# Forum More Stuff Debate & Technical Discussion  Negative Gearing and toll poppy syndrome

## Marc

If there is one attribute we are known all over the world for and we shouldn't be proud of, is the so called tall poppy syndrome. 
And nowhere else is this anti-value more prominent than when talking about negative gearing.  
The current ambiguous not right not left, sort of who-knows-what government, short of money and ideas is dusting off various skeletons pulled from under different beds, to see if they can pump life in them. 
When a 50% tax increase donation to the incompetent states is abandoned, up comes the limitations or abolition of negative gearing.  
However stupid and communist born this idea is and however negative and damaging to the economy this idiotic concept is, it is re floated over and over by left leaning politicians from time to time, only because of it's blatant popularity.  
 And that is the rub. Politicians are what they are, but popular culture is what directs and allows politicians to act. Certainly not what is good for the country.  
If you want to have a laugh, just ask around your friends and relatives what do they think about the rich (very important that you use this pejorative word) being allowed to negative gear rental properties and listen to the replies. The attitude you will encounter will most probably be on the pathetic side unless your environment is widely different from mine. 
Now let's just backtrack a bit and think about what this despised "negative gearing" actually means.  
If you buy a business, any business, your expenses, all of them be it stock, salaries, rent and interest on loans to name a few, go against your profits and reduce that way your taxable income and tax liability. Without this basic elementary principle no business, not even a casino would be viable. If you own two business, one making a profit and one making a loss, and you conform to the appropriate tax law, you can transfer the loss from one business to the one making a profit. No secrets there. 
Negative gearing is exactly that. You own a rental property, your expenses go against your profits. If your rental makes a loss because your expenses are higher than the rental income, you will have to pay the shortfall from your own pocket, namely from your day job, and it is only logical that you claim such loss as a tax deduction since you are one and the same. The difference between the first example and the second is that the first one is a commercial entity and the second is an identifiable person with a face and a name.   
 Big Ben has one rental property and one salary. He makes a loss on his rental and props the rental business up with his salary and so his tax bill is smaller. 
Wrong? Why? Because Big Ben has a face and a name and is a target to be hated and despised.  
Block the local newsagency from writing off his expenses against his profit and you close him down. Block Big Ben from claiming a loss on his rental as an expense and you will hurt a "rich" person and make a lot of people happy. 
 Really?
 Unfortunately so. It is rather pathetic and the conversations you get into if you discuss this subject can be rather revealing of people's thoughts and beliefs. 
 Understandably so when generation after generation has been brought up with the belief that there is something inherently wrong about prosperity and that there is virtue in poverty. 
 The reality that 95% of rental properties owners in Australia own just one rental property and that Big Ben has now sold his rental and that the rent has shot up for all those virtuous people who must pay rent, has not escaped even this clueless government but still eludes the populous.
 Sad really.

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## ringtail

A different way to look at it Marc and one I hadn't considered. Makes sense. Although, the difference is the "business". The rental property only has it's tenants as its customers and the "business owner" is not making any attempt to turn a profit. Neg gearing property inflates the property prices and landlords can't even get close to getting a decent rental yield. IIRC, neg gearing is gone in the UK and rents went up briefly then property prices went down, rents went down but yields went up and property was positively geared. Might have changed now, not sure. Don't get me wrong, I'm 100% in favour of self wealth. I think a better system would be to scrap neg gearing but also scrap capital gains tax completely. If someone does the hard yards to accumulate wealth through buying shares, property etc.... and make a tidy profit on capital gain then they shouldn't be taxed on it at all. No expenses would be deductible though.

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## Marc

There is a lot to be said for tax reform but I was actually focusing on people's attitudes towards prosperity. Tax reform? I say a flat rate tax for all, no threshold nor tax brackets, everyone from $1 to $1,000,000,000,000 pay the same rate of tax and ... drum roll ... no deductions whatsoever from personal income. 
Accountants will probably have a cry or two though. 
Capital gain tax is government shamelessly stealing from you. After all they must pay for all their travel expenses.

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## Black Cat

I think the important thing to focus on here is the issue of housing affordability. Fine give negative gearing to the mom and pop investors who want to have a rental property to support their retirement, but any more than two rental properties and in my humble opinion negative gearing should cease. A lot of the government's argument focusses on people with a taxable income of $80,000. They might have an actual income way over that, but because of negative gearing and various other perks they are able to reduce their tax to that paid by the ordinary sod whose income is $80,000.  
If we really are in a serious financial state (and external analysis rates us as one of the richest countries in the world), then we should focus tax reform on those who pay no tax at all while raking in billions. Newscorp for example, paid no tax at all. Gina Rinehart paid very little tax compared to her income. This is not tall poppy syndrome it is about equity. If you earn x dollars you should be required to pay at the relevant tax threshold. Consider that some of the politicians opposed to this move not only own several properties, but are also charging 'travel expenses' when staying in them. That means that the rest of the time they are standing empty and providing a nice little tax loss to their owner. There are fairer ways of distributing income and tax. Tax is, after all, paying for the roads, education, facilities etc that allow someone who is 'self-made' to get where they are. It is the price of living in a society.

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## David.Elliott

On the money Marc.
Tax reform, flat rate for all.. and it needs to be pitched like the US was many years ago at just a bit more than the cost of avoiding it. 
Evert time I see tax reform mentioned think of the famous Kerry Packer moment at the senate hearings... 
My current hobby horse is the tax/welfare roundabout. Some pundits have calculated there is a 20 billion dollar roundabout. Taxing us all and giving it back in payments.
Cannot link the article, but here's the headline  Feb 13, 2016 *... Government ministers have cited the statistic that 40 per cent of all households and 30 per cent of working households did not pay net tax.* *LabeledThe Australian*  
Here's another article, Nocookies | The Australian 
Imagine the money we could save in public servants by taxing us all less and giving us less or nothing back...? 
Black Cat
You're spot on with the pollies and their properties they say in...
As my old Dad used to say. 
Pollies are like prostitutes, regardless of the reason they get into it, they all end up being in it for the money

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## Marc

[QUOTE=Black Cat;1005656]I think the important thing to focus on here is the issue of housing affordability.  Not really ... in a free market we have offer and demand. Plenty of cheap housing in smaller towns. Fortunately the governemt does not (yet) pass around coupons for buying properties. 
Fine give negative gearing to the mom and pop investors who want to have a rental property to support their retirement, but any more than two rental properties and in my humble opinion negative gearing should cease.  Yes, I am sure Cuba has a similar concept. Prosperity is baaaad. I had 9 properties up to not long ago, I must be _really_ baaad.  A lot of the government's argument focusses on people with a taxable income of $80,000. They might have an actual income way over that, but because of negative gearing and various other perks they are able to reduce their tax to that paid by the ordinary sod whose income is $80,000.   Making a loss in order to maintain a business for future gains is a choice not a perk and it costs a lot of money to keep it going. It is the actions of individual entrepreneurs that create a rental market for those who choose to rent instead of buy. It costs less to rent than it costs to buy a property so can we consider renting to be a perk supported by mum and dad investor? This would be a very popular concept to float I am sure.  
If we really are in a serious financial state (and external analysis rates us as one of the richest countries in the world), then we should focus tax reform on those who pay no tax at all while raking in billions. Newscorp for example, paid no tax at all. Gina Rinehart paid very little tax compared to her income. This is not tall poppy syndrome it is about equity.   Ha ha, thank you for making my point. I envy you for being privy of Gina Rinehart personal income and Newscorp profit and losses. if you think they have broken the law, you should contact crime stoppers. otherwise it is just tall poppy syndrome. You can pay as little tax as you want providing you take the necessary legal steps for it.  
If you earn x dollars you should be required to pay at the relevant tax threshold. Consider that some of the politicians opposed to this move not only own several properties, but are also charging 'travel expenses' when staying in them. That means that the rest of the time they are standing empty and providing a nice little tax loss to their owner. There are fairer ways of distributing income and tax. Tax is, after all, paying for the roads, education, facilities etc that allow someone who is 'self-made' to get where they are. It is the price of living in a society.  Aah the strum of the wealth re-distribution tune and the Robin Hood tax bracket charade. [/QUOTE] 
Allow me to reply with a quote or two from *William John Henry Boetcker* (18731962)There are several minor variants of the pamphlet in circulation, but the most commonly accepted version appears below:   _You cannot bring about prosperity by discouraging thrift.__You cannot strengthen the weak by weakening the strong.__You cannot help little men by tearing down big men.__You cannot lift the wage earner by pulling down the wage payer.__You cannot help the poor by destroying the rich.__You cannot establish sound security on borrowed money.__You cannot further the brotherhood of man by inciting class hatred.__You cannot keep out of trouble by spending more than you earn.__You cannot build character and courage by destroying men's initiative and independence.__And you cannot help men permanently by doing for them what they can and should do for themselves._
Boetcker also spoke of the "Seven National Crimes":[4]  I dont think.I dont know.I dont care.I am too busy.I leave well enough alone.I have no time to read and find out.I am not interested.

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## cyclic

The thing that has always amazed me is the fact most people do not understand tax and negative gearing.
eg If I buy/start a business/property/investment of any kind and my cost is more than the income, then I am negative geared, a term started by the Real Estate Industry in the 80's in order to help sell Investment Property, however, negative gearing is simply making a loss on an investment which in turn is claimed against other income.
But lets look at the full situation.
Lets say I buy a Unit for $500,000 and borrow the lot at 5% to make it easy.
Lets make up some costs      
 Interest        $25,000 
Rates           $2,500
Body Corp    $5,000
Maintenance $1,500
so we end up with costs of $34,000 as opposed to income of $25000, so a loss of $9,000 which comes off the taxable income, but even if the tax rate we are paying is 49%, out of the $9,000 loss we have incurred, we only get back 49% of the $9,000 being $4410, so we have blown $4,590 up in smoke. Gone/pooff/up in smoke.
It gets far worse if the investment is run through a Company with the tax rate at 30% ie 30% of $9000 = $2700, meaning we have blown $7300 out the window.
And don't ask your Accountant if you are doing the right thing because they will simply tell you they are saving you tax by advising you to negative gear.

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## Marc

Which is why in the 80ties when the real estate agents advertised in the papers at full page "Let the tax man pay for your investment" I was foraging for positively geared properties in Goulbourn and many other places outside Sydney. I was of course ridiculed by my peers who assured me I was just "working for the bank".  
Well I had the last laugh a long time ago but today's once more revival of the "unethical rich" who "benefit from negative gearing" by the people who are only exercising their right to hate, is what brings me to start this debate that by no means wants to convince anyone of anything, just stating a few rather obvious points, hopefully without insulting anyone if at all possible. 
PS 
As far as what is wrong, the one thing that could have mentioned and was not is that there are a lot of illegal actions being taken and ignored by the government for kiss butt reasons, that are making prices go ballistic and that is illegal acquisitions by foreigners. Yet it is not cool to talk about that. You may be racist you know?

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## woodbe

So Marc, how many negative geared investment properties do you have? 
The bottom line on negative gearing is that a taxpayer can play his investment to wipe out his tax while the property continues to gain income and asset value. Basically, you get to spend money on your own asset instead of handing it over to the tax department. I'm not a big fan, but I'm not against it either as long as the taxpayer ponys up with a fair share of the profit when the property eventually is sold. 
Wiping it out, or just allowing it on new properties is probably a bit of an over reaction. Might be better to ust put a cap on it, so ma and pa can do their thang, but the greedy buggers better look elsewhere. Would also save some of the people who go crazy without adequate asset backing when the boom busts...

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## johnc

We don't get sensible discussion when we start talking about envy or attributing responses to how we think we may be perceived. Negative gearing doesn't really exist in reality it is simply a term that has become part of language and the current proposal seems to be to limit deductions to other forms of passive income such as other rents, dividends and interest. For assessing Centrelink payments such as family benefit we already eliminate rental losses so extending it to taxation would be nothing radical. If we are being fair dinkum we have to take into account the impact on rents and house prices and that impact on all Australians. Our rapidly rising house prices and rents in major cities point to a failure in the market which includes housing supply and price, I have little time for those whining about the isolation of rental losses, if you have a large portfolio you would expect to have other properties in profit and not be effected, if you are in the higher income brackets which 80% of negative gearers are then you are sponging off the tax system and the less well off, so really should you be getting a free ride.  
Same with the CGT discount of 50% why should someone get their tax cut in half for speculative gains when someone actually earning money running a business and employing gets hit at full whack. Rewarding idle speculators and punishing the productive makes little sense. Same with the company tax rate, cut the rate and it makes possibly no difference to Australian individuals but lowers the rate of tax paid by foreign companies and investors, it would make more sense to give accelerated deductions to companies investing in new plant and equipment to increase business efficiency and employ. Same goes for super, why should the super wealthy be able to enjoy massive tax free incomes when a single person on a low income and no kids pay at their full marginal rate. Tax isn't fair we need to collect it around the rate of 25% of GDP from different sectors and sources. For those advocating a flat rate of tax you really have no idea, most of the support for that absurd proposition is based on logical fallacies, for most people if you bring it in would see personal tax rise not fall as you have narrowed your tax base.  
There is plenty of scope for a logical debate although sadly the LNP at the whiff of poorer polling are back to scare tactics so I suspect the whiners, whingers, drongos and dopes still have the ascendancy and proper discussion is an orphan with no home.

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## Marc

> The bottom line on negative gearing is that a taxpayer can play his investment to wipe out his tax while the property continues to gain income and asset value.

  Clearly you don't understand the concept of negative gearing.
It goes rather like this:
Your personal income is $100k you pay $30k tax.
Your investment property makes a loss of $30k, you pay no tax .... err ... wait a moment ... 100k - 30k loss = 70k You pay about 22k on $70k income, so you are still $22k behind. Bummer, how much loss do you need to make in order to "wipe out your tax?" Well easy ... no tax means earning less than $18.5k so 100-18.5= $81.5 ... answer to wipe off your tax bill of $30k you must make a loss of $81.500 EVERY YEAR   -  A brilliant strategy!
And when you finally sell for a profit, the state takes half of it because you had the gall to earn enough to pay the top marginal tax bracket. Someone else that is not working and earning under $18,000 will pay no capital gain tax on an equivalent property.
Brilliant justice

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## toooldforthis

interesting thread.
I don't think tho that people buying residential property that is negatively geared are buying an investment/business that they hope to turn into a profit making concern that might employ people. The carrot for them is the CG at the end of the rainbow. The neg gearing is just some juice along the way so they can say tell themselves they are reducing their tax while making a loss.
unfortunately this speculation on residential property has pushed house prices very high, which is where some of the resentment kicks in from those who cannot afford to buy shelter. 
While I think the policies of negative gearing and CGT for speculating in residential property could do with some tweaking it is fair to say that both apply to a lot of areas besides residential property – shares, business investment etc.
Some of these areas are productive investments, speculating on residential property isn’t imho.
Having said all that the main reason residential house prices have ballooned in that last 20 odd years isn't NG or CGT it is easy credit and, more recently, low interest rates. Which leads us to the banks and their practices...

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## johnc

> Clearly you don't understand the concept of negative gearing.
> It goes rather like this:
> Your personal income is $100k you pay $30k tax.
> Your investment property makes a loss of $30k, you pay no tax .... err ... wait a moment ... 100k - 30k loss = 70k You pay about 22k on $70k income, so you are still $22k behind. Bummer, how much loss do you need to make in order to "wipe out your tax?" Well easy ... no tax means earning less than $18.5k so 100-18.5= $81.5 ... answer to wipe off your tax bill of $30k you must make a loss of $81.500 EVERY YEAR   -  A brilliant strategy!
> And when you finally sell for a profit, the state takes half of it because you had the gall to earn enough to pay the top marginal tax bracket. Someone else that is not working and earning under $18,000 will pay no capital gain tax on an equivalent property.
> Brilliant justice

  Not exactly Marc, if you make a capital gain the maximum the state gets is slightly less than a quarter of it, not half as you claim. Most people earning less than $18000 don't have to worry about capital gains because they don't have anything or possibly managed to manipulate a low income year to avoid paying out, lets get real here if you have sold out of a property and made a substantial gain it is probably going to be more than $18000 isn't it.

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## Marc

As far as the UK ban on negative gearing, no such thing. They are talking or already imposed I don't know a LIMIT on the percentage of tax allowed. That is if you are on the lower marginal tax rate you can do it if you are one of the disgusting people (drongos according to Jonhc) who earn the higher marginal tax then you are limited to say 20% or thereabouts.
One thing no one has told Australians is that since forever, the owner occupier in the UK was able to claim his own home interest bill on tax.  
As far as "sensible discussion" what does that even mean? The reality is that our values and anti-values are what determines our actions and the way we judge others. 
The point I make in this posts is that negative gearing objectors raise personal hatred points to support their theories. Gina is one example since Kerry has passed away. 
And they are by no means in the minority. Far from it. The number of people who openly or secretly or, even unknown to themselves believe that wealth is wrong is up in the 90 to 95% of the total population.    
A fascinating subject, certainly nowhere near "sensible".

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## SilentButDeadly

> The number of people who openly or secretly or, even unknown to themselves believe that wealth is wrong is up in the 90 to 95% of the total population.

  They'd probably be the one's who aren't wealthy?  :Harhar:

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## Marc

> interesting thread.
> I don't think tho that people buying residential property that is negatively geared are buying an investment/business that they hope to turn into a profit making concern that might employ people. The carrot for them is the CG at the end of the rainbow. The neg gearing is just some juice along the way so they can say tell themselves they are reducing their tax while making a loss.
> unfortunately this speculation on residential property has pushed house prices very high, which is where some of the resentment kicks in from those who cannot afford to buy shelter. 
> While I think the policies of negative gearing and CGT for speculating in residential property could do with some tweaking it is fair to say that both apply to a lot of areas besides residential property – shares, business investment etc.
> Some of these areas are productive investments, speculating on residential property isn’t imho.
> Having said all that the main reason residential house prices have ballooned in that last 20 odd years isn't NG or CGT it is easy credit and, more recently, low interest rates. Which leads us to the banks and their practices...

  You are not wrong about the resentment bit. My point precisely, yet this is called "the market" offer and demand. I don't see many riots going on because of the trajectory of Google shares.
 As far as your division between "productive" and "speculative" investment, I beg to differ. If you think that one investment property is not a productive investment ask your local real estate agent and the army of tradesman that he employs to keep the properties habitable. And if you want to go a tad further think of it this way ... it is cheaper to rent than it is to buy. So the rental market is subsidised by private entrepreneurs, philanthropist of sort that love their fellow man and buy a property to give them shelter.  
There are armies of "charity" organisations that make a profit and actually "distribute" less than 10% of the profit and pay no tax.

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## Marc

> They'd probably be the one's who aren't wealthy?

  Not for a moment Silent, not at all. I know personally very successful individuals who had backwards stories hammered in their head all their life, that feel very guilty of their own success. 
I have a lot of fun when people who retire from business start parroting they now ..."want to give back". 
I regularly ask if they have actually stolen something. What is there to "give back"?

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## Micky013

> Not exactly Marc, if you make a capital gain the maximum the state gets is slightly less than a quarter of it, not half as you claim. Most people earning less than $18000 don't have to worry about capital gains because they don't have anything or possibly managed to manipulate a low income year to avoid paying out, lets get real here if you have sold out of a property and made a substantial gain it is probably going to be more than $18000 isn't it.

  Im confused here. Everyone pays capital gains regardless of taxable income. Capital gains arises from income producing activities/assets so sadly if i rent my mums house for a certain period of time after she dies, it was the family home and im a dole bludger then i need to pay cgt on it. Simple really 
Also im with Marc 100% in this. Just because you have a bunch of properties negatively geared (can even be the case with shares) doesnt mean its easy to get or keep running. If youve got the beans to get it going and maintain it good luck to you. Thats is my plan.

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## johnc

Short term it is cheaper to rent than buy, long term cheaper to buy than rent, the reference to drongo's is clear, there is a bigger story to housing affordability and supply, that should be the core of the discussion not the ranting's of someone who feels a bit hard done by.

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## johnc

> Im confused here. Everyone pays capital gains regardless of taxable income. Capital gains arises from income producing activities/assets so sadly if i rent my mums house for a certain period of time after she dies, it was the family home and im a dole bludger then i need to pay cgt on it. Simple really 
> Also im with Marc 100% in this. Just because you have a bunch of properties negatively geared (can even be the case with shares) doesnt mean its easy to get or keep running. If youve got the beans to get it going and maintain it good luck to you. Thats is my plan.

  There are a few rules on deceased estates, you may pay no capital gains at all in that situation, you may pay a tiny amount it depends on different factors. If all your income including capital gains is under the taxable threshold you pay no tax, if over you do, Marc's analogy is a little misleading, but not untrue.

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## Micky013

Correct. It just sounded as if cgt didnt apply if you earned less than 18k which is not the case (unless like you mention).  
Coming from a tax accounting firm and not a @@@@@@ h&r block firm. You see sooooo much more "tax avoidance" type strategies (all legal of course)  from businesses rather than the small returns you make from negative geared properties.

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## toooldforthis

> You are not wrong about the resentment bit. My point precisely, yet this is called "the market" offer and demand. I don't see many riots going on because of the trajectory of Google shares..

  yet, with neg gearing the offer made by the investor has a tax advantage over the offer made by an occupier? the repayments/interest on the investor's offer are tax deductible 
 .  

> As far as your division between "productive" and "speculative" investment, I beg to differ. If you think that one investment property is not a productive investment ask your local real estate agent and the army of tradesman that he employs to keep the properties habitable..

  I doubt an investor spends more on their property via trades etc than an owner/occupier. 
 .  

> And if you want to go a tad further think of it this way ... it is cheaper to rent than it is to buy. So the rental market is subsidised by private entrepreneurs, philanthropist of sort that love their fellow man and buy a property to give them shelter.

  rubbish. they buy even tho the rent doesn't cover the repayments cause they expect a CG when they sell.
take the expectation of CG away and they would only buy properties that are positively geared.

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## Marc

> Im confused here. Everyone pays capital gains regardless of taxable income. Capital gains arises from income producing activities/assets so sadly if i rent my mums house for a certain period of time after she dies, it was the family home and im a dole bludger then i need to pay cgt on it. Simple really 
> Also im with Marc 100% in this. Just because you have a bunch of properties negatively geared (can even be the case with shares) doesnt mean its easy to get or keep running. If youve got the beans to get it going and maintain it good luck to you. Thats is my plan.

  Capital gain is stealing plain and simple, and stealing Robin Hood style. 
If I buy a property or shares at 100k and sell at 200k, I make a profit of 100k right?
Wrong.
If I buy a machine in the US for 10k, import it and sell it at 20k, spent 2k for transport and taxes, cleaning and repairs I made a profit of ... 8k yes, that is profit, because the conditions exist to do it over and over within reason. I took action to change some goods from one market to another and made a profit in the process. 
My property did not make a profit, the market changed and the demand made the price go up. If I sell at 200k can I buy another for 100K? Not of course I sold the same property in a changed market. No profit so there should be no tax. It's the same property and it is devalued money after paying a string of taxes and maintenance that is not deductable. If you want it in other words, the 100k from 20 years ago are now the 200k from today. What profit did I make? NONE! 
And it does not end there. My so called capital gain is not taxed at a fixed amount but at a variable rate depending on how much I earn elsewhere. What on earth has that to do with the price of fish?
If one person sells his property at a capital gain of 100k yet has a personal income of zero, his tax bill will be way lower than someone who has the audacity of earning so much as to pay tax at the highest marginal tax (what a bastard) and so will be paying half of his gain to the government to spend on helicopter rides and family holidays.  
Ah the sweet justice of Robin Hood.

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## johnc

> Correct. It just sounded as if cgt didnt apply if you earned less than 18k which is not the case (unless like you mention).  
> Coming from a tax accounting firm and not a @@@@@@ h&r block firm. You see sooooo much more "tax avoidance" type strategies (all legal of course)  from businesses rather than the small returns you make from negative geared properties.

  Quite correct, the general public have no idea how much legal rorting goes on by the stretching of the rules to what should be beyond breaking point.

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## johnc

> Capital gain is stealing plain and simple, and stealing Robin Hood style. 
> If I buy a property or shares at 100k and sell at 200k, I make a profit of 100k right?
> Wrong.
> If I buy a machine in the US for 10k, import it and sell it at 20k, spent 2k for transport and taxes, cleaning and repairs I made a profit of ... 8k yes, that is profit, because the conditions exist to do it over and over within reason. I took action to change some goods from one market to another and made a profit in the process. 
> My property did not make a profit, the market changed and the demand made the price go up. If I sell at 200k can I buy another for 100K? Not of course I sold the same property in a changed market. No profit so there should be no tax. It's the same property and it is devalued money after paying a string of taxes and maintenance that is not deductable. If you want it in other words, the 100k from 20 years ago are now the 200k from today. What profit did I make? NONE! 
> And it does not end there. My so called capital gain is not taxed at a fixed amount but at a variable rate depending on how much I earn elsewhere. What on earth has that to do with the price of fish?
> If one person sells his property at a capital gain of 100k yet has a personal income of zero, his tax bill will be way lower than someone who has the audacity of earning so much as to pay tax at the highest marginal tax (what a bastard) and so will be paying half of his gain to the government to spend on helicopter rides and family holidays.  
> Ah the sweet justice of Robin Hood.

  The original capital gains tax rules indexed the gain for inflation which is quite fair, if you buy in a booming market and sell for a gain why should you line your pockets with the cash tax free, there really isn't an argument that supports the idea that taxing gains is theft. Taxation should encourage hard work and economic gain it shouldn't support idle speculation by the lazy, simple as that.

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## Micky013

> Capital gain is stealing plain and simple, and stealing Robin Hood style. 
> If I buy a property or shares at 100k and sell at 200k, I make a profit of 100k right?
> Wrong.
> If I buy a machine in the US for 10k, import it and sell it at 20k, spent 2k for transport and taxes, cleaning and repairs I made a profit of ... 8k yes, that is profit, because the conditions exist to do it over and over within reason. I took action to change some goods from one market to another and made a profit in the process. 
> My property did not make a profit, the market changed and the demand made the price go up. If I sell at 200k can I buy another for 100K? Not of course I sold the same property in a changed market. No profit so there should be no tax. It's the same property and it is devalued money after paying a string of taxes and maintenance that is not deductable. If you want it in other words, the 100k from 20 years ago are now the 200k from today. What profit did I make? NONE! 
> And it does not end there. My so called capital gain is not taxed at a fixed amount but at a variable rate depending on how much I earn elsewhere. What on earth has that to do with the price of fish?
> If one person sells his property at a capital gain of 100k yet has a personal income of zero, his tax bill will be way lower than someone who has the audacity of earning so much as to pay tax at the highest marginal tax (what a bastard) and so will be paying half of his gain to the government to spend on helicopter rides and family holidays.  
> Ah the sweet justice of Robin Hood.

  Sadly thats just the way it is - i dont think thats ever gonna change its just too easy to make money that way

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## Marc

> The original capital gains tax rules indexed the gain for inflation which is quite fair, if you buy in a booming market and sell for a gain why should you line your pockets with the cash tax free, there really isn't an argument that supports the idea that taxing gains is theft. Taxation should encourage hard work and economic gain it shouldn't support idle speculation by the lazy, simple as that.

   Nonsense.
Take it to the extreme for illustration purposes. 
I know of a waterfront property sold for 36,000 pounds by a pom returning to the UK in the early 50ties 
That property sold last year for a bit over 11 millions.
Had it been an investment property and if the capital tax would apply to properties that far back the tax bill would be astronomical.
 Why? Profit? What profit? 36000 pounds was a lot of money then and that is the equivalent today. No one made any "profit" that needs taxing. The concept is to take money from the person at the time only because it can be done. Not because it equitable. 
Your choice of words sais it all. "booming market" ... "selling for a gain" ... "lining your pockets" are all sensationalist newspaper talk. The fact remains that tax takes from the easy targets, discourages productive activity(ever had a business that reached the one million dollar salary mark?) and encourages unproductive speculation. And property investment is far from unproductive, it is just a thorn in the side of those left behind that need to blame someone. Something that is in the open and evident.

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## SilentButDeadly

Err Marc...I was/am of the opinion/understanding that CGT is indexed to annual inflation.  So your example takes the biscuit...

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## Marc

And CGT does not apply past 84 or thereabouts ... for illustration purposes only to discuss the concept of "gain". 
I say what gain? 
in 1952 you could buy other properties for 36,000 pounds, today you can buy other properties like that for 11 millions, that is the value, there is no gain.

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## Spottiswoode

So you think capital gains on property is unfair, what about shares? There is probably a line somewhere between someone whose business is buying and selling for capital gain and someone who happens to hold a property for long enough for the price to rise. It is really hard to draw lines in legislation that suit everyone, so we are stuck with if you sell an income producing asset then it is considered profit and is therefore taxed. The home is excluded because you need to live somewhere, the CGT discount applies to assets held over 12months to reduce speculative buy/sell for short term profit. 
Take away CGT and there will be a lot of stockbrokers, real estate brokers etc that all of a sudden don't pay tax at all.

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## woodbe

> And CGT does not apply past 84 or thereabouts ... for illustration purposes only to discuss the concept of "gain". 
> I say what gain? 
> in 1952 you could buy other properties for 36,000 pounds, today you can buy other properties like that for 11 millions, that is the value, there is no gain.

  What a load of twaddle. 
If you had 36000 pounds in 1952 and put it under your bed, you would have taken a loss on the basis of inflation. No tax.
If you put it in the bank, you would get some interest, well, not much until inflation hit... Taxable.
If you bought a range of shares with it, you would be sitting on a stack of cash today. Taxable.
If you put it in the property market you would make a good profit above interest. Taxable (unless it is the family home.) 
But apparently, investment property buyers should be exempt from supporting the economy when their property value increases?

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## Black Cat

If we really are in a serious financial state (and external analysis rates us as one of the richest countries in the world), then we should focus tax reform on those who pay no tax at all while raking in billions. Newscorp for example, paid no tax at all. Gina Rinehart paid very little tax compared to her income. This is not tall poppy syndrome it is about equity.   Ha ha, thank you for making my point. I envy you for being privy of Gina Rinehart personal income and Newscorp profit and losses. if you think they have broken the law, you should contact crime stoppers. otherwise it is just tall poppy syndrome. You can pay as little tax as you want providing you take the necessary legal steps for it.  
Marc, the information is publicly available, if you care to look around you. So if you want to have an opinion, try to make it an informed one in future.

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## Black Cat

And by the way Marc - I also own investment property (or do at present), so I know whereof I speak. I also own just one such property, despite having had the opportunity to build my property empire to the extent you yourself have done. But just because something is legal it does not mean it is moral. And I am afraid I live my life by moral standards, not the dog eats dog approach that rules much of society these days.

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## Marc

Yes, I hear you Black Cat, and you are not alone. You ride the moral high ground and therefore are limited. I am immoral and so I can pursue the achievement of wealth. What a load of hogwash. 
And you think your choice is unique, that it is yours that it is original.
It is not your choice, it was made for you and it limits you for no other reason than fear.
But that is another story.  
Negative gearing objections are tall poppy syndrome. And mentioning Gina is just the icing on the cake.

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## SilentButDeadly

Marc...your atypical lack of empathy for your fellow human and self righteous indignation at others apathy to your world view is getting you nowhere in the sympathy stakes on this one. 
Personally I'm ambivalent to ending negative gearing and I'm equally ambivalent to CGT...neither apply to me and are unlikely to in the future. 
As for those intellectually lazy enough to blame the tall poppy syndrome for their perceived woes and self conscious fears... HTFU ya sooks! Its not all about you...in fact most of us aren't even aware you exist.

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## johnc

Marc I gather sees everything as an attack on himself, while really all of us are that insignificant to the decision making process we are irrelevant to whatever is going to happen. I have property and capital gains are a regular feature in my world, I couldn't give a toss if they end negative gearing and the 50% rebate on CGT is silly in my view as it diverts capital into passive investment and away from the job generation areas of industry and business endeavour. Ultimately I figure I'm worse off long term because of the drag on economic growth as a result of excessive domestic debt. Owners of rental properties don't contribute much to the economy, we have a large pile of vacant property in our capital cities held by buyers who don't wish to rent and are hanging around solely for the capital gain. If taxing those gains forced a bit more of that stock onto the market we might see prices become a little more affordable.

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## Spottiswoode

I don't think there is an easy answer. The tax system is so complex that those with the most money can pay accountants to rort it easily, while the rest of us pay a decent share. Realestate prices are a hot topic so it's only natural that the opposition is crowing about doing something about all those fat cats getting rich off the property market while the Aussie dream of owning your own home slips further away for a lot. the media then run with it and the likes of A Current Afair and the tabloids scare 'everyone' into thinking negative gearing rollback is going to cut house prices by 20%. 
why shouldn't an investments costs be part of the business of increasing your own wealth. Sometimes it costs a bit more than the immediate income generated while waiting for the bigger returns later on, which ultimately increase wealth and decrease the burden on the pension system. No one in their right mind goes into an investment with the idea of losing money with out a long term view for an increase in wealth

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## Black Cat

> Yes, I hear you Black Cat, and you are not alone. You ride the moral high ground and therefore are limited. I am immoral and so I can pursue the achievement of wealth. What a load of hogwash. 
> And you think your choice is unique, that it is yours that it is original.
> It is not your choice, it was made for you and it limits you for no other reason than fear.
> But that is another story.  
> Negative gearing objections are tall poppy syndrome. And mentioning Gina is just the icing on the cake.

  What an extraordinary response. Perhaps it is simply that having been both a property investor and now getting out of the game allows me to see more than one perspective - in other words it expands my appreciation of the issues rather than limiting them. You need to take a broader view yourself, as others have already suggested. Laws affect people. Some are affected positively, some negatively. Going to jail for theft affects someone negatively - should they they demand that theft be legalised? Try to think beyond your own boundaries and consider the greater good - a healthy economy is one from which all people benefit - if you have a job that makes good money you can spend that money, thereby creating jobs and greater national wealth (more people with money to spend). Same applies with the housing market - while all people with an income can buy a house, the market is healthy and reasonably steady - get too many properties being bought by investors then you have a market that bounces like a rubber ball. Not good for anyone except a few sharks.

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## Marc

Ha ha priceless.
Anyway, just proves my point beyond my expectations. 
The rich are rorting the tax system.
Negative gearing is immoral and should be banned.
Anyone earning big money is immoral by default.
I am limited but I am honest.
Priceless.  
The Australian Tall Poppy Syndrome. 
That is the sort of anti-value that holds people back and has done so for a very long time.

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## Spottiswoode

I think the Aussie fair go is probably more accurate than the tall poppy syndrome with this example. Aussie want equity across the tax Paying public. We want the rich to pay their fair share of tax more than wanting them not to be rich and there is certainly a perception that the more you earn the less you pay proportionally. This is why negative gearing has been targeted, it is a tool which is used by the rich to pay less tax. Unfortunately by removing it it also hurts middle Australia that have taken a risk trying to get ahead with property.  
I own own a negatively geared property. It helps me reduce my tax bill, and take advantage of the equity in my home. 
just now on one of those stupid morning shows there is a prolly scaring people about tax, negative gearing etc. the rhetoric is definitely anti-opposition policy, rather than positive discussion about tax reform.

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## sol381

Mate.. not having a go at you in any way.. i agree with negative gearing.. take that away and then they must take away any tax on capital gain..just to even out...my point is what was your point.. what was the reason for posting..did you see something on a current affair or are you just sick of people talking down negative gearing..again, not having a crack it just seemed like a curious thing to bring up and what did you hope to gain.. were you just curious to see others views or get their reactions..

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## cyclic

Nine MSN article  https://au.finance.yahoo.com/news/is...045416264.html

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## Marc

> Mate.. not having a go at you in any way.. i agree with negative gearing.. take that away and then they must take away any tax on capital gain..just to even out...my point is what was your point.. what was the reason for posting..did you see something on a current affair or are you just sick of people talking down negative gearing..again, not having a crack it just seemed like a curious thing to bring up and what did you hope to gain.. were you just curious to see others views or get their reactions..

  Sure ... sometimes it is hard to have a conversation among a number of people with disparaging attitudes and understandably so. 
There are a number of interesting issues in relation to negative gearing and how it is perceived by the general population that once more is manipulated by the politicians for their own gain. As it has become blatantly obvious, you can see that the concept is not understood by most even those that are lodging it with their tax return every year.
It has become the Australian Bastille that will be stormed by the revolutionary expecting to find scores of political prisoners yet will find zip.
My point? That the public is being once more manipulated by politicians using the public's natural aversion to personal success or the pursue of it. The idea that the "rich" must pay for the "poor" by taking half of their personal income away then mismanage it on education revolution or sending funds to rogue nations or shamelessly squandering it and sell farms to China ignoring local bidders. 
The " Abolish the negative gearing" movement is based on a fallacy that it is a get rich scheme abused by the wealty. The fact is that a property that makes a loss is a burden and a long term gamble not necessarily that brilliant of a scheme. if you lose money and your marginal tax rate is low your losses are even higher. If you are on the top tax bracket you only recover half of your losses through negative gearing.
The negative gearing haters also seem to miss that it is well understood and widely used by every business under the sun. The reason people hate it is because it is seen as a PERSONAL method to reduce the tax bill. And that introduces the personal variable that allows it to be labelled as "immoral" ... "unfair" and all the other emotional buttons. The fact that it is a business tool, and that far from recovering your losses gives you back 50% at best and most probably way less in practice is missed. Don't let the truth get in the way of a good story... 
And the last point that is rather obvious is that even in a forum that deals with property, no one seems to understand that rental property in Australia is 95% in the hands of single rental property owners. That means that the vast majority of investment owners are amateurs, and far from rich. Or ... like in the case of politicians who never had a real job and that find themselves overnight with a high salary courtesy of the taxpayer, run to buy a high end rental property and negatively gear it against their salary thinking they are very smart in doing so. 
There are a few that own 2, very few that own more than 2 and a handful of companies that own a few hundreds and I know of one company that owns 1240 properties. Most multiple property owners do not buy negatively geared.
So in brief, changes to negative gearing will affect almost exclusively those who buy a rental by impulse without much planning and that hope some time in the future to make a capital gain to pay off their own home.  
So much for the high moral ground ... or the low moral ground for that matter.

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## Black Cat

Marc, apparently your response to reasoned argument is to start name-calling. I am going to assume this thread is just about you letting off steam because your personal financial structure is under threat ATM. Go for it. But please respect the right of others to have an opinion that differs from yours. Especially when that opinion is based on personal experiences that differ from yours.

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## Marc

If you really need to know I have never had any negatively geared properties. Sure had some that made a small loss from time to time due to unforseen circumstances and by no means is my "financial structure under threat". Hope this satisfies your curiosity.

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## r3nov8or

Guys, tame your tomes and head over to Take A Photo Of Something for some fun. Help needed 
Also, they aren't gonna touch NG and CG (much anyway), coz if they do they need to fund more public housing which costs more than they will make. 'Cheaper' private housing will never be cheap enough (serviceable loans) for most that rent. Damn, I wrote a mini-tome.

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## Marc

Is there an easy way to upload a photo from your phone without first posting it on facebook or some other website? if you try to post a photo from your computer directly the time you need to spend cropping it and chopping it takes all the fun out of it.

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## r3nov8or

> Is there an easy way to upload a photo from your phone without first posting it on facebook or some other website? if you try to post a photo from your computer directly the time you need to spend cropping it and chopping it takes all the fun out of it.

   Try Go Advanced then Manage Attachments, Choose File, Upload. i just tried but the photo was too large, and can't seem to change the size on my phone. Yours may be different.

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## Marc

Yes, thought so ... I usually post it to facebook and then straight here, no problems with size, but if I start posting unidentifiable bits I'll get a heap of questions and they come faster than I can delete the photo.  :Smilie:

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## woodbe

> Yes, thought so ... I usually post it to facebook and then straight here, no problems with size, but if I start posting unidentifiable bits I'll get a heap of questions and they come faster than I can delete the photo.

  Relevance to negative gearing?

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## r3nov8or

> Relevance to negative gearing?

  Depends on the photo I suppose.

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## sol381

> Sure ... sometimes it is hard to have a conversation among a number of people with disparaging attitudes and understandably so. 
> There are a number of interesting issues in relation to negative gearing and how it is perceived by the general population that once more is manipulated by the politicians for their own gain. As it has become blatantly obvious, you can see that the concept is not understood by most even those that are lodging it with their tax return every year.
> It has become the Australian Bastille that will be stormed by the revolutionary expecting to find scores of political prisoners yet will find zip.
> My point? That the public is being once more manipulated by politicians using the public's natural aversion to personal success or the pursue of it. The idea that the "rich" must pay for the "poor" by taking half of their personal income away then mismanage it on education revolution or sending funds to rogue nations or shamelessly squandering it and sell farms to China ignoring local bidders. 
> The " Abolish the negative gearing" movement is based on a fallacy that it is a get rich scheme abused by the wealty. The fact is that a property that makes a loss is a burden and a long term gamble not necessarily that brilliant of a scheme. if you lose money and your marginal tax rate is low your losses are even higher. If you are on the top tax bracket you only recover half of your losses through negative gearing.
> The negative gearing haters also seem to miss that it is well understood and widely used by every business under the sun. The reason people hate it is because it is seen as a PERSONAL method to reduce the tax bill. And that introduces the personal variable that allows it to be labelled as "immoral" ... "unfair" and all the other emotional buttons. The fact that it is a business tool, and that far from recovering your losses gives you back 50% at best and most probably way less in practice is missed. Don't let the truth get in the way of a good story... 
> And the last point that is rather obvious is that even in a forum that deals with property, no one seems to understand that rental property in Australia is 95% in the hands of single rental property owners. That means that the vast majority of investment owners are amateurs, and far from rich. Or ... like in the case of politicians who never had a real job and that find themselves overnight with a high salary courtesy of the taxpayer, run to buy a high end rental property and negatively gear it against their salary thinking they are very smart in doing so. 
> There are a few that own 2, very few that own more than 2 and a handful of companies that own a few hundreds and I know of one company that owns 1240 properties. Most multiple property owners do not buy negatively geared.
> So in brief, changes to negative gearing will affect almost exclusively those who buy a rental by impulse without much planning and that hope some time in the future to make a capital gain to pay off their own home.  
> So much for the high moral ground ... or the low moral ground for that matter.

  
Fair enough...i guess what most poeple dont understand is that a lot of people who have an investment property arent really rich at all.. they might be average earners who may be struggling and may have just had a bit of luck investing in a property.. if you negative gear you are in fact losing money or making a loss..the thing is to be positively geared so you at least make some money..i doubt many investors have a property that loses more than $10,000 a year.. if so you either paid way too much for the house or the rent is too low.. either way that 10 grand loss equates to a tax saving of maybe 3 to 4 grand..not really that much..any business can right off a loss why not property.. 
As for the tax brackets.. i agree there should be a flat rate.. say 20%..why be penalised if you have a high paying job or earn a lot because you spent 4 years at uni or work 80 hours a week..20% of 50 grand is still a lot less than 20% of 200 grand..increasing the tax the more you earn is a disencentive and encourages people to try and minimize their tax.. 
Also this is purely my opinion .. i dont care if you agree or totally disagree...also i may be wrong on a few points and i dont mind being corrected if so..

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## Marc

Actually you are spot on, but your and my opinion are far from popular. 
Property investment is in actual fact a very slow and painful way to build capital, when it is done as we discuss, without money. Even slower when the investor is nurturing a loss 
The high yield fast ways to build capital are most of the time out of sight for the average punter and as such elude scrutiny and would give a hissing fit to the "negative gearing objectors" if they got wind of the details.

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## Bedford

> Im confused here. Everyone pays capital gains regardless of taxable income.

  I don't.   

> Capital gains arises from income producing activities/assets

  Doesn't have to be income producing, could be vacant land that's increased in value over time.   

> so sadly if i rent my mums house for a certain period of time after she dies, it was the family home and im a dole bludger then i need to pay cgt on it.

  That wouldn't trigger a CGT event. 
It would create the start time, but CGT wouldn't apply unless you sold it.

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## woodbe

Negative gearing is just fine if the housing market continues to grow, but if the bubble bursts there will be a lot of negative geared investors looking pretty darn sick.  Expert predicts Australia's mortgage bubble will burst and property values will plunge | Daily Mail Online  Don't bet your house on it (if you even have one)

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## Micky013

And yes it would create a cgt event if you sold it - which was my point, surely that was clear enough

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## johnc

> Actually you are spot on, but your and my opinion are far from popular. 
> Property investment is in actual fact a very slow and painful way to build capital, when it is done as we discuss, without money. Even slower when the investor is nurturing a loss 
> The high yield fast ways to build capital are most of the time out of sight for the average punter and as such elude scrutiny and would give a hissing fit to the "negative gearing objectors" if they got wind of the details.

   This is quite true for most property investors gains come slowly and some would be much better off salary sacrificing into super. We have two huge issues dragging on the economy housing affordability and rentals low enough for people to manage. In the end for the country to be better off we need to have regulation that allows the population to get ahead. To do that we need to be broad in our thoughts and move beyond the self and look at spreading wealth without resorting to terms and insults but sticking to facts. Most social media is dominated by the self centred bit players but we do have the capacity in Australia to do much better than the rest of the world which we aren't at the moment

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## toooldforthis

> Negative gearing is just fine if the housing market continues to grow, but if the bubble bursts there will be a lot of negative geared investors looking pretty darn sick.  Expert predicts Australia's mortgage bubble will burst and property values will plunge | Daily Mail Online  Don't bet your house on it (if you even have one)

  + this 
a lot of people don't understand why house prices have gone up in Oz in the last 20 years.
therefore it follows they can't see them busting.
I'm not saying it is totally their fault. banks, property spruikers, mortgage brokers, r/e agents all are to blame; but at the end of the day it is the purchaser's decision - caveat emptor.

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## cyclic

> Negative gearing is just fine if the housing market continues to grow, but if the bubble bursts there will be a lot of negative geared investors looking pretty darn sick.  Expert predicts Australia's mortgage bubble will burst and property values will plunge | Daily Mail Online  Don't bet your house on it (if you even have one)

  Re the bubble bursting.
Up here it is already showing in units.
Owner of the unit I rent paid $760,000 in approx 2008 and is now trying to sell at $585,000 with only one offer in nearly 3 months at $460,000.
Not one buyer registered at Auction.

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## Bedford

> And yes it would create a cgt event if you sold it - which was my point, surely that was clear enough

  You said nothing here about selling, you referred to renting,   

> Im confused here. Everyone pays capital gains  regardless of taxable income. Capital gains arises from income producing  activities/assets so sadly if i* rent* my mums house for a certain period  of time after she dies, it was the family home and im a dole bludger  then i need to pay cgt on it. Simple really

  No CGT applicable before 20 September 1985 so not everyone pays CGT. 
Can you please fix where you quoted me so it does not read like I said it.

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## Micky013

> You said nothing here about selling, you referred to renting,   
> No CGT applicable before 20 September 1985 so not everyone pays CGT. 
> Can you please fix where you quoted me so it does not read like I said it.

  Im not fixing anything -FIXED NO MORE ADDING TO QUOTES MAKING IT LOOK LIKE THE ORIGIONAL POSTER there are exceptions to cgt yes. In the topic i was commenting on the issues was being under the threshold and how cgt applied in that situation. To me it seemed that what was being said was cgt didnt apply if you were low income - didnt say whether that was before or after profit was accounted for. I am well aware of precgt.

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## Bros

I think it's time to wind this thread up as this is a Renovate Forum not an investment forum.

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