cent would give Australia the second highest CGT rate among comparable countries. While the paper claims this too would have no harmful impacts, that assertion is directly contrary to the evidence, which it systematically ignores.

Daley responds:

 We don’t know what evidence he has in mind. But a substantial body of literature, including an OECD report, finds that tax rates have little impact on how much people on high incomes invest.

Even the government’s own Re:think paper on tax reform says that while “low-income individuals may respond to tax incentives with new saving, high-income individuals are more likely to divert savings to more tax-preferred savings”. It concludes that, “although taxes may affect the allocation of savings, they are unlikely to affect significantly the overall level of investment in the economy”.

Turnbull argued that:

The paper also ignores the fact that under reasonable assumptions, if the CGT discount was reduced to 25 per cent, the effective tax rate on real capital gains would under reasonable assumptions be close to 70 per cent.  As a result, the paper dismisses, with little analysis, the important point that high rates of capital gains discourage entrepreneurial investment, whose returns generally come in the form of capital gains.

Daley responds:

This is an issue that our report works through in detail, and it all depends on what assumptions you make, bearing in mind that tax is not paid on capital gains until the asset is sold. Under a capital gains discount of 25 per cent, as we propose, and with inflation at 2.5 per cent, an asset held for fifteen years with a 3 per cent nominal income return and 4 per cent capital return would pay a real effective tax rate of about 55 per cent if the taxpayer is one of the 3 per cent of Australians on the top marginal rate.

Turnbull argued that:

Removing negative gearing would mean a tax increase for wage and salary earners and would affect incentives to work. The paper ignores these efficiency costs.

Daley responds:

…using negative gearing seems a strange way to solve this problem. Why would we try to reduce marginal income tax rates, but only for the minority of workers who happen to invest? What’s more, income tax rates need to be higher across the board to pay for the tax break we provide to one in 10 taxpayers.

Another complete demolition. What a tragedy for the nation that such rhetorical flair turned to selling outright lies.

Latest posts by David Llewellyn-Smith (see all)


    • Common sense lol
      Hey Mal, Is it “common sense” that you would advocate foreign investment in new builds to boost supply but oppose NG for new builds only?

  1. The final point nails it… all else being equal, to give one group a tax break (especially the wealthy, who pump less of said tax break back into the economy), you have to tax someone else (aka assetless PAYG taxpayers) more.

    I’m in the latter group. How about ‘no’. How about I take my hard won skills elsewhere, and Australia gets no tax? I encourage other young people to do the same.

    • Tassie TomMEMBER

      +1. This needs to be articulated far more clearly by ALP and Greens – the message is not getting across. The message that the ALP and Greens ARE getting across is a class warfare message, and that one will not win the election for them.

    • St JacquesMEMBER

      That’s already been happening in droves with the best educated and most energetic young/youngish and has is growing all the time.

  2. Daley’s first point doesn’t actually contradict Turnbull’s point. And most of his other responses don’t make sense or are just speculation.

    If prices don’t change but the ownership mix does, that implies that that the current market is at a knife edge where all purchasers are at their limit and that by making change to the tax system you push investors’ ability to make a purchase down 2% which just happens to be 1% below where all the owner occupiers are ready and waiting to go.

    Turnbull’s final point is a silly one though.

    • If prices don’t change but the ownership mix does, that implies that that the current market is at a knife edge where all purchasers are at their limit and that by making change to the tax system you push investors’ ability to make a purchase down 2% which just happens to be 1% below where all the owner occupiers are ready and waiting to go.

      happens every weekend at an auction somewhere

    • “Daley’s first point doesn’t actually contradict Turnbull’s point. And most of his other responses don’t make sense or are just speculation.” That comment just isn’t correct J. In each case Daley refers to his report of the evidence backing it up?

      What do you mean?

      • Daley made the assertion that NG goes beyond “generally accepted principles” of tax.

        Turnbull makes the valid point that NG has been part of Australia’s tax system forever. So by definition they are generally accepted.

        Daley’s only response is “yeah well, hardly anyone else does it” which doesn’t prove anything. (For instance, hardly anyone has a GST of 10% or Dividend Imputation either).

        In any case, it is misleading to pick and chose single aspects of other tax systems. The US for instance allows you to deduct interest against your own home regardless of what you do with the funds.

      • We do have the non-commercial losses provisions that prevent a small business owner from claiming deductions for unrelated expenses against business income – so Daley is right here, preventing unrelated deductions is a generally accepted principle of tax. Negative gearing has risen with the rise of asset speculation over the last two decades – it is essentially out of date when viewed in the light of monetary policy as well.

        It is safe to say that almost no jurisdictions allow the progressive income tax system to be undermined by interest expense deductions associated with unrelated asset speculation. This is a fair comment by Daley.

      • Disagree. The non-commercial losses are a specific (and relatively recent) exception to the general rule and were brought in as an anti-avoidance measure because the lines were too blurred between business use and personal use for things like holiday houses and hobby farms.

        You can still set off business losses against other income if you can show the ATO that you are engaged in a legitimate business.

        In the case of investment losses, there is no such blurring around personal v income producing purposes.

        So, Daley is wrong.

      • High levels of asset gearing is recent as well. The non-commercial loss provisions were brought in to protect the integrity of the small business income revenue. The same reason the changes are proposed to negative gearing.

        There is no history of extreme asset speculation and gearing to minimise tax for unrelated S&W income in the tax provisions.

      • It’s also worth pointing out there is a very real history (although often slow) of addressing threats and changes to the revenue mix in tax policy. So if anything is policy it is the ongoing work of keeping up with new tax minimisation and sheltering plans as the firms bring them into existence…

        To say there is a history of letting a particular type of deduction be allowed is simplistic. The world has changed with the rise of asset speculation and extreme gearing, it is quite expected the tax provisions will change to protect the integrity of the tax base.

        If you don’t want progressive taxation (many don’t), or want lower taxes (many do), then it is best to be upfront with that.

      • @Jason – I have share trading losses and capital losses that cant be offset against my PAYE income.
        I also have start up losses in a company that also cant be offset.
        Please explain.

      • @ Stomper

        As I’m sure you know capital losses are another specific exception to generally accepted rule (the rules came in in 1985, relatively recently).

        Of course there is a trade off for this, capital gains are concessionally taxed ie not taxed at your full marginal rates. As far as I can tell, there is nothing in the ALP/Grattan policy that gives such a trade off for investment income.

      • Jason,

        The well accepted rule regarding deductions is that they must relate to earning the assessable income.

        That is why wage and salary earners have to establish a clear connection between an expense and their assessable income.

        What you mean is that there has been a long standing exception to that general rule in that people have been allowed to make deductions from their wage and salary income for CERTAIN investment losses that have nothing to do with earning the salary and wage income.

        All that people are talking about is whether that long standing exception to the general rule regarding deducting expenses from assessable should be modified.

        Considering the ongoing modifications that are made to how different classes of expenses and their relationship to earning assessable income are assessed modifications to the rules regarding when investment income can be deducted are unremarkable.

        Restricting deductions to those arising from investment in new housing is a tweak and nothing more.

        Funny thing is that we are not seeing any figures on how many losses from investments that do NOT involve existing property are claimed against wage and salary income.

        That would be interesting information.

        I suspect it may be very little as most real investors are investing for the ongoing return from an investment (and thus are positively geared) and not merely speculating that the value of the assets they have acquired will rise on a cushion of easy credit.

      • “Turnbull makes the valid point that NG has been part of Australia’s tax system forever. So by definition they are generally accepted.”

        It has?

        It was introduced in 1933 by the NSW government (when the states had control of income tax) to boost share purchases. It was inherited federally when they took over income tax in WWII.

        But ‘forever’…..

      • Mining BoganMEMBER

        Hey Mr Penny, have you got a link with the history of NG coming from a state government?

        NG’s past seems a bit confusing to me.

      • @ pfh

        Sorry, you are fundamentally incorrect. You get a deduction for losses and outgoings incurred in the derivation of assessable income. As a general rule there is no distinction between types of assessable income and the losses that relate to each type. Eventually, you work out your entire taxable income for the year (which is all your assessable income less all your allowable deductions) and it is this number that you pay income tax on.

        When you acquire a rental property, you will earn assessable income. Therefore losses and outgoings that relate to that property and the earning of that income are deductible.

        I am happy to debate the merits or otherwise of the ALP/Grattan policy but for one of the arguments in favour of it to be that it it is somehow against fundamental income tax principles (and particularly those in Australia) is utterly misleading.

      • Sorry Jason.

        “……Sorry, you are fundamentally incorrect. You get a deduction for losses and outgoings incurred in the derivation of assessable income. As a general rule there is no distinction between types of assessable income and the losses that relate to each type. …”

        That is incorrect.

        And good example is the approach taken to University students who worked part time jobs at convenience stores etc but COULD NOT deduct their expenses of studying against that income.

        The only income they could deduct those expenses against was income that related to the course of study. That means they could deduct their self education expenses IF they were receiving Austudy and against that income.

        That is not surprising though because you can ONLY claim self education expenses against your income if that self education is directly related to the earning of that income.

        For example: You cannot claim self education expenses for studying dentistry against your income earned working as accountant.

        The fact that assessable income is a single figure on your tax return does not change the principle that applies to claiming a deduction.

        If you cannot establish that the deduction was incurred in earning the income you cannot claim it.

        Sounds like you better cross your fingers that the ATO do not audit your returns if you have not been following that approach.

        As I said you are correct that the ability to claim certain types of assessment losses against wage and salary income is long standing but it is a long standing exception to normal Australian tax principles.

      • Once again Pfh I will have point out that you are incorrect. (Not that is is really a big point in the scheme of this debate.)

        The pre -work self-education example is a particularly poor one as the ATO’s view on it has changed over time. The ATO’s view is now that for education expenses incurred before you have a job, these are non-deductible as they do not related to the derivation of any particular income. Yes, they will inevitable help you earn income down the track but this is seen as too remote to justify a deduction now. (For a time you could deduct them against Austudy income but I have a feeling that has now changed as well.) The point is, self-education expenses such as these are not able to be offset against other income because of some principle of matching deductions to certain income, they are simply not deductible in the first place.

        None of that is relevant to rental deductions though – these are clearly linked to the derivation of rental income.

      • Jason,

        You are making my point for me. Self-education expenses are not deductible against income that they do not directly relate to and that is why the ATO did not and still do not allow them. That they now don’t allow them against AUSTUDY anymore is simply an example that EVEN the fundamental principal that expenses can be deducted against income to which they relate is not set in stone.

        “…None of that is relevant to rental deductions though – these are clearly linked to the derivation of rental income….”

        But they are clearly not related to the derivation of salary and wage income.

        And that is point that you keep on missing.

        Allowing an expense to be deducted against unrelated income is the exception to the general rule.

        You are not actually providing an argument that supports your position that ANY expense can be deducted against any income.

        The ATO looks at the character of an expense and the character of the income that it is claimed against very closely.

      • Sigh…

        Self-education expenses before you have a job are not deductible because Courts have held they don’t relate to the derivation of any income. Therefore they don’t even go into the taxable income (that is, assessable income less allowable deductions) equation when determining how much tax you have to pay income on.

        Rental losses are deductible because the do relate to the derivation of assessable income and therefore are taken into account when determining overall taxable income.

        If you don’t believe me, try the Tax Act:

      • Jason,

        Don’t sigh this stuff is not easy to grasp so just hang in there.

        Students who ARE earning income cannot claim self education expenses unless those expenses relate to their income.

        Pretty simple – best read those decisions again.

      • Well yes, I’ve been trying to say that. It is a cost not related to the derivation of any assessable income so isn’t an allowable deduction which can against any of your assessable income. You could just as easily made the observation that a nurse can’t deduct the cost of going to the movies; or a lawyer can’t deduct the cost of their Game of Thrones Series 1-5 DVD set.

        Rental costs are in fact allowable deductions as they relate to the earning of rental income. So, per section 4-15 linked above, they can be set off against any source of your assessable income.

    • “If prices don’t change but the ownership mix does, that implies that that the current market is at a knife edge where all purchasers are at their limit…”

      Why does it necessarily imply that? Couldn’t removing the ability to claim an ongoing tax loss simply make property investment relatively less attractive compared to other investment options?

      • The policy (both the ALPs and Grattan’s proposal) applies to all investments, not just property.

        But even if it did make property less attractive, the fact that they think price will fall 1-2% but that more OOs I think had to imply what I am suggesting. I’m happy to be shown the flaw in my thinking though.

      • Yeah, I see your point if the falls are that small (though I think they’ll be bigger) – have they said anything about slowing the rate of future price increases which could also affect investor interest?

        The changes wouldn’t affect savings or term deposits which would make them relatively more attractive compared to debt-financed investments.

      • Yeah maybe. Grattan only says “We estimate prices would be up to 2 per cent lower than otherwise” which is pretty vague.

    • @ Jason, how old are you and what do you do for a living?

      Why -he’s a shill for the Libs don’t you know?

    • Fellas, Jason can keep coming back at you all day, this is what he does for a living. Probably gets paid by the post. Best to respond to the drivel by scrolling down.

      • Bp2,

        Jason has been making valid points; you disagreeing with him doesn’t make him less incorrect.

      • Agreed @GoannaJoe. I disagree with @Jason at times but he definitely knows what he’s talking about and makes plenty of relevant points.

  3. casewithscience

    I am relatively sick of Australia. It protects asset owners and does not reward innovators. How on earth are we, as a society, going to compete in the 21st century when our policy settings are pointed to wealth protection?

    • Good example in the paper today. Quickflix in administration because it couldn’t raise $4m of finance.

      Nobody has issues raising $4m finance to speculate on houses, though. Just need a $100,000 income and a $100,000 deposit . Innovation is for mugs.

      • Today's Empire Tomorrow's Ashes

        As someone who lost a bit of $ on QFX in SMSF including in capital raisings I do not trust them to actually make money and increase share price.

        They missed the boat and lost out to better content.

        It didn’t help that Stan’s UX and UI is so much better and QFX’s streaming player didn’t work on OSX without having to use developer settings to disable security and other stuff (something I am capable of doing, but the general user is completely lost on).

        We discontinued using their service given the above issues.

        No such complaints with Stan.

    • You must have missed the memo? MT is all about innovation, it’s just that you need to do the hard yards first by buying a portfolio of NG investment properties from which you use as collateral to start your enterprise (if you can be bothered of course, as you’ve just proven to yourself that its easier to rent seek). Too bad if you’re 50 years old before that happens.

  4. turnbull is a disgrace

    just another smarmy lawyer who thinks he is better

    sales should have asked him…Mal…how many pollies use neg gearing??? why do pollies own on average 2-3 investment properties??? do you think pollies have vested interests

    also…PM…why did you say all those years ago that NG is a tax lurk??? so giving mothers with newborns PPL is a rort, and this isn’t???

    turnbull is a creep

    • Leigh Sales is just reading a ‘pickle packet’. MT still stammers, even with canned questions. I liked him in “Silence of the Lambs” tho…. 🙂

      • +1 For all her good intentions, you can see Sales is out of her depth on tax policy
        My kingdom for a economically sophisticated interviewer

  5. Where is the evidence Malcolm Turnbull has any “rhetorical flair” ? Most of the time he is stuttering, blathering, and incoherent. Last night’s interview with Leigh Sales is a good case in point. He is all over the shop.

    • Because it’s much harder to defend the indefensible – he knows it’s poor policy – he is on record stating it is poor policy – yet he has to tow the party line.
      He was elected by the party to spin the party line NOT change any policies of substance.
      He is captured and he / we know it.

  6. What I find amazing is that MT turned this NG issue into a personal war that can only cost him. Number of people who claim NG is relatively small compared to total number of voters (almost everyone in Australia votes), most of them are Lib supporters already (he cannot gain many new voters by pushing this agenda) so by forcing this issue so far he can only lose voters by alienating 75% of population that support abolition of NG. He seems to be thinking that this is America or EU (where strategy like this may work by stimulating a specific demographic to participate in elections) completely ignoring the fact that everyone votes in Australia.

    I’m not disappointed by anything MT did since becoming PM – I expected even worse (abolition of penalty rates and new workChoice).
    On the other hand I’m quite disappointed by seeing how stupid he actually is. MT seems to be not much smarter than Tony Abbott. His action seems to be driven not by political interests but rather by blind beliefs and failed ideology. He also seems to be not very intelligent either, his responses are commonly slow, dogmatic and poor (often starts an answer by making it personal something like … “well, I have to … ). He is also arrogant enough to not surround himself with smart people that would be able to help him in these personal battles.

    • The number of people who claim NG may be relatively small, and what most claim relatively small, but they aren’t the voters that MT is appealing to ( trying to frighten, more like!) It’s all those Australians who are in debt. Especially the debt associated with their properties; be it investment ones or homes. Thatcher was right, as many have noted on here, that by keeping an electorate in debt, you can do all sorts of irrational things and still keep your voters in line, and your Opposition ones as well!, with the fear of “How will I pay off my debts if my collateral value falls?”

      • Absolutely. Add in the impact on bank shares (and super balances) if property prices fall and there is a clear scare tactic at work.

      • Whatever the argument is meant to be, it doesn’t seem to be working out too well for the bumbling duo.

        Labor has taken an election-winning lead after the first week of the unofficial election campaign and leads the government 52%-48% on a two-party preferred basis, today’s Essential Report shows.

        Labor’s primary vote has risen over two percentage points to 39%, while the Coalition’s vote is down two points to 42%, while the Greens have dropped a point to 10%. The result is the first time Labor has taken a 2PP lead since Malcolm Turnbull became Prime Minister, and comes after a shambolic start to the government’s campaign, marked by confusion over the election date, a desperate effort to head off Labor’s call for a banking royal commission and another leak, this time about budget advertising.

      • And further…

        The government also has its work cut out for it on negative gearing, with voters saying they would support moves to limit negative gearing in the budget 48%-24%, while its rumoured plans to cut corporate tax are strongly opposed, with 57% opposition and just 22% support.

      • I understand Lib initial position and hope that fear will hurt Labor but at this point of time (after months of failed scared campaign) MT should just bury the issue because it’s hurting him now badly.
        For “some” reason people are not scared (because nothing is save as houses) so it appears that only directly affected NGers are against. Others probably see potential house price fall as another entry opportunity (to load more PI into portfolio) – nowhere on this planet people are so deluded by property greed

  7. Political discourse focused on the right of Australian’s to be supported by the taxpayer, investing in loss making ventures.

    No wonder the place is unproductive and overtaxed.

    Try investing in something that makes a profit. Bold idea…

    Malcolm should be ashamed of himself. It would have been far more fun watching Tone go under the bus on this crazy line in the sand. Another Sydney-sider who thinks they are at the centre of the Universe.

  8. sydboy007MEMBER

    This is getting embarrassing for the LibNuts. They’re give a giant bird and Farkyou to pretty much anyone under the age of 35.

    Canute Turnbull is flogging the waves of disappointed voters but the tide will not be deterred. Sadly I don’t believe MT is seeking to show the same humility of Canute.

    • Andrew William

      ……and 1 in 2 aged over 35 as they are most likely divorced or separated and unable to get back onto or stay on the property ladder due to the inflated property prices caused by negative gearing, illegal overseas buyers and the general rent seeking minority. There are millions of divorcees and separated people affected adversely by the property bubble – far more than benefit from negative gearing

  9. My question to Turnbott, SloMo is:
    How many Australian mums and dads are struggling to get to the housing market because of this stupid negative gearing policy?
    SloMo has the exact number of nurses, midwives, policemen and teachers investors that are negatively geared.
    I am sure he does have the numbers for those nurses, midwives, policemen and teachers that have been trying to buy a house for years, NOT FOR INVESTMENT but to live in with their families.
    We are not asking MT and SloMo to be kind as we know they are far from that, but to be fair and reasonable in covering all sides of the argument.
    No hope from these liers.

    • Very true

      What loss to the economy having a population burdened by truly excessive levels of debt supporting unproductive/loss making investment?

      Retail, leisure, education, innovation, availability of growth capital – all down the chute to feed the property porn beast.

      • nexus789MEMBER

        When the economy is subject to a strong external economic shock then inflated assets (housing, commercial property) will experience a decline. I say external shock as Mal and his mates will do anything to keep the debt train chugging along. Investment has not only been made in loss making ventures as you comment but also in unproductive assets that will contribute nothing to Australia’s competitiveness going into the future.

      • Yes – I think the ‘Uh Oh’ moment is when the RBA cuts and the banks pass on a donut due to ballooning offshore funding costs.

    • + many!

      Can we start talking about all the families that can’t afford a home, or are loaded up with private debt because of this stupid policy.

      Lets even think about subsidising those poor families that bought a house and have been screwed with high debt.

      What about if the property is less than $X and it is your first home and a primary place of residence, then the banks must apply % discount to the interest rates for buyers before the negative gearing changes came in?

      The rent seekers can go whistle…

  10. There once was a Packer bagman called Mal
    Who’s failed Republican model left a bad smell
    But his Machiavellian ambition was never in dispute
    Finally sated as the PM of the Empty Suit
    Integrity and fairness, you can all go to hell

    • I remember thinking that i didn’t want a republic because that arrogant clown just wants to be the new King. Now i’m older i realise i was absolutely correct.

  11. John daley was right. …Remove Negative gearing will either resulting in asset price fall ( forced sell due to the negative cashflow) Or increased rental ( if every vendor increased rent, the rent will be pushed up and poeple have to pay more , due to the inelastic nature of housing demand) …

    Neither are a desireable political outcome..

    • “John daley was right. …”

      John Daley says the opposite of what you claim.

      Our analysis demonstrates that the tax changes we propose will lead to property prices that are about 2 per cent lower than otherwise. This is much smaller than typical price changes from year to year.

      And there is unlikely to be any material change in rents or new construction because new supply is primarily constrained by planning permissions rather than by lack of returns. Studies around the world show that in practice tax changes are primarily reflected in property prices, while impacts on rents are too small to measure.

    • One is not so clear…

      “John daley was right. …Remove Negative gearing will either resulting in asset price fall ( forced sell due to the negative cashflow) Or increased rental ( if every vendor increased rent, the rent will be pushed up and poeple have to pay more , due to the inelastic nature of housing demand) …”

      Renters are paying the maximum rent as is. The market forces for the price discovery of rent are not determined by the deductibility of the cost of capital.

    • AB I think ‘Amanda’ posted this on the wrong website. Her blatant lie is easily found out here. Me thinks her employer enlisted her/his help to ‘inform’ the poor mum and dad infestors with some dodgy ‘facts’.
      Amanda you’re wasting your time here …… try the MSN site, plenty of people you could influence there I’m sure.

  12. Notwithstanding the Grattan research, what are the thoughts on the real impact on house prices from ALP policy. They will effectively be taking 2 billion in subsidies out of purchasing established housing as well as fundamentally changing the ‘dodging tax so winning’ mentality of the herd.

    At pg 25 the report says “In their eagerness to pursue tax minimisation strategies, Australian landlords have moved from being collectively profitable, to accruing billions in net rental losses each year. In 2013-14, 1.3 million landlords reported collective losses of $11 billion. And total net rents have been consistently negative since the introduction of the CGT discount (Figure 10).87 Losses are
    reducing only because interest rates have fallen.”

    • Good question. My gut feel is that the proposed NG changes alone will have little impact on prices (perhaps CGT changes will though) but there will be so much noise in the form of slowing economic growth, macroprudential measures, exiting of foreign buyers etc that we will never truly know – just as we don’t really have any idea what impact they’ve had to date.

      • I think the NG changes would have a fairly significant impact given the psychology of “beating the tax man” that so many property investors have. I do agree though that it would be impossible to actually measure what the impact was given so many other variables.

      • One of the biggest issues with the whole debate is the lack of specifically relevant taxation statistics.

        Grattan (and MB) are very fond of the “rental losses by income decile” graph which is frankly meaningless in assessing the ALP/Greens/Grattan policy proposals. What there needs to be is a “average net investment loss” chart which takes into account other income and capital gains. What you can tell is that in 2014 the Net Rental Loss for individuals was $3.7b as we know (which itself is an aggregate of $11b of losers and $7.3b of winners) but that aggregate trust distributions, Dividends, interest, capital gains and franking credits was $110 billion (and that’s before business income of $28b which the ALP have said can be set off against negative gearing losses) and “other income” of $41b.

        I have asked the Taxstats email address at the ATO for this information – unfortunately they replied with “sorry, we are too busy”. Maybe if someone important like MB asked…

  13. I think the ALP was goint to grandfather any changes to NG.
    So wouldnt affect current NGers, so they wouldnt have to sell.
    It would only affect NGers going forward.
    I think what the current discussion does is focus attention on the reality of investment properties if the housing market does fall, as everything is dependant on ever rising prices.

    I really thought Turnbull was a shoe in for next election, hehas turned out to be a real dead set Drongo.

    • They will grandfather existing NG loans.

      However, if/when rents inflate and become positively geared they will no longer impact the budget, nor will I/O loans that refinance after some duration.

      Price will go down because new bids on the margins will be by those who cannot NG. That’s a good thing in all facets, except in the mind of the bogan, hence we can’t let the ALP get elected.

      The libs need to own this resistance, need to own this as the cornerstone of their ideology, and need to own the utter devastation that will befall the Australian economy.

      If the slightest scape goat can be found, then it’s likely we will hurt the young of the future. We need scum of the earth human beings to die out with the boomers.

  14. here’s an idea that could help housing affordability in this great retirement village of a nation, yet seems to get very little press –

    can a young person, who owns a $2M house, walk on into Centrelink and walk on out with a weekly welfare cheque for the foreseeable future? I don’t think so.

    Then, question, why is it that anyone over a certain age can own outright a house worth millions of dollars, and be ‘eligible’ for a weekly welfare payment from the commonwealth? The aged pension is meant to be a SAFETY NET, not a fucking free-for-all that Boomers can strive for by allocating all their wealth into select asset classes in order to be ‘eligible’, or should we say ‘entitled’ to receive.

    and strive for it you bet they will! There is a whole FIRE industry of leeching scum that get rich by advising old folk how they can ensure they are ‘eligible’ to receive the welfare ticket to eternity… what’s it costing the nation? 60 billion EVERY year? what portion of this is genuine safety-net welfare?

    Include PPOR in the aged pension eligibility tests, and the aged pension will again revert to being a genuine safety-net rather than a supplementary superannuation account for boomers!

  15. kiwikarynMEMBER

    One thing that doesnt seem to be accounted for is the natural human tendency to want to beat the taxman. Any changes in tax rules will result in changes in investment behaviour that exploits other loopholes. People will find alternative avenues to compensate for the increased tax. Whether this is hiding money offshore in Panama, setting up a self managed super fund to buy investment properties and have your super contributions cover the cashflow shortfall, setting up trusts so that non-tax paying beneficiaries pay the least amount of capital gains tax, or moving to NZ and becoming tax resident there to preserve your retirement nestegg, etc etc. The rich can afford to hire accountants, tax lawyers, and estate planners. Capital is mobile, wage earners are not. The low-middle income investors will simply be forced out. It would be amusing if the Law of Unintended Consequences saw a capital flight and a lot of tax minimisation efforts that actually result in LESS income and capital gains taxes being collected.

    • There is clearly a risk of this. The ALP wants more owner occupiers. Housing is much better taxed (ie not at all) for OOs v IPs in the long run.

      That’s not to say that there aren’t other social benefits of more OOs but the benefits to the budget in the long term from the ALP’s policy is highly tenuous.

  16. Indeed if property prices fall and other scare tactics….. Meanwhile CPI has fallen to 1.3 the lowest recorded. Meanwhile we have people (Jason for one) defending taxation which reduces the economy, as does mortgage payments in housing cost inflated by non-legislated for 10 years money laundering via housing by foreigners. Oldies are terrified as savings for retirement at tiny interest rates do not support them, those needing a home so they can have a life and kiddies are terrified facing up against asians/uk/etc who are buying our spending is frozen or going to high rents… really the “rules” of the ATO are irrelevant.
    Better the ATO focus on foreigners buying homes illegally and the govt make a 15% minimum surcharge for foreigners on stamp duty for a start.
    Jason who cares about the budget, apart from you and those who took 80 billion from schools and hospitals but spent 39 billion on submarines according to the media… the ATO and Govt is meant to work for us, we Australians. We pay our taxes for our country and our benefit.

  17. Thank god Jason was around today to post! Everything else was lame & mostly made no sense! LOL!
    Some on MB need to get a real grasp of Tax Act & court cases before blah blahing re Tax matters they know not much about.

  18. @Rusty : Renters are paying maximium rent as it..
    I disagree with this argument. in the 1980s the rent of sydney and perth has gone up during the time as a matter of fact when NG was removed. there was an article a while ago in MB explain why the rent is not going to change.. but that articled has great assumption that renters will turn into buyers , which i think it is only authors own assumption. The credit check and deposit requiremnt to buy a house is very different than merely renting… i dont think most renters will turn into buyers, they will keep renting. when the price of cheese goes up , you can buy other stuff or live without. housing is different. if everyone increase the rent, the renter will have to pay extra. …
    @raymond, I think the one and only person you need to worry about where to post opnion etc. is you yourself