# Forum More Stuff At the end of the day  Negative Gearing

## cyclic

Now the election is done, and with all the talk about negative gearing, I thought it would be timely to discuss negative gearing. 
Hands up all those who believe if you negative gear something, you get it all back on tax. 
Believe it or not, there are a lot who believe this, and it could not be further from the truth. 
Negative Gearing, put simply , is making a loss (insert blowing money) , which can then be offset against other taxable income, and the word tax, is the key, because 
(A) You can only claim the costs (not principle repayments on a loan, as well as any other costs (property rates, repairs, insurance) so 
(B) You will only get the tax back, not the whole amount of claim, meaning even if your tax rate is 47% (including medicare levy) for every $10000 you claim, you will get back $4700,. 
The remaining $5300 is gone/poof/ blown 
or if you manage to get on the lowest rate of 21%,(including medicare)  for every $10000 you claim, you will get back $2100. 
The remaining $7900 is ditto gone.  
 From The ATO site. *Residents* 
 These rates apply to individuals who are Australian residents for tax purposes. *Resident tax rates 2018–19*  Taxable income Tax on this income  0 – $18,200 Nil  $18,201 – $37,000 19c for each $1 over $18,200  $37,001 – $90,000 $3,572 plus 32.5c for each $1 over $37,000  $90,001 – $180,000 $20,797 plus 37c for each $1 over $90,000  $180,001 and over $54,097 plus 45c for each $1 over $180,000  
 The above rates *do not* include the Medicare levy of 2%.
 The above rates include changes announced in the 2018-19 Federal Budget.  
 Disclaimer
The information provided is in no way financial advice.
Professional advice should be sought for your individual situation.

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## Bedford



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## SilentButDeadly



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## r3nov8or

To be valuable, OP needs inclusion of income generated, e.g. rent.  
Also, to reduce confusion, add the missing ")" in point A

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## DavoSyd

there might be a few better explanations available, e.g. the horse's mouth: https://www.ato.gov.au/Forms/Rental-...gative_gearing

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## pharmaboy2

Don’t forget about depreciation. 
the idea is to to use the depreciation, eg $10,000 a year as tax deduction which gives you a $3200 tax return that then brings the cash loss of the investment from say a $2000 cash loss into a $1900 cash flow,positive investment. 
it is not necessary to loose money in order to gain a negative gearing advantage - it’s about real cashflow versus paper deductions

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## Bros

My car has a reverse gear does that help?

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## Bedford

> My car has a reverse gear does that help?

  Only if you want to go backwards!

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## SilentButDeadly

> Only if you want to go backwards!

  Like house prices in Sydney?

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## Bedford

> Like house prices in Sydney?

  Yes, and a few other places too......

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## Marc

If you own a fish and chip shop, you will deduct from your gross income all the expenses you incur to run the business. No surprises there. If you expenses cancel out the takings, you will need to put money in the business from elsewhere or shut shop. 
The source of your "elsewhere" income can come from your bakery that makes a good profit, so you prop up the fish and chip shop with your profits from the bakery because you hope for your shop to pick up soon. 
No surprises there.
in the past only companies or partnership were able to offset losses against different entities, and individual could not do this.  losses would stay quarantined within the entity.
Negative gearing, a term coined by real estate agents and accountants, means just that, the ability for an individual to offset income and losses from different sources like any partnership or company has always been able to do.  
This allows a person to buy a business, shares, a rental property or any other business, and support this business during the initial years when the business or investment makes a loss in lieu of future profits or capital gain. 
No surprises there. 
The reason this became a hot potato with the left is because of the way negative gearing works. Like cyclic explains, the loss is not deducted from the tax liability but is deducted from the taxable income, making the benefit proportional with the marginal tax rate. 
So the person on 45% marginal tax rate will benefit more than the person on 19% marginal tax rate, and this gives the ammunition to call this "unfair"
However if you bother working out the difference between the rebate from $10,000 loss if you earn $50,000 or if you earn $200,000 you will see that it is surprisingly very close. 
When it comes to so called negative gearing being some sort of scam, this comes usually from those who have no real notion of what a business is allowed to claim on their tax and the most basic of all principles of taxation is not to tax the cost of producing that income.  
To me, if there is a scam, it is progressive taxation, that is I must pay 45% tax whilst others pay 19% and to add insult to injury the explanation is ... because "I can afford it".
The ultimate slap in the face comes when you get old and need a place in retirement where you will get charged outrageous sums that can be half or even one million as opposed to zero according to how much is in your pocket.  
There are many ways to see inequalities, and negative gearing is not one of them.

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## toooldforthis

@Marc. That's a pretty good summary.
As is cyclic's. 
my ex couldn't understand neg gearing (one of the reasons...)
sucked in by the spivs - she didn't realise that eventually your investment must 'appreciate' to justify the early losses.

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## DavoSyd

there's probably as many explanations of NG as there are property investors... 
here the ABC's simplified post:   

> *What is negative gearing?*  Negative gearing allows property investors who make a loss to reduce the tax they pay on other income. Australia has more than 2 million landlords, and more than 60 per cent made a loss in the 2013-14 financial year. The average loss is about $10,000. If someone earned wages of $80,000, for example, negative gearing would cut their taxable income to $70,000. The total amount of claimed tax deductions in 2013-14 was about $11 billion. *
> What is the capital gains tax discount?*  The CGT discount was introduced in 1999 by the Howard Government. It generally sees half the profits from the sale of an investment property go untaxed. So if an investor made $100,000 selling a house, only $50,000 of that would be taxed. The increase in property investment really took off after this was introduced. The CGT discount for investor-owned properties is estimated to have cost the budget more than $6 billion last financial year.  *Who uses negative gearing?*  A Grattan Institute report last month showed the top 10 per cent of income earners, before negative gearing, get almost half the benefits. Surgeons who use negative gearing get some of the largest tax deductions, claiming nearly $30,000 each on average in 2013-14. Other medical professionals also had some of the highest losses. The Government said most people who negatively gear have a taxable income below $80,000. This is true, but negative gearing is a tax deduction that works to reduce someone's taxable income.

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## Bedford

> To me, if there is a scam

  It's Land Tax and CGT on my Son's house. 
We helped our Son get his first (and only) home. 
In order for him to get a loan my wife and I had to be on the loan as well, fair enough. 
By having our names on the loan we had to also have our names on the title, fair enough, you'd think. 
Now each year my wife and I pay Land Tax on two thirds of our sons home. 
Ten years on, our son wants to sell and move to another area, fair enough. 
However my wife and I will have to pay two thirds of the CGT on the sale. 
His house has never been rented since he's owned it so has produced no income, is Land Tax and CGT free for his part. 
When it sells, we will receive none of it as it's not our house. 
Did someone mention inequality?

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## Marc

Everyone tries to "explain" NG obfuscating the real meaning to hammer a political belief. 
That ABC rubbish is just a tool to make belief that ng gearing is a tool by the rich.  _If someone earned wages of $80,000, for example, negative gearing would cut their taxable income to $70,000._ _The total amount of claimed tax deductions in 2013-14 was about $11 billion._ The above pretends to show that the $10,000 loss i fully funded by the taxpayer. False. The following line is geared to make believe that the bad rich are scamming the poor ATO by 11 billions. Another farce aimed at the gullible and the ignorant of business matters. 
The capital gain discount exists as an form of admission that such is a punitive tax, a confiscation that calls "profit" whas is not. You have a profit when you add value at a marginal cost and cash in. If a product increases in value, the replacement value also goes up so it is not possible to make a profit by buying and selling. In other words, if you buy a house at $100,000 and sell it at $200,000 you make a profit if you are able to do so in the same market. If you do this 20 years apart, and it is the same house unchanged, you made zero profit and the CG tax is an unconstitutional confiscation just like forcing farmers to quarantine 90 % of their land with no compensation.

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## r3nov8or

> It's Land Tax and CGT on my Son's house. 
> We helped our Son get his first (and only) home.

  Bedford, assuming your son can now qualify for the loan on his own, is it possible for your son to refinance and remove you from the title before selling?

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## Greenwood

So to simplify it for us plebs is it better to be negatively geared (Losing money) and get tax back, or positively geared (Making money) and pay tax.....  
----

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## Marc

> So to simplify it for us plebs is it better to be negatively geared (Losing money) and get tax back, or positively geared (Making money) and pay tax.....  
> ----

  Not for a minute. profit is better than loss. I was out buying positively geared properties in the early nineties, houses in regional areas for 60k to 90k that would rent for $150 plus a week. Paying the mortgage and leaving net profit every week. There is no substitute for straight simple profits. 
You risk losses for a limited time in a booming market hoping for appreciation. Negative gearing is an unsustainable business strategy in the long term, and is used far too often without a proper understanding of when it is a good idea and when you are better to let it go. 
 In the words of Kiyosaki, you can have a liability for a brief period if you aim at and can turn it into an asset, otherwise the liability will sink you. 
I will never forget my ex accountant who at tax time declared to me triumphantly that now that properties 1,2 and 3 are making a profit it is time to sell them. I ditched him instead. 
Too many people guide their business by what the accountant tells them not understanding that accountants are not businessman and only parrot back to you what they hear his customers utter under their beard once a year to them in passing.

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## Bedford

> Bedford, assuming your son can now qualify for the loan on his own, is it possible for your son to refinance and remove you from the title before selling?

  Thanks, 
A refinance would still want our names on the loan because they are on the title. 
To get our names off the title our son would have to buy our share. 
And guess what, he'd have to pay stamp duty on that purchase at the two third value amount! 
And to add another insult, our son could not get a first home buyers grant because someone else on the title (us) had already had one.

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## Marc

In hindsight Bedford, it was predictable and an unfortunate consequence of trying to help, or rather helping your son. 
i have seen many cases like this and much worse when the son or daughter marriage ends in separation. In the old days, people would sign as guarantor rather than being in the title, adding more risk, kids selling at a loss and parents needing to pay the rest of the loan. 
One of my fellow in law is working at age 75 because of an unfortunate decision by one of his other son.  
Sometimes it is much better to just gift a sum you can afford to help rather than get involved legally.

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## joynz

> It's Land Tax and CGT on my Son's house. 
> We helped our Son get his first (and only) home. 
> In order for him to get a loan my wife and I had to be on the loan as well, fair enough. 
> By having our names on the loan we had to also have our names on the title, fair enough, you'd think. 
> Now each year my wife and I pay Land Tax on two thirds of our sons home. 
> Ten years on, our son wants to sell and move to another area, fair enough. 
> However my wife and I will have to pay two thirds of the CGT on the sale. 
> His house has never been rented since he's owned it so has produced no income, is Land Tax and CGT free for his part. 
> When it sells, we will receive none of it as it's not our house. 
> Did someone mention inequality?

  You really should have got tax and legal advice before adding your name to the title. Both are important. 
However, it’s not too late (hopefully) - I suggest you consult a tax / legal specialist now to see if there is a more acceptable solution? 
At least, ask one of the lawyers and tax experts on the Property Chat web forum for advice...

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## toooldforthis

> Everyone tries to "explain" NG obfuscating the real meaning to hammer a political belief. 
> [snip]....

  Negative gearing is just juice for those speculating on residential property so they can tell themselves they are reducing their tax eachyear; as opposed to losing money. Their main goal is the capital gain at the end of the rainbow. Without that carrot of CG they wouldnt buy, NG or not. 
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 propertyisnt imho. 
Having said all that the main reason residential house prices have ballooned in the last 20 odd years is easy credit and, more recently, low interestrates. 
I would prefer to see regulations in place to stop banks lending so freely on residential property and more encouragement to lend to business. 
In fact, I read recently, that in respect of negative gearing the regulations dont even need tweaking, just enforcing. Apparently the ATO can enforce that the investment must have been made to be profit making in order to claim the deductions. Buying a property that is loss making until it is sold for a CG (maybe/maybe not) would fall outside the existing guidelines.

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## commodorenut

I'm more than happy to lose $2K net every year, for 20 years, for the capital gain of over $490K - half of which I can keep. 
So I lose $40K over those 20 years - a scary thought right?  But my net gain is still well over $200K after CGT.   Sounds like a good deal to me, and it's exactly why I've been one of the 2 million landlords. 
Typical political bulldust, whipped up into even more confusion by the clowns at the ABC.  Maybe they should be negative payrolled for the political tripe they sprout?

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## joynz

> I'm more than happy to lose $2K net every year, for 20 years, for the capital gain of over $490K - half of which I can keep. 
> So I lose $40K over those 20 years - a scary thought right?  But my net gain is still well over $200K after CGT.   Sounds like a good deal to me, and it's exactly why I've been one of the 2 million landlords. 
> Typical political bulldust, whipped up into even more confusion by the clowns at the ABC.  Maybe they should be negative payrolled for the political tripe they sprout?

  In my experience, the ABC is the only place you can get the truth - e.g. the fact checker about negative gearing and many other examples... 
No need to be rude just because you don’t agree with the facts (and I’m a landlord too!).

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## johnc

> Bedford, assuming your son can now qualify for the loan on his own, is it possible for your son to refinance and remove you from the title before selling?

  That transfer would still involve CGT. With non arms length transactions the selling price is current market value, you can't insert a below market price to fudge the outcome.

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## johnc

> I'm more than happy to lose $2K net every year, for 20 years, for the capital gain of over $490K - half of which I can keep. 
> So I lose $40K over those 20 years - a scary thought right?  But my net gain is still well over $200K after CGT.   Sounds like a good deal to me, and it's exactly why I've been one of the 2 million landlords. 
> Typical political bulldust, whipped up into even more confusion by the clowns at the ABC.  Maybe they should be negative payrolled for the political tripe they sprout?

  Negatively geared properties rely on the property going up in value, this doesn't happen for everyone, outside of the main cities the returns sometimes just aren't there. From a tax viewpoint many would be better off putting money in super.

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## r3nov8or

> Negatively geared properties rely on the property going up in value, this doesn't happen for everyone, outside of the main cities the returns sometimes just aren't there. From a tax viewpoint many would be better off putting money in super.

  Done well, residential property investment can require no out of pocket expenses at all. Are you saying people should invest borrowed money into Super?

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## Bros

> Done well, residential property investment can require no out of pocket expenses at all.

  Are you one of those sprukers telling everyone at paid seminars that you have 10 properties before you are 30?

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## DavoSyd

> In my experience, the ABC is the only place you can get the truth - e.g. the fact checker about negative gearing and many other examples...

  if you think ABC is good, you should check out the places they get their info from!  
e. g. https://grattan.edu.au/?s=gearing

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## Greenwood

> Not for a minute. profit is better than loss. I was out buying positively geared properties in the early nineties, houses in regional areas for 60k to 90k that would rent for $150 plus a week. Paying the mortgage and leaving net profit every week. There is no substitute for straight simple profits. 
> You risk losses for a limited time in a booming market hoping for appreciation. Negative gearing is an unsustainable business strategy in the long term, and is used far too often without a proper understanding of when it is a good idea and when you are better to let it go. 
>  In the words of Kiyosaki, you can have a liability for a brief period if you aim at and can turn it into an asset, otherwise the liability will sink you. 
> I will never forget my ex accountant who at tax time declared to me triumphantly that now that properties 1,2 and 3 are making a profit it is time to sell them. I ditched him instead. 
> Too many people guide their business by what the accountant tells them not understanding that accountants are not businessman and only parrot back to you what they hear his customers utter under their beard once a year to them in passing.

  Thanks for that Marc that's what i always thought, but the way some people spruik ng made me wonder. They love to tell you how much money they get at tax time... 
-----

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## r3nov8or

> Are you one of those sprukers telling everyone at paid seminars that you have 10 properties before you are 30?

  No. Just speaking from personal experience.

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## cyclic

> Thanks for that Marc that's what i always thought, but the way some people spruik ng made me wonder. They love to tell you how much money they get at tax time... 
> -----

  My point exactly. 
People talk about how much they get back, but in a lot of cases, they have no idea what it actually cost them to get the tax back. 
As Marc has pointed out, Accountants are the same. 
Come tax time they will blow their trumpet and tell you they have saved you $10000 in tax. 
What they don't tell you is it cost you $21276 to get $10000. at 47% taxation

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## Bros

Everyone is refering here to residential property for negative gearing but you can negative gear shares. That is the way Storm Financial worked encouraging investors to borrow heavily and negative gear the interest.

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## Marc

> Thanks for that Marc that's what i always thought, but the way some people spruik ng made me wonder. They love to tell you how much money they get at tax time... 
> -----

  I remember in the end of eighties full page ads in the paper from RE agencies telling you to buy "and let the tax man pay for your investment" 
I bought properties in the nineties that people had bought with 100 % mortgage and making massive losses owing more than the value of the property. The tax man did "pay for the investment" but only in as much as they paid taxes so the loss was still massive.  
When the fury of NG started I was buying positively geared and was the target of jokes from my colleagues that I was just working for the bank.
Ten years later it was obvious that the way to go was positive and the caffe latte investors started going out to one horse town and buying everything and pushed the prices out of reach of the locals. Today the concept of positively geared properties is completely absent from residential and is only possible in commercial. 
RE is a good way to make money but the strategy of buying one property make a loss for 20 years and sell to cash in capital gain is flawed at too many levels. 
RE is a business and must be treated as such, yet most (95%) treat is as a side line investment that is secondary to their main source of income and supported by it. Those (5%) who make money do so with multiple properties, mainly commercial and have an army of support trade and professionals who service them at reduced prices like a builder, namely plumber, electrician, handyman, accountant, solicitor, conveyancer, RE agents,  banker etc. 
You can start small with one unit, but must understand the nature of the business and be quick to adapt to changes, like any other business.

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## r3nov8or

> ... you can negative gear shares. That is the way Storm Financial worked encouraging investors to borrow heavily and negative gear the interest.

  Yeah, and always the ever-present threat of a margin call and you lose it all...

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## Bros

> Yeah, and always the ever-present threat of a margin call and you lose it all...

  And that's what happened. 
I think it would be somewhat harder to borrow money to negative gear now unless you had a lot of assets that the bank can hold.

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## r3nov8or

> ...
> RE is a good way to make money but the strategy of buying one property make a loss for 20 years and sell to cash in capital gain is flawed at too many levels. 
> ...

   On the other hand, and in real life, when you make it happen without using any of your own money, and walk away in the end with 100s of 1000s of dollars... it's not flawed at all. Go figure.   

> Those (5%) who make money do so with multiple properties, mainly commercial and have an army of support trade and professionals who service them at reduced prices like a builder, namely plumber, electrician, handyman, accountant, solicitor, conveyancer, RE agents, banker etc.

  Where'd you get that silly guess, um, statistic from? 
And of course every one of those skills is tax deductible.

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## r3nov8or

> And that's what happened. 
> I think it would be somewhat harder to borrow money to negative gear now unless you had a lot of assets that the bank can hold.

   That would be real estate  :Smilie:

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## Bedford

> In hindsight Bedford, it was predictable and an unfortunate consequence of trying to help, or rather helping your son.

  Correct Marc, and it has helped him.  
Our main concern was asset protection both his and ours. 
1) it was a lot harder to get if there was an attack on his assets, 
2) it was pretty much impossible to get at my assets as I hadn't put anything else up as collateral or guarantee. (although I am mindful of the "All monies" clauses) 
3) the loan repayments were done by us, with our son depositing into our account, so if he was sick and couldn't work it was automatically paid by us.    

> i have seen many cases like this and much worse when the son or daughter marriage ends in separation. In the old days, people would sign as guarantor rather than being in the title, adding more risk, kids selling at a loss and parents needing to pay the rest of the loan. 
> One of my fellow in law is working at age 75 because of an unfortunate decision by one of his other son.  
> Sometimes it is much better to just gift a sum you can afford to help rather than get involved legally.

  Yes, but I couldn't do that at the time.    

> You really should have got tax and legal advice before adding your name to the title. Both are important.

  Thanks, but I did. 
I'm not stressed by it in any way, I mainly posted to point out what I feel are some inequalities.

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## DavoSyd

> That would real estate

  most businesses are "negatively geared" upon commencement.

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## r3nov8or

> most businesses are "negatively geared" upon commencement.

  And the collateral/assets supporting the loan is most likely to be...? One's antique car collection?

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## DavoSyd

usually property!

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## Marc

> On the other hand, and in real life, when you make it happen without using any of your own money, and walk away in the end with 100s of 1000s of dollars... it's not flawed at all. Go figure.
> Where'd you get that silly guess, um, statistic from? 
> And of course every one of those skills is tax deductible.

  No guesses here, talking from experience. I had 9 properties 2 of them commercial for a few decades so I know what I am talking about. It all depends of what you are aiming for. The idea of making decades of losses for a pot of gold in the future that can or can not eventuate depending from market, may appeal to some but is not a good strategy and is a minefield. Sure sometimes it works out OK. others it does not. 
A portfolio of positively geared properties is a source of income and it remains a source of income regardless of the property market for as long as you are prepared to get those pesky phone calls. Selling is easy. 
A positively geared property is an asset ... a negatively geared property is a liability. The fact that the asset may or may not be growing in value is irrelevant. If a property gives you an income or just pays for itself is very relevant. in my view anyway.

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## r3nov8or

> No guesses here, talking from experience. I had 9 properties 2 of them commercial for a few decades so I know what I am talking about. It all depends of what you are aiming for. The idea of making decades of losses for a pot of gold in the future that can or can not eventuate depending from market, may appeal to some but is not a good strategy and is a minefield. Sure sometimes it works out OK. others it does not. 
> A portfolio of positively geared properties is a source of income and it remains a source of income regardless of the property market for as long as you are prepared to get those pesky phone calls. Selling is easy. 
> A positively geared property is an asset ... a negatively geared property is a liability. The fact that the asset may or may not be growing in value is irrelevant. If a property gives you an income or just pays for itself is very relevant. in my view anyway.

  *shakes head*. Not worth the trouble...

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## Marc

> Not worth the trouble...

   Agreed

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## r3nov8or

> Agreed

  The method of investment doesn't really matter, as long as you are happy with the outcome. (Let's not debate happy, happier, happiest)

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## Bedford

You also need to be happy with the income!

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## r3nov8or

> You also need to be happy with the income!

  I see what you did there  :Smilie:

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## johnc

> Done well, residential property investment can require no out of pocket expenses at all. Are you saying people should invest borrowed money into Super?

  No, however if you are reaching into your pocket to cover the losses you may well be better off and safer to put that amount in super and cut the risk while picking up a 100% tax deduction for your trouble. Mind you it isn't that simple there are multiple factors that impinge on both and neither can be guaranteed to do better than the other.

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## r3nov8or

> ... however if you are reaching into your pocket to cover the losses ...

  My post mentioned, by example, that this wasn't the case. 
But aside from that your logic is sound.

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## chrisp

Interesting thread! 
I thought that itd be good to find the actual dollar numbers of some typical negative- and positive-geared property investments. Its a bit hard to find the numbers, but I found this article - A Snapshot of the Australian Taxpayer - see https://onlinelibrary.wiley.com/doi/...111/auar.12219 It references data from the ATO. 
I extracted some numbers from the article and made a table...   
The data is somewhat incomplete as it doesnt contain information on the capital gains/losses of the investors. 
The notable thing is that higher income individuals seem to favour negative-gearing whereas lower income individuals seem to favour positive-gearing. Income is measured three different ways in the table (salary/wages, taxable, and total).

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## Bedford

Only an engineer could come up with something like that. 
So who's making the most money?

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## Marc

Bedford, the answer is simple. Considering a NG property is making a loss and a PG, profit, only the PG is "making money".  
But it is not that simple. Any property can make a profit if you have enough money to pay as much as needed to make the interest and the rest of the expenses, lower than the income from rent. However the cost of opportunity of that money has to be considered. Also in the case of the NG, the proportion of the loss you save, that is proportional to your marginal tax rate must be considered.  
There are no simple answers, it depends purely from your personal circumstances, and the interest you have in looking after properties; accountants who consider their success in the light of how much tax they can save the customer, don't help one bit.  
The pub conversations where the person brags he makes $150,000 and pays very little tax is meaningless and ignorant. A direct loss from holding the property can only be offset at the top marginal rate and so the best one can do is 45% soon to be 30% (hopefully) This makes Labor fixation with abolishing NG a farce when you consider the collateral damage from doing so just to satisfy a marxist concept.  
There are situations where only a NG property makes sense. Say you want a slice of the action in a multi million dollars property on the Sydney harbour, in an area that is being either rezoned or will benefit from infrastructure that is being built and you have inside knowledge about this. Sure, borrow as much as you can, make a loss for that short period till the price rises and sell. Speculative and dangerous but a sound strategy. That is the way councils counselors make their money.  
For the average Joe, look for PG anytime. I remember making a mint with a few blocks of flat I had in Mt Isa, bought for a song during the low in the nineties fully PG and then sold to the NG fanatics when the price went through the roof at 300% profit. 
There are no fixed rules in business.
Or ... gamble with the potential price increase for 20 years, make a loss for 20 years, pay 50% capital confiscation tax  and count your gains or losses. 20 years is a lifetime and so many things can change or go wrong that proposing this as a business strategy is not particularly smart. Even when it works half of the time ... or may be less. If you could hear the stories of those whose investment strategy has gone sour because of family, health, job market, interest rates, council rezoning, degentrification and so many others too long to list. 
But this is only my opinion and you must do your own diligent research.

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## r3nov8or

A rather balanced view there, Marc. Although you seem to imply that CGT only applies to NG?    

> ...
> Or ... gamble with the potential price increase for 20 years, make a loss for 20 years, pay 50% capital confiscation tax  and count your gains or losses....

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## chrisp

> Only an engineer could come up with something like that. 
> So who's making the most money?

  That’s a good question. Looking at the (somewhat incomplete) data, it does look very much like the higher income individuals are in it for the tax minimisation. However, we don’t know (from the data in the table) how much capital gains will be made. 
It is interesting to see the difference in the setup between a negative geared property and a positive geared property. The PG is producing more rent at a lower cost whereas a NG is producing less rent at a higher cost. (So it probably isn’t a simple country-property versus a city-property thing?).

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## Bedford

> It is interesting to see the difference in the setup between a negative geared property and a positive geared property. The PG is producing more rent at a lower cost whereas a NG is producing less rent at a higher cost. (So it probably isnt a simple country-property versus a city-property thing?).

  Any property can be +ve geared if you put enough money into it, it is not specific to any location. 
You also need to consider % returns and how much a tenant can pay, compare % returns for city/country properties.

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## Marc

> A rather balanced view there, Marc. Although you seem to imply that CGT only applies to NG?

  i wish. 
Capital confiscation aka "C gain" (pun intended) ... is a pathetic marxist grab, based on a fraudulent notion of what constitutes gain and unfortunately applies to any equity status.

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## r3nov8or

> i wish. 
> Capital confiscation aka "C gain" (pun intended) ... is a pathetic marxist grab, based on a fraudulent notion of what constitutes gain and unfortunately applies to any equity status.

  You gotta hand it to the ATO though. They call the 50% tax a 50% tax *discount*!

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## Marc

> You gotta hand it to the ATO though. They call the 50% tax a 50% tax *discount*!

  Well ... it is, ask the share traders that are not big enough to be considered traders that must pay 100% EVERY TIME. 
It is piracy. 
Marc's tax reform:
Abolish CG tax, 
abolish tax on super at any stage, money in or money out, no tax. 
Abolish tax on savings at any stage. 
Flatten tax brackets much further aiming for a flat rate of tax. 
Create a tax on soyachinos and any other form of coffee that deviates from the normal coffee. 
Tax "get up" at the top marginal tax rate.

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## chrisp

> You gotta hand it to the ATO though. They call the 50% tax a 50% tax *discount*!

  To clarify, it’s not 100% tax nor a 50% tax. The capital gains is taxed at the tax payer’s marginal rate - and they get a 50% discount on that tax. So, if they make $100,000, they only pay tax on it as if they earned $50,000. $50,000 is untaxed. 
And if they made that capital gain via negative gearing, they got a tax subsidy to cover their ‘losses’ to make that capital gain. The tax payer is helping the negative gearing property investor at both ends of the transaction - and yet some of they complain incessantly. 
Be careful about what you complain about!

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## Bedford

> To clarify, its not 100% tax nor a 50% tax. The capital gains is taxed at the tax payers marginal rate - and they get a 50% discount on that tax. So, if they make $100,000, they only pay tax on it as if they earned $50,000. $50,000 is untaxed. 
> And if they made that capital gain via negative gearing, they got a tax subsidy to cover their losses to make that capital gain. The tax payer is helping the negative gearing property investor at both ends of the transaction - and yet some of they complain incessantly. 
> Be careful about what you complain about!

  So why CG tax people that didn't -ve gear the same as those who did?

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## Bedford

> The capital gains is taxed at the tax payer’s marginal rate - and they get a 50% discount on that tax.

  Not always.

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## pharmaboy2

Even for you Marc, abolishing CGT is tight out there with just have no tax at all, and just have anarchy. 
CGT is one of the drivers of NG, because you are deducting at marginal, and ultimately paying tax down the track at 25%.  Just modifying the CGT rate radically changes the appeal of NG to higher earners.   
Ultimately, income can be switched into capital by many if not most people of means which is what they were doing pre CGT - it was brought in to directly attack the schemes designed to capitalise income - it’s fair and reasonable for that reason

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## chrisp

> So why CG tax people that didn't -ve gear the same as those who did?

  The capital gain is still a form of income - so why shouldn’t it be taxed? I can see merit for being able to spread a one-off capital gain income over several tax years instead of being heavily hit in a single year. 
I’d contend that the negative-gearing incentive should be removed as it doesn’t make any sense - why have the tax payer partially prop up a poor investment and encourage people to make not-so-sensible investments. 
BTW it was heartening to see both yourself and Marc support positive-gearing. 
For whatever reason, our tax system seems to favour those who borrow rather than those who use their own funds.

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## Marc

CG is piracy for the reason I explained before. There is no "gain" when the price increase is due to the market forces and there is no added value to the property. Passive price increase is not gain and shouldn't be taxed as if it is profit. 
As for the old mantra that NG is the poor virtuous taxpayer subsidising the evil speculator, that is nonsense at the nth degree. NG is just a fancy name for deduction of expenses, a perfectly valid tax deduction that any business applies in any corner of the world.  
But you know that.

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## Bedford

> The capital gain is still a form of income - so why shouldnt it be taxed?

  No reason at all, as long as it applies equally and fairly to all houses including owner occupied. 
It is the owner occupied houses that can be traded up every few years without paying any CGT on them.    

> I can see merit for being able to spread a one-off capital gain income over several tax years instead of being heavily hit in a single year.

  Not sure how you'd do that as the tax only happens in the year you sell it.    

> Id contend that the negative-gearing incentive should be removed as it doesnt make any sense - why have the tax payer partially prop up a poor investment and encourage people to make not-so-sensible investments.

  It's only a poor investment in your view Chris, if it was a dud there wouldn't be many doing it.   

> BTW it was heartening to see both yourself and Marc support positive-gearing.

  I didn't know there was any other way! 
It's easy for you to knock everything to do with this but not everyone had or has had access to superannuation to help in their retirement years, and there are still a lot of people trying their best to support themselves and their family without being a burden on the system. 
Maybe you should  look a bit wider at it.  :Smilie:

----------


## r3nov8or

> To clarify, its not 100% tax nor a 50% tax. ...

  Bah! Yes, thanks, I do know that but said it all wrong! (referring to the Discount Method)

----------


## r3nov8or

> ...
> I’d contend that the negative-gearing incentive should be removed as it doesn’t make any sense - why have the tax payer partially prop up a poor investment and encourage people to make not-so-sensible investments.
> ...

  The incentive is there so the investor community provides the lion's share of affordable housing so the government no longer needs to build, maintain and generally manage (as many) Commission houses

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## Marc

> _I’d contend that the negative-gearing incentive should be removed as it doesn’t make any sense - why have the tax payer partially prop up a poor investment and encourage people to make not-so-sensible investments._

  Yep ... so why not remove the "laundry" claim in your tax return ... or the car expenses, or the meal allowances? 
It is exactly the same. Me the taxpayer is "subsidising" your "lifestyle". That does not make any sense since you are a not so sensible investment and I refuse to do so.  
Only those who are illiterate in business dealings let the marxist religion claud their discernment and wave the placard of the "poor taxpayer victim of the evil rich" 
I propose that voters get each a different weighted vote according to what they have achieved in life. Lefties, get negative points.  :Rofl5:

----------


## chrisp

> Yep ... so why not remove the "laundry" claim in your tax return ... or the car expenses, or the meal allowances? 
> It is exactly the same. Me the taxpayer is "subsidising" your "lifestyle". That does not make any sense since you are a not so sensible investment and I refuse to do so.  
> Only those who are illiterate in business dealings let the marxist religion claud their discernment and wave the placard of the "poor taxpayer victim of the evil rich" 
> I propose that voters get each a different weighted vote according to what they have achieved in life. Lefties, get negative points.

  Marc, 
I can assure you that you aren’t subsidising my laundry, car expenses nor my meal allowances - I have never claimed them. And I’d very much doubt that you are subsidising my lifestyle at all. 
And I’d happily have my vote weighted to my life achievements (but I think you really mean by how much money one has) - but that wouldn’t be a democracy would it. 
I’ve done okay in life, but I’m aware that it is just as much good luck, good circumstances, good fortune, as much as so called “hard work”. There are many who work harder and earn less, just as there are many who work less and earn more. 
I suggest that you get over your taxation phobia and learn to happily pay your tax.  :Smilie:

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## chrisp

> It's only a poor investment in your view Chris, if it was a dud there wouldn't be many doing it.

  May be or may be not. I think it would be a fairly safe bet to say that if the government removed the negative gearing tax concession, the number of negative geared properties would most likely drop rather than increase.  :Smilie:

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## SilentButDeadly

> The incentive is there so the investor community provides the lion's share of affordable housing so the government no longer needs to build, maintain and generally manage (as many) Commission houses

  Hot damn! And hasn't that been a raging success... #sarcasm.org

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## havabeer

Easy way to avoid CGT is to never sell...

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## Marc

> Marc, 
> I can assure you that you aren’t subsidising my laundry, car expenses nor my meal allowances - I have never claimed them. And I’d very much doubt that you are subsidising my lifestyle at all. 
> .

  For illustration purposes only. Of course I have no way to know who claims what. 
The phobia towards NG expressed above, (not by you) makes as much sense as my proposed abolition of car expenses and landry claims.
Ironically this, conceded small claims, are most of the time imaginary and therefore fraudulent. NG is instead not only legitimate and legal but also in tune with the spirit of tax legislation that does not tax expenses incurred.  
The opposition to NG is based on ignorance of all the details of this valid and widespread practice in all business, just like calling franking credits "a gift" ... and such ignorance is used and brandished by politicians for their agendas. Whoever runs with this idea that it is patriotic to abolish NG because it abuses the tax system should also push for abolishing all the other deduction claims.  
A flat rate of tax on everything, doing away with returns would most likely be beneficial and equitative. 
Debating the taxation methods is what the left does all the time, by attacking NG for example, yet when I question the rates or the validity of progressive (regressive) taxation, I must pay my tax and shut up. Not very democratic, right? 
That is the essence of the left. you have the right to debate and oppose anything but when someone else is running with a different agenda, the case is closed, and you send "get up" to disrupt it.  
A weighted voting system does not exist in politics but does exist in the corporate world.

----------


## chrisp

> That is the essence of the left. you have the right to debate and oppose anything but when someone else is running with a different agenda, the case is closed, and you send "get up" to disrupt it.

  You, as everyone else, are welcome to debate and argue whatever you like. It’s the false categorisations and name-calling that I’m calling out. 
It’s like the argument for free speech - free speech isn’t a right to say any falsehoods or misrepresentations that you like. Example below...   

> Yep ... so why not remove the "laundry" claim in your tax return ... or the car expenses, or the meal allowances? 
> It is exactly the same. Me the taxpayer is "subsidising" your "lifestyle". That does not make any sense since you are a not so sensible investment and I refuse to do so.  
> Only those who are illiterate in business dealings let the marxist religion claud their discernment and wave the placard of the "poor taxpayer victim of the evil rich" 
> I propose that voters get each a different weighted vote according to what they have achieved in life. Lefties, get negative points.

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## r3nov8or

> Hot damn! And hasn't that been a raging success... #sarcasm.org

  Sarcasm aside, it is THE reason no government will fully abolish the tax concession. It just costs much more to do it all in the public sector, and we'd all pay more tax as a result.

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## Bedford

> The capital gain is still a form of income - so why shouldnt it be taxed?

  So you agree that the gain on your owner occupied house should be taxed, after all it is a form of income?   

> May be or may be not. I think it would be a fairly safe bet to say that if the government removed the negative gearing tax concession,

  I think it would be a fairly safe to say that if some political party suggested that, they'd be out on their ass. 
Have you forgotten what happened less than a week ago?    

> the number of negative geared properties would most likely drop rather than increase.

  Where are you going to put the tenants that were in these houses?

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## chrisp

> So you agree that the gain on your owner occupied house should be taxed, after all it is a form of income?

  It is a form of income if you sell it, and there would be serial renovators who buy, renovate, and sell their ‘principal residence’ for profit. I’m not sure if they pay tax on that income (other than stamp duty)? 
Some other counties do tax the capital gains of the principal residence - notably Japan and the US, so obviously it can be done as part of a workable tax system. Ireland taxes the development of the principal residence, and Spain taxes capital gains of the principal residence but allows roll-over exemptions if buying another house. 
As to whether I’d personally agree with it or not would depend upon to overall proposed changes to the tax system.   

> Where are you going to put the tenants that were in these houses?

  Are you suggesting that those houses be demolished?  
I suspect that ‘market forces’ will come in to play and prices would probably drop and some of the tenants would become home owners.  
Australian house prices are quite extraordinary and we have somehow priced our children out of the housing market. I don’t think that house prices can remain out of reach for a significant sector of society without some form of correction taking place.  
Ask the the younger generation about their views of baby boomers and how good baby boomers have it!  
I can only speculate that it is Australia’s generous tax concessions to property investors in the form of both negative-gearing tax concessions _AND_ capital-gains tax concessions is contributing to the property bubble in Australia. I think that it is disappointing that the government is effectively setting (and has already set) some people up for a big fall - and we all had an opportunity to correct it a week ago. Oh well!

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## Marc

The assumption that the price increases we have seen in the major cities in Australia in the last 30 years is due to the bad rich exploiting the weak government tax concessions is flawed at many levels.  
Prices are set by supply and demand. We have the highest intake of migrants and illegals than any other country in the world. That is the demand. 
Supply is in the hand of council's stranglehold on land release, plus the zero development of regional areas. 
Add continuous booming demand, and trickle supply and you have your price increase.  
If the tax system is changed without drastic reduction in people intake, the demand will remain unchanged, meaning will constantly increase, and the supply reduced. What do you think this will do to prices of property _and_ rent?  
If any government is serious about levelling out the price of domestic dwellings, it should as first measure zero migrant intake for 10 years and keep all the incentives for home purchase and building. This way demand decreases and supply remains steady. Simple abc of marketing.  
Of course there are more votes in chanting "dead to the NG and franking credits is a gift", and state that NG is pricing our children out of the market, then singing in chorus, " Stop migration now", something that none of the major parties has the gonads to do. Not to mention stopping the illegal acquisition by foreigners of existing properties, and the sale by re agents to other countries without even advertising locally. On no! we can't do that! can not upset the chinese!  
There is more votes also in photo opportunities with new tram lines and playing catch up with the massive human intake by releasing more land for developers before there is even a decent road, and whilst we are running desal plant and the dam is at 50% ... oh ... but we can not lift the warragamba dam because it will mean that a certain frog will get wet and we can not have that! 
The socialist ideas "for our children" and blaming others for the state of the market is rather disingenuous. The truth is always more complex and the effects of changes need to consider the collateral damage, something that the socialist prefer to ignore. 
In fact when I read any political statement containing the words "for our children" and "Hospitals and schools" (something that will obviously benefit from a freeze in migration), it is blatantly obvious that the emotional card is being played and serious reasoning is being suppressed.

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## Bedford

> As to whether Id personally agree with it or not would depend upon to overall proposed changes to the tax system.

  Irrespective of any proposed tax changes would you agree to paying CGT on your house if you sold it today?    

> Are you suggesting that those houses be demolished?

  I'm not suggesting anything, you're telling the story.    

> I suspect that market forces will come in to play and prices would probably drop and some of the tenants would become home owners.

   Can you explain these "market forces" please, are they different from supply and demand?    

> Australian house prices are quite extraordinary and we have somehow priced our children out of the housing market

  You may have, but I haven't priced anyone out of anything.    

> Ask the the younger generation about their views of baby boomers and how good baby boomers have it!

  
Well you're the younger generation Chris, you tell me how good I've had it.

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## Marc

Yep, I missed that pearl. So if we abolish NG the prices will drop and tenants become owners.  
Somehow unrealistic and utopian. Sure, there will be a small adjustment at first with those investors on small incomes having to sell, most likely absorbed by the bigger players whilst the glut lasts. 
In the long term, with demand ever increasing through our massive intake of people, prices will invariably rise again, yet the rent increase will stay. And the abolition of NG will not magically make people's credit rating change. 
And whilst talking about other countries, many countries allow to deduct from your income the interest paid on your own home something that we do not. 
As for prices ... we are in a price drought at unprecedented levels. Just bought a property advertised at 1.5m for 1.02m

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## Bros

> Australian house prices are quite extraordinary and we have somehow priced our children out of the housing market.

  No different now to when I bought my first house as it was very expensive to us and in those days two income households were not the norm like now. Every election since I started voting has been about house prices being to high for the first home buyer and it hasn't changed   

> Ask the the younger generation about their views of baby boomers and how good baby boomers have it!

  I'm a baby boomer and I lay that blame wholly and solely on my parents.

----------


## SilentButDeadly

> Sarcasm aside, it is THE reason no government will fully abolish the tax concession. It just costs much more to do it all in the public sector, and we'd all pay more tax as a result.

  True...but given that it hasn't really achieved one of the things it was implemented to achieve then perhaps it's appropriate to consider some alternatives. 
Out here in the boonies, especially where there's no mining investment, negative gearing could actually be a useful tool to incentivise housing investment.  
By way of an example, much of the housing stock in my town is well past its use by date. The average house is worth mid to high 100k. Capital gain in excess of the CPI is highly unlikely. Replacing a house here is an economically insane proposition. However, most houses are fully occupied and many are rented. A typical rent is mid $200 per week. Many of the people renting here could never afford to rent in a regional centre...let alone a capital city. 
However, if you were an investor and you wanted a fast way to create equity in your investment portfolio rather than massive borrowing then incentives like negative gearing in places like this mean that you could potentially provide improved housing, enhance the quality of life in a town and generate personal equity to improve your investment capacity...all in one go.  
Unfortunately, capacity is not profit which is why few real estate  investment portfolios are structured like this...but imagine if they were... especially early in their life.

----------


## Marc

The RE market is a tempting playing ground for government that love to play heroes of the underdog and bashers of the (evil) prosperous. That is why the Labor of today, that has nothing to do with the Labor of B Hawke ... is always waving the placard of NG, talk about "house affordability" and many other marxist banners. Labor and the greens are overrun with the extreme left since the communist party is no more.  
House affordability is particularly irritating to listen to. What does it mean? supply and demand determine prices, not the government, fortunately, so we should talk about suburbs affordability. I would like to live on a Sydney Harbour waterfront. It is not "affordable" to me so ? Do I ring my local MP and complain about house affordability?  
Since thankfully disaster was averted last week with the overwhelming majority of voters rejecting the pathetic, policies of Labor, that was banking on the accuracy of skewed and biased polls that reflected only what a minority of inner city armchair socialist wanted to hear ... we can now relax for 3 years and perhaps use other regions of the brain, in order to analyze what other countries have done and the consequences such actions had on the re market.  
Perhaps the biggest Re experiment ever undertaken was the disastrous lending initiative of the "liberal" left in the US that lead to a global recession. Oh sure, I hear you say that it was the (evil) banks. Pull the other one. It was the government telling the banks to lend everyone an his dog since they all had the right to own a house.  
Another very different social experiment of a different nature and at a different scale was the indigenous revolution in Fiji. It was some 10 years ago that I was on the phone with a Fijian Indian, who was among 2500 public servants in high paid positions, fired in block by the new government and replaced by natives. 
Unable to find work most of this professionals and middle management came to Australia and NZ  and put their house on the market.
Place 2500 high end properties for sale in a small market like Fiji and see the value plumett to less than half.  
Things we do. 
Governments should abstain from interfering in markets as much as possible and their actions if necessary should be limited to conservative and carefully studied corrections in small increments and not actions like the proverbial bull in the china shop.
Ban the live export! Ban the greyhound! are but two of idiotic government interference not required and not thought through. How about pink batts and school halls?  
When it comes to our RE market, the only positive show of muscle a government could do is to regulate the banks into passing on all the interest drops in full.
No votes there and also no balls.

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## DavoSyd

> I can only speculate that it is Australias generous tax concessions to property investors in the form of both negative-gearing tax concessions _AND_ capital-gains tax concessions is contributing to the property bubble in Australia.

  this is a widely held view and in there would be few (without vested interest) that would try to argue against it - the theory is so sound that the Labor party adopted rectifying it to some degree as one of its main election policies!! 
(edit - for the last two election cycles! and only due to FUD Labor remains unsuccessful.)

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## chrisp

> The RE market is a tempting playing ground for government that love to play heroes of the underdog and bashers of the (evil) prosperous. That is why the Labor of today, that has nothing to do with the Labor of B Hawke ... is always waving the placard of NG, talk about "house affordability" and many other marxist banners. Labor and the greens are overrun with the extreme left since the communist party is no more.  
> House affordability is particularly irritating to listen to. What does it mean? supply and demand determine prices, not the government, fortunately, so we should talk about suburbs affordability. I would like to live on a Sydney Harbour waterfront. It is not "affordable" to me so ? Do I ring my local MP and complain about house affordability?  
> Since thankfully disaster was averted last week with the overwhelming majority of voters rejecting the pathetic, policies of Labor, that was banking on the accuracy of skewed and biased polls that reflected only what a minority of inner city armchair socialist wanted to hear ... we can now relax for 3 years and perhaps use other regions of the brain, in order to analyze what other countries have done and the consequences such actions had on the re market.  
> Perhaps the biggest Re experiment ever undertaken was the disastrous lending initiative of the "liberal" left in the US that lead to a global recession. Oh sure, I hear you say that it was the (evil) banks. Pull the other one. It was the government telling the banks to lend everyone an his dog since they all had the right to own a house.  
> Another very different social experiment of a different nature and at a different scale was the indigenous revolution in Fiji. It was some 10 years ago that I was on the phone with a Fijian Indian, who was among 2500 public servants in high paid positions, fired in block by the new government and replaced by natives. 
> Unable to find work most of this professionals and middle management came to Australia and NZ  and put their house on the market.
> Place 2500 high end properties for sale in a small market like Fiji and see the value plumett to less than half.  
> Things we do. 
> Governments should abstain from interfering in markets as much as possible and their actions if necessary should be limited to conservative and carefully studied corrections in small increments and not actions like the proverbial bull in the china shop.
> ...

  I do get terribly confused by your arguments at times!  :Confused:  
You want the government to ‘abstain from interfering in markets’, you also have noted in other posts that negative-gearing isn’t a good idea and the positive-gearing makes more sense. 
Yet, you are arguing black and blue for negative gearing tax concessions and you claim that capital gains tax is theft (so, in effect you are arguing for a 100% capital gains tax discount instead of the present, very generous, 50% discount). Both concessions _are_ interfering with the housing market! 
Yet you want the government to ‘regulate the banks into passing interest rates on all in full’! 
It seems to me that we have differing views on the government. I take it that you see the government as an interfering burden that is somehow imposing constraints on your free will (and money), whereas as I see the government as society’s way of providing for the collective good of the whole community. 
I do agree that we need a government with “balls” to change the system, but they didn’t get elected!

----------


## phild01

> I do agree that we need a government with “balls” to change the system, but they didn’t get elected!

  Thankfully.
One day they might get their act together but with Chalmers lurking, it may not be for a long time.

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## Marc

> Originally Posted by *chrisp*  _I can only speculate that it is Australia’s generous tax concessions to property investors in the form of both negative-gearing tax concessions AND capital-gains tax concessions is contributing to the property bubble in Australia._

  The above can only be classified as psychological crutches. " I have no idea how it works but rich people do it so it must be wrong" sort of thing ...  :Smilie: 
How prices are pushed up in Australia: 
Supply is slow due to land stranglehold by councils.
Demand is atrocious due to the content of Hobart dumped on Sydney and Melbourne every year.  
If there is someone left that can not see what this does to prices, regardless of the nature of taxation and how it operates with ALL business not only RE ... well, I can not help you, Too laborious ... you need help from a professional.  
Chris ...   

> You want the government to ‘abstain from interfering in markets’, you also have noted in other posts that negative-gearing isn’t a good idea and the positive-gearing makes more sense.

  Small government is key to private enterprise and individual and corporate prosperity. If you want the public service to grow to 4 millions, you will need to create jobs in the form of overseers and checkers of all the rule and regulations necessary to get the utopia going. The only small problem is that there will be no one left to do anything let alone pay taxes to pay for this army. It is a well know concept. Conservatives = small government. Leftie interventionist over regulators = big government, big taxes and poverty galore.  
As for the real estate business, I have given you my personal strategy to make money with RE. Take it or leave it. No one is forcing you. However ... (drum roll) NG is a legal and perfectly valid tax deduction and if that goes on the altar of good old Marx, what else will go next? what will burn for incense?   
I have also given you the reason why I personally think that CG is confiscatory. There is no "profit" and shouldn't be added to your personal income ... simple. Furthermore it is discriminatory as well, since if you and me, we both sell an identical house in the same market that we previously bought together in the same market and at the same price, the so called capital gain will be identical yet whoever earns the most income FROM OTHER SOURCES will pay more CG tax. Marx is enjoying this immensely (Give it to the bastard, they can take it  :Smilie:  ) The 50% discount on CG is but an admission of the confiscatory nature of this criminal form of tax that should be completely abolished, full stop.  
Did you notice my capitals in "from other sources? There is a reason for it. The NG deniers, argue black and blue that it is wrong because it allows a person to reduce his tax obligations. Oh my ... we can not have that right? Wrong! if CG uses your income FROM OTHER SOURCES to work out how to rob you, negative gearing equally uses income FROM OTHER SOURCES to prop up a business that is temporarily going backwards. What is good for the goose is good for the gander.  
Yet, like you noted, there are areas in which the government needs to intervene. For example, moratorium on immigration. Say stop it completely for 10 years in order to bring demand down. (Yes please, two million people less on the road, in schools and hospital)
So? A perfectly valid government intervention. 
Another one is the one you noted. Yes, interest is regulated by the central bank, and every drop in interest, should be followed by the banks instantly. Another good way to tell the banks who is in charge.  
Unfortunately a peanut comfortably dwarfs the size of the average ball from our beloved Canberra dwellers regardless of their political confession.
Could it be the result of gender fluidity? Who knows! 
Fluidity? I don't like the sound of that ...

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## Bedford

> Originally Posted by *chrisp*   
>  The capital gain is still a form of income - so why shouldnt it be taxed?

   

> Originally Posted by *Bedford*   
>    So you agree that the gain on your owner occupied house should be taxed, after all it is a form of income?

   

> As to whether Id personally agree with it or not would depend upon to overall proposed changes to the tax system.

  Irrespective of any proposed tax changes would you agree to paying CGT on your house if you sold it today? 
Are you able to answer this question Chris, if not why not?

----------


## chrisp

Bedford,  
If capital gains tax on the principal residence was part of a fair and equitable taxation system, I’d happily pay it. 
My beef with negative gearing _and_ capital gains tax is that I, and other tax payers, (call them ‘hard working Australians’) are propping up and subsidising property speculation. This is inequitable. 
I have no issue with any investment that anyone’s wishes to partake in, just as long as they use their own funds/money/borrowings and leave the Australia’s hard working tax payers out of it. If it is such a good investment, they they don’t - and shouldn’t - need the general tax payer to subsidising them.  
Now see see if you can get a straight answer out of Marc - I challenge you!  :Smilie:

----------


## Bedford

> If capital gains tax on the principal residence was part of a fair and equitable taxation system, Id happily pay it.

  You still haven't answered the question, you're just continuing with diversions and BS.   

> My beef with negative gearing _and_ capital gains tax is that I, and other tax payers, (call them hard working Australians) are propping up and subsidising property speculation. This is inequitable.

  It is not inequitable, it is legal and available to anyone.    

> I have no issue with any investment that anyones wishes to partake in, just as long as they use their own funds/money/borrowings and leave the Australias hard working tax payers out of it. If it is such a good investment, they they dont - and shouldnt - need the general tax payer to subsidising them.

  Do you have any property investing experience to base the above on or are you just guessing again? 
Do you know the difference between cost and loss?   

> Now see see if you can get a straight answer out of Marc - I challenge you!

  No, I'm asking you for a straight answer, and still haven't got it, can you try again please?

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## chrisp

Bedford, 
I don’t seem to be able to provide you with the answer you want - what do you want me to say? I have answered the question twice so far in this thread. 
I don’t have any issue paying my taxes, and that would include capital gains tax on the principal residence if it were part of the taxation system. [Three times now]. 
I don’t participate in any tax minimisation strategies (even though they might be legal). I have always focused on my earnings rather than tax minimisation and so I’m happy to pay my taxes to support the services in our society (whether I use them or not). 
With tax systems, and the reforming of the tax system, it is important to look past the “what’s in it for me?” and look at what is good for the greater community. 
As you seem to have some sort of fixation on capital gains tax on the principal residence, I’d be happy to hear your ideas on reforms to the tax system and how much you wish to tax capital gains on the principal residence.

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## phild01

How could CGT on a principal residence ever be equitable or agreed to, makes no sense. Even Stamp duty on a new principal residence is hard for me to understand.

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## DavoSyd

_you must spread some Reputation around before giving it to chrisp again_

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## chrisp

> How could CGT on a principal residence ever be equitable or agreed to, makes no sense. Even Stamp duty on a new principal residence is hard for me to understand.

  The ‘poster boy’ of capitalism (the good old US of A) does it - see International Comparison of Australian Taxes - Report 
In the end, whether it is equatable to not would depend upon the structure of the whole tax system.

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## Bigboboz

> CG is piracy for the reason I explained before. There is no "gain" when the price increase is due to the market forces and there is no added value to the property. Passive price increase is not gain and shouldn't be taxed as if it is profit.

  Do you have more money? That's a profit.  What am I missing? Sounds like a good investment.  If you have less afterwards, that's a loss and you can set that off against other profits.  Seems reasonable 
NG is a non issue but it does lead to irrational behaviour such as taking on more debt than is prudent just to get that tax deduction up...

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## PhilT2

Govt debt is well over half a trillion dollars at the moment. With the economy slowing and revenue decreasing the reality is that figure will keep rising. Labor tried to sell a complex mix of cutting expenses and increasing taxes as away to deal with it at the election and it didn't work for them. While we can debate what should and shouldn't be taxed and what is a fair rate, if you think that level of debt will go away without some increases....well I have these unicorns I can sell you.. cheap!

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## Bigboboz

> If capital gains tax on the principal residence was part of a fair and equitable taxation system, I’d happily pay it.

  No one could afford to move as soon as prices rise. Taxes would boom and bust twice as hard with losses being written off against other income.   

> My beef with negative gearing _and_ capital gains tax is that I, and other tax payers, (call them ‘hard working Australians’) are propping up and subsidising property speculation. This is inequitable.

  But you and other tax payers (incl me, definite net payer) are not subsidising them. It's $#% investment that is betting on prices rising.  The bit that I don't like is unlike other investments, it receives too much support from government and regulators, so it's targeted by 'punters'.  Can get high gearing, low rates and no margin calls on property and the comfort government and regulators will do their best to support your investment.  Better still, unlike other investments, property has others interested in buying for non investment purposes (have to live somewhere).  No reason to buy shares other than for investment. There is no other investment option with the same terms. 
And then the government gives you a 50% discount on your tax bill when you cash out on sale (assuming prices did rise). 
NG is a distraction, the problem with property investment _is_ distortions created by the cheap gearing with friendly terms (no margin calls).  Leads to unhealthy speculation.  Property needs investors, not everyone is in position to own, wants to own or makes sense for them to own, just feels like it's set up currently with the wrong bias vs other investment options.

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## Bigboboz

> While we can debate what should and shouldn't be taxed and what is a fair rate, if you think that level of debt will go away without some increases....well I have these unicorns I can sell you.. cheap!

  Small government is the best government.  There is a better alternative to higher taxes but they don't win elections...argument for longer terms so we have less elections with big spending promises.

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## Marc

Sure, all good points, yet no one is acknowledging the hard truth of price rises. 
It is not the bad "speculators" nor the bad government giving "incentives" with NG.
It is artificial population increase through a ponzi scheme. The ponzi scheme that government plays at our expense. Immigration legal and illegal.   
Chris ... (this is getting interesting)  :Smilie:   

> I have no issue with any investment that anyone’s wishes to partake in, just as long as they use their own funds/money/borrowings and leave the Australia’s hard working taxpayers out of it. If it is such a good investment, they they don’t - and shouldn’t - need the general tax payer to subsidising them.  Now see see if you can get a straight answer out of Marc - I challenge you!

  Your statement above denotes resentment against individuals who are entrepreneurial and try to achieve and advance. Not very good for yourself Chris. other people's success must be celebrated not resented. I know it is an Australian sport tall poppy syndrome and all that, but it is very unhealthy. 
Now to your beef, not to be confused with stake ...  
Real estate investment is not easy. Lots of people think it is but it is not really. If you account for everything that goes into a part time investment on the side whilst you work for the boss to pay the bills, if you measure honestly all that goes into that property for 20 years, if you measure the risk you take, the end result after the taxman robs you of 25% of the difference between purchase and sale without having contributed nothing of all that hard work, well ... my conclusion is that there are better ways to make money.  
However ... lots and lots of mum and dad investors with one or two income do take the plunge and 95 % of rented properties belong to a single property investor. 5% are multiple property investors and less than 1% own hundreds. I know one that owns 1200 at last count in 2018. Good for him ... actually her. 
So why do people get into RE rather than shares or buy a shop? I tell you why, because it works. First of all your stupid accountant tells you, as soon as you are earning above average, that you are paying too much tax so should have a NG property. And you believe him that it is a great move. 
Second, you know first hand scores of people who have done it, have sold and upgraded their own home with the sale. If it works for Jonny it will work for me.  
Now to your point. NG is a subsidy by the tax man to stupid Jonny who believed his accountant and that is making a bad investment that is making a loss purely because he thinks he is smart and will get a tax deduction and reduce his tax obligations. 
The problem with this idea is that NG is not in place to help Jonny. It is based on a simple principle of taxation that does not tax expenses incurred to produce income or to pay expenses. Your idea that NG is so unfair is based on the fallacy that only stupid Jonny benefits and that it is tailored for him.
Wrong.
Anyone that owns a business uses NG, every partnership and company has always used NG since beginning of time. Just that it was not called NG, a name coined by real estate agents to con Jonny into buying what is at face value a bad investment that makes a loss. 
Would you buy a restaurant that makes a loss? You probably wouldn't unless you have a reasonable chance that your fortunes will change. In the case of the restaurant you will need more than just sit and wait. With RE you can dish out a usually small amount as a loss after the books are balanced and wait for a few more millions dumped on your city in the next 10 years by the government that is playing the ponzi scheme of pumping up the demand for everything at our expense.  
So is NG "unfair" because the buyer is claiming expenses on his income? Not really. To return to quarantine the losses to the source of the loss, like it was a long time ago allowing only partnerships and companies to do this would be unfair and discriminatory. 
Sure it looks good to lefties and watermelons who have usually little business knowledge and lots of emotional tripe about it. But that does not make it true or even plausible, not to mention useful for any practical purpose, besides gather votes from the ignorant and the envious.  
I have personally invested many times my own money, other times the bank's money, made losses and made profit, had sleepless nights facing massive losses with the spectre of mines closing, had challenges from idiotic governments moves, and benefited from market fluctuations, favorable rates, bank policy and government largess in search of my vote. 
Sure.
So?  
So did you in other areas and in a different manner. We all face our challenges and take advantage of change to survive. That is life. Make the best of it without resenting others' success. Celebrate others' success, it is contagious.

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## Bedford

> Originally Posted by *chrisp*   
>  My beef with negative gearing _and_  capital gains tax is that I, and other tax payers, (call them hard  working Australians) are propping up and subsidising property  speculation. This is inequitable.

    

> As you seem to have some sort of fixation on capital gains tax on the principal residence, Id be happy to hear your ideas on reforms to the tax system and how much you wish to tax capital gains on the principal residence.

  No, you're the one with the fixation not me. 
I think you either fail to comprehend the complexities of the issues involved, have a hatred for people who try to better themselves, or are deliberately trolling this thread.

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## Marc

PS
And I did not even touch on the massive multiplying effect that a rented property, making a loss or a profit is irrelevant, has on the economy. 
RE agents, tradesman, materials sold and manufactured, GST on everything, services by accountants, solicitors, conveyancers, is but one aspect of a MASSIVE market that starts with ... stupid Jonny believing his stupid accountant.  
The rental market is a dynamo of income for a vast array of occupations. And if you go into commercial rental market, the stakes are even larger. 
And no beef.  :Smilie:

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## chrisp

Okay, I think that I understand this a little bit better... 
Let me use a hypothetical example, and Ill make the following assumptions: (a) the example will be a negative-gearing, with a positive capital gain, and (b) its not a principal residence. 
Jill is a home owner with significant equity in her home, has a job with an income of $90,000 pa (32.5% tax bracket). She decides to invest in a rental property.  
For the example, lets assume that the investment property was purchased for $500,000 and that it costs Jill $25,000 per year in interest repayments, and $4,000 per year in other associated costs. It rents out for $15,000 pa. 
So, the outgoings are $29,000pa and the income from the property is $15,000pa. The net is a $14,000 loss per annum which Jill makes up out of her pay packet for her job. So, her net income for the tax year is $76,000 ($90,000 - $14,000). So, instead of paying income tax on $90,000 ($20,797 + Medicare levy), she pays income tax on $76,000 ($16,247 + Medicare levy). Her income has dropped by $14,000 and her income tax has dropped by the corresponding $4,550. 
So, from Jills perspective, she has taken on an investment that is costing her $14,000 pa but it is only making a $9,450 difference to her take home salary. This is the negative-gearing incentive that tempers the cost of the investment. 
Lets assume that Jill decides to sell it after 10 years. Jills property has experienced an average appreciation of 8% per annum. So, she realises $1,079,462 (= 10 years of appreciation at 8%/pa on $500,000). So the capital gain is $579,462. 
The capital-gains tax discount means that 50% is tax free ($289,731) and half is taxed. 
Her income for that tax year (assuming the same salary and tax scales) is $76,000 plus $289,731 = $365,731. The income tax on this is $137,676 (plus MC levy). So her take-home (ignoring the MC levy, etc.) is $517,786 (= $76,000 + 579,462 - $137,676).  *To summarise, the 10-year investment has cost Jill 10 x $9,450 = $94,500. The gain is $441,786 (= $517,786 - $76,000) after tax. A net gain/profit after-tax and costs of $347,286.* 
If the 50% capital gains tax discount didnt exist, Jills income for the year would have been $655,462 (= $76,000 + 579,462) and she would pay $268,055 in tax (plus MC levy, etc,). A take home income of $387,407. After deducting the costs over ten years, this corresponds to a net gain/profit (after tax) of $216,907. 
So, after crunching the numbers, I think the biggest incentive to the investment is the capital gains tax concessions rather than the negative-gearing. 
From this example, I think that there is merit in:  leaving the negative-gearing concession as-is;removing the 50% capital gains tax concession (i.e. the profits from the capital gains are fully taxed); butallowing the cost-base for the taxation of the capital gains to increase with inflation.

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## Marc

Tax and investment advice is not free for a reason. It depends from personal circumstances and must take all aspects of the person, market circumstances, rental availability etc into account. 
The fact that some investment in ideal circumstances (8% price increase a year) and many other assumptions you have made ... have a good outcome does not make them undesirable, wrong, in need of bashing and denouncing, and they are by no stretch of the imagination a drain on the taxpayer. They are in fact what makes the economy turn, and what makes you and many others employed.  
I could post a few business that I know have 1000 to 2000% profit marking and a turnaround of less than a year, perfectly legal and that would probably make your toes curl and give you indigestion and for that reason i will not post them.  
You are suffering from a socio/political mindset that fits most likely what folks in Cuba believe to be right, may be Venezuela? 
Western societies economies prosper with individual and corporate profits. They are the one that pay the bill that funds all the public service we enjoy. Kill the investor and make investment mediocre or languish and the investor will do business elsewhere. It has never been easier to make business o/seas.  
Sound healthy business is based on profit and lots of it. Marx calls it "Mehrwert" and claims it belongs to the workers that make it possible. 
i am sorry that there are no countries left that actually subscribe to Marx theories for you to visit and see the ill effects of such shambolic social experiment.
Down here it is just good old capitalism. The big fish eats the small one, and pays as little as possible tax within the law. If a business does not prosper, you dump it and start another one. That is how the wheels turn and how we can afford driverless tram and soyacchinos, and to quote the ex Labor leader aka BS ... schools and hospitals.   
I hope you can take a bit of well intentioned banter mate. It is what it is, and nothing is perfect and nothing is absolutely fair. Everything you see is a compromise and a work in progress. 
I hope that aunty Jill will consult an independent expert before making investment decisions based on your long term analysis.
Long term as you know is prone to spectacular failures ... see for example global warming. No warming yet ... still waiting 40 years later  :Smilie:  oh and sea level rising?  :Rofl5:

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## Bedford

> Okay, I think that I understand this a little bit better... 
> Let me use a hypothetical example, and Ill make the following assumptions: (a) the example will be a negative-gearing, with a positive capital gain, and (b) its not a principal residence. 
> Jill is a home owner with significant equity in her home, has a job with an income of $90,000 pa (32.5% tax bracket). She decides to invest in a rental property.  
> For the example, lets assume that the investment property was purchased for $500,000 and that it costs Jill $25,000 per year in interest repayments, and $4,000 per year in other associated costs. It rents out for $15,000 pa. 
> So, the outgoings are $29,000pa and the income from the property is $15,000pa. The net is a $14,000 loss per annum which Jill makes up out of her pay packet for her job. So, her net income for the tax year is $76,000 ($90,000 - $14,000). So, instead of paying income tax on $90,000 ($20,797 + Medicare levy), she pays income tax on $76,000 ($16,247 + Medicare levy). Her income has dropped by $14,000 and her income tax has dropped by the corresponding $4,550. 
> So, from Jills perspective, she has taken on an investment that is costing her $14,000 pa but it is only making a $9,450 difference to her take home salary. This is the negative-gearing incentive that tempers the cost of the investment. 
> Lets assume that Jill decides to sell it after 10 years. Jills property has experienced an average appreciation of 8% per annum. So, she realises $1,079,462 (= 10 years of appreciation at 8%/pa on $500,000). So the capital gain is $579,462. 
> The capital-gains tax discount means that 50% is tax free ($289,731) and half is taxed. 
> Her income for that tax year (assuming the same salary and tax scales) is $76,000 plus $289,731 = $365,731. The income tax on this is $137,676 (plus MC levy). So her take-home (ignoring the MC levy, etc.) is $517,786 (= $76,000 + 579,462 - $137,676).  *To summarise, the 10-year investment has cost Jill 10 x $9,450 = $94,500. The gain is $441,786 (= $517,786 - $76,000) after tax. A net gain/profit after-tax and costs of $347,286.* 
> ...

  
This is hilarious!  
You still haven't got it................. distorted numbers like that is how the climate alarmists do it. :Doh:

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## pharmaboy2

One of the things that is going on here, is you are looking back over the past, and that includes of the largest booms in housing prices we have ever seen.  Second, most of the profit is actually from the leverage employed rather than capital.   Any alternate capital investment over a period of asset growth due to low interest rates and low inflation with high leverage will also provide high capital profits. 
the question we should be asking, is what is going to happen over the next 10 years?   
10 years ago, no one would have predicted the 300k plus per year of pop growth going into only 2 cities, or the foreign capital coming in from China nor the available liquidity from the banking system (it all seemed pretty much stuffed in early 2009). 
dont ask people who bought stacks of property back then though - they tend to think they are geniuses, but generally any long term investment that is negatively geared over 5 years is a crap investment. - or should be. 
a more sensible policy would be to cap the number of years - gearing should be allowed      

> Okay, I think that I understand this a little bit better... 
> Let me use a hypothetical example, and Ill make the following assumptions: (a) the example will be a negative-gearing, with a positive capital gain, and (b) its not a principal residence. 
> Jill is a home owner with significant equity in her home, has a job with an income of $90,000 pa (32.5% tax bracket). She decides to invest in a rental property.  
> For the example, lets assume that the investment property was purchased for $500,000 and that it costs Jill $25,000 per year in interest repayments, and $4,000 per year in other associated costs. It rents out for $15,000 pa. 
> So, the outgoings are $29,000pa and the income from the property is $15,000pa. The net is a $14,000 loss per annum which Jill makes up out of her pay packet for her job. So, her net income for the tax year is $76,000 ($90,000 - $14,000). So, instead of paying income tax on $90,000 ($20,797 + Medicare levy), she pays income tax on $76,000 ($16,247 + Medicare levy). Her income has dropped by $14,000 and her income tax has dropped by the corresponding $4,550. 
> So, from Jills perspective, she has taken on an investment that is costing her $14,000 pa but it is only making a $9,450 difference to her take home salary. This is the negative-gearing incentive that tempers the cost of the investment. 
> Lets assume that Jill decides to sell it after 10 years. Jills property has experienced an average appreciation of 8% per annum. So, she realises $1,079,462 (= 10 years of appreciation at 8%/pa on $500,000). So the capital gain is $579,462. 
> The capital-gains tax discount means that 50% is tax free ($289,731) and half is taxed. 
> Her income for that tax year (assuming the same salary and tax scales) is $76,000 plus $289,731 = $365,731. The income tax on this is $137,676 (plus MC levy). So her take-home (ignoring the MC levy, etc.) is $517,786 (= $76,000 + 579,462 - $137,676).  *To summarise, the 10-year investment has cost Jill 10 x $9,450 = $94,500. The gain is $441,786 (= $517,786 - $76,000) after tax. A net gain/profit after-tax and costs of $347,286.* 
> ...

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## Bros

> Govt debt is well over half a trillion dollars at the moment. With the economy slowing and revenue decreasing the reality is that figure will keep rising. Labor tried to sell a complex mix of cutting expenses and increasing taxes as away to deal with it at the election and it didn't work for them. While we can debate what should and shouldn't be taxed and what is a fair rate, if you think that level of debt will go away without some increases....well I have these unicorns I can sell you.. cheap!

  Yep I agree and you haven't heard the end of negative gearing as Morrison has been reported to have been considering it. 
Anyone remember the GST that was dead and buried? 
I hear that Fridenburg has giving his approval at looking into all forms of retirement income as it hasn't reduced the burden on the pension, you can bet some nasties will come out of that. 
Governments need money to function and they are giving a tax cut to larger income brackets so they will lose that money, so where is the money coming from as from what I have been reading dividend income imputation credits will rise over the years.

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## commodorenut

Has anyone bothered to go back & look at what was proposed for NG? 
It was to come into force 1/1/2020, and only affect purchases after that date.  The existing (million maybe?) NG properties will still be grandfathered under the existing NG terms - just like property purchased prior to the introduction of CGT.   
Considering the other important other factors in the market over the last 2-3 years:
1. Increasingly high capital costs (in metro Syd & Melb) far outweighing potential rental income.
2. Tightening of lending to investors - ie govt imposed limits put on lenders to reduce the amount of loans given to investors.
3. Limits on "interest only" loans.
4. Increased interest rates on investment loans vs owner-occupier
5. The requirement for more "clear" capital by investors - thus removing those "speculators" who can't really afford it. 
And NG becomes far less of a "reason" needed to supposedly make housing more affordable (which, ironically, was still unaffordable before NG laws). 
Those 5 reasons culled the investment market quite nicely - only those who have the means to still afford it (ie, capital & income) and have reasonably performing properties have stuck around - the speculators can make far greater returns elsewhere. 
One HUGELY important point nobody seems to bring up, is NG CAN help to keep rental costs affordable.  How?  Well I'm in a position where I have quite a lot of equity in my place, meaning the annual interest is low.
This is the point where those slick seminars tell you to go buy 3-4-5 or 6 more properties from that equity....... but with the uncertainty over real estate in the next 5 years, why would I take that risk?
Now if I increase the rent by $20 per week, I'll effectively positive gear the property.  Which is great as far as Marc is concerned.  But why gain $1000 when I can gain $4K with the tax man?  My tenants are very happy - even more so that they are paying rent at the bottom end of the scale for similar properties in the area, and the net benefit to me is that they look after the place well, and want to stay long term - you can't put a price on that.  
Does that mean every taxpayer is effectively subsidising my tenant's rental costs?  Does it matter?  I am providing "affordable" rental housing - the whole goal of NG in the first place. 
And lets not forget about the swathes of old Housing Commission homes in Sydney's west & south west that have either been sold off, or demolished by private developers reaping huge profits.  Where are all those displaced people going?  Sure, some get re-housed in modern apartments in new estates (next decade's ghettos) but there's an awful lot more who need affordable private rental accommodation. 
What the govt takes away with one hand, they have to give back in some form with the other.  
NG can start a domino effect on housing costs, affordable housing, and govt housing, that no govt would want to start.

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## Marc

> Now if I increase the rent by $20 per week, I'll effectively positive gear the property. Which is great as far as Marc is concerned. But why gain $1000 when I can gain $4K with the tax man?

  Err ... really?  Do you care to elaborate? $20x52 = $1040 a year gross. If you pay 37% tax, you will be in the black by $655. 
If you don't increase the rent by $20, you gain $4000? 
That sort of reasoning may work in the pub conversation but not with the ATO

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## Bedford

> Jill is a home owner with significant equity in her home

  What did Jill do with this significant equity?

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## SilentButDeadly

> What did Jill do with this significant equity?

  Put a contract out on Jack.

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## chrisp

> Err ... really?  Do you care to elaborate? $20x52 = $1040 a year gross. If you pay 37% tax, you will be in the black by $655. 
> If you don't increase the rent by $20, you gain $4000? 
> That sort of reasoning may work in the pub conversation but not with the ATO

  Marc, 
I think you are making a false assumption (the 37% tax bracket). 
There is a scenario where earning an extra dollar will cost you an extra $3,750 in tax (close enough to $4,000). 
[but I could be making a wrong assumption about Falconnuts circumstances too].

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## commodorenut

Marc, the difference is the deductions I can have on a NG property vs making a $1 profit on a PG property.
Without $2K in sewer work last year, I would have been PG, rather than NG.
Year before, I was borderline PG, but did some repairs in May/June, that were justifiable.
I am more than happy to make deductible repairs & maintenance to keep it NG, but to do this honestly can become difficult (eg, getting legitimate receipts). 
So the safer option is to keep the rent increase to the bare minimum to be within the market range, and the spinoff is a happy, reliable, long-term tenant.
The agent understood my point - they were suggesting a $15-25/wk increase, but in reality, that's only a few weeks rent - weeks I would lose finding a new tenant if these guys ever left, and the chances of finding tenants as good as these are slim. 
Sometimes investment decisions aren't all about bottom-line profit.

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## Marc

Mm ... and here I was thinking in division 293 ... 
However I still don't see how that can happen. You can claim expenses on any property, regardless if you make a profit or a loss. Your example of $1000 additional income, cancelling $4000 of tax return ? don't get it.  
Chris ... $1 will cost $3750 ? May be a loss of a subsidie? Extra Medicare levy? Too detailed for the current discussion.  
As far as the always present dilemma of increasing the rent and lose the tenant ... welcome to the landlord world. The RE agent that is not your agent but only after his own interest, will always push for higher rent. It is your call if the market can take an increase or not. I am curious about the maths of the mysterious $4000 though  :Smilie:  
But back to NG. I believe that it is the amateurish nature of rental property ownership, (95 in hand of single property mum and dad) that makes this debate over NG possible.
 No business owner would get together with fellow businessman and debate the social responsible nature of offsetting losses against other sources of income. https://www.ato.gov.au/business/inco...siness/losses/ 
And it is this amateurish nature that can turn a seemingly ordinary salary earner, that in the eyes of his fellow workers is just another one, into an overnight business person who may strike gold and find himself with half a million as the process of quietly taking a risk for a very long time and being in the right place at the right time. 
No one spares a thought for those thousands upon thousands of mum and dad who take a risk and get it wrong, make a massive loss yet their property was home to tenants all along, swelling the numbers of available proeprty for rent and keeping the supply high. Most likely schadenfreude all around and .. I told you so. Meantime the taxman gets his share regardless. 
Nothing like someone else good fortune to generate envy and promote the search for some phantom immoral conduct that needs rectifying by decree. He made money so he must be a crook for sure. Let us cancel NG ... even considering that NG is not such a clever strategy to scam the taxman, but rather a palliative measure to make a loss more bearable but that remains still a loss all along. 
The nature of man ( an woman)

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## cyclic

> But why gain $1000 when I can gain $4K with the tax man?  My tenants are very happy - even more so that they are paying rent at the bottom end of the scale for similar properties in the area, and the net benefit to me is that they look after the place well, and want to stay long term - you can't put a price on that.  
> .

  I agree with looking after good tenants, to a point, but I have no idea how you can lose rent increase of $1000 and gain $4000 back from tax. 
Could you please explain how this happens.

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## Marc

Now now, get back in the queue. I am first in line and next on the phone with the accountant  :Rofl5:

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## chrisp

I was thinking it might have been a Division 293 matter. Earn over $250,000 and the ATO sends you a letter about your super contributions and how they are now taxed at 30% instead of 15%. If you have contributed $25,000 to super that year, then that is an extra $3,750. (Not that you have to pay it that year as it can be deferred). 
Anyway, it seems that is not the issue at play here.

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## Bedford

Was Jill's investment house in Australia, and if so which state?

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## Marc

Yes, I thought about division 293, but it does not quite work that way. If an increase over the threshold would generate the need for $4000 restitution, it would be a punitive fine and not proportional tax on contribution increase from 15 to 30 ... They finally changed the system this year where you fill a form on line and the ATO deals with the super fund. The way it was before was a form to the super fund who would drag their feet for 6 month and the taxman send you letter after letter saying you owe them.  
But there is another more interesting matter to be discussed as a branch off from NG. 
Given that NG is so attractive due to the many reasons discussed, valid and invalid, where folks don't mind to lose $7000 in order to gain $3000 off tax, this fatal attraction like the moth to the light, could be used by a clever government, to reverse the fortunes of so many people who go all their life from the hand to the mouth, never putting anything aside for retirement, and then fall on the governemt pension and start whining that it is not enough. 
Say that we abolish tax on savings AND on super contributions altogether. We can place a cap on the concession to please those who think millions is a swear word. 
What will happen? The guy goes to the accountant who dutifully explains he is paying "too much tax". Solution/ Put some money aside in savings or super and it is all tax exempt.  
I can see the left rising in outrage and frantically painting large placards. Hang on, think about it. The banks would be swamped with money, so much that credit will become as cheap as chips, business become more liquid, mortgage cheaper, a long string of benefits would come from tax exempt savings.
Singapore has workers contributing 40% in state managed super and personal income tax as low as 4%.  
There are many clever ways to regulate the economy in order for people to prosper. The problem is when prosperity is considered evil, and poverty a virtue that the government ... that is but the reflection of the community they emerged from, starts to treat people accordingly, taking from the evil to give to the virtuous.

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## DavoSyd

> Yep I agree and you haven't heard the end of negative gearing as Morrison has been reported to have been considering it. 
> Anyone remember the GST that was dead and buried? 
> I hear that Fridenburg has giving his approval at looking into all forms of retirement income as it hasn't reduced the burden on the pension, you can bet some nasties will come out of that. 
> Governments need money to function and they are giving a tax cut to larger income brackets so they will lose that money, so where is the money coming from as from what I have been reading dividend income imputation credits will rise over the years.

  indeed, and Morrison has already suggested that Coalition policy would target the "excesses" of negative gearing.

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## Bedford

> indeed, and Morrison has already suggested that Coalition policy would target the "excesses" of negative gearing.

  I guess he'll have satisfy this lot if he wants to survive.  Occupation Total number of taxpayers Number who claimed rental losses Per cent who claimed rental losses Average rental loss, per claimant ($) Total rental losses claimed ($)  General Managers 212,131 41,882 19.74% 11,362 475,890,567  Chief Executives and Managing Directors 153,841 25,690 16.70% 14,079 361,713,317  Accountants 163,461 29,642 18.13% 9,839 291,664,152  Advertising and Sales Managers 166,771 27,363 16.41% 10,222 279,725,325  Registered Nurses 288,326 34,316 11.90% 7,258 249,091,366  General Clerks 362,345 30,525 8.42% 6,315 192,793,420  Secondary School Teachers 139,510 21,065 15.10% 7,679 161,762,337  Office Managers 175,836 20,743 11.80% 7,249 150,370,246  Practice Managers 79,682 14,488 18.18% 10,365 150,179,645  Electricians 100,901 15,937 15.79% 9,307 148,331,979  ICT Managers 60,009 11,917 19.86% 11,701 139,442,997  Contract, Program and Project Administrators 105,977 15,159 14.30% 8,594 130,285,877  Primary School Teachers 148,310 18,014 12.15% 6,709 120,859,504  Police 59,029 13,026 22.07% 9,210 119,977,510  Software and Applications Programmers 71,933 10,148 14.11% 10,622 107,798,319  Drillers, Miners and Shot Firers 51,313 9,420 18.36% 11,187 105,390,826  Construction Managers 53,905 9,867 18.30% 10,488 103,494,622  Sales Representatives 149,746 13,706 9.15% 7,482 102,559,543  Real Estate Sales Agents 60,113 10,673 17.75% 9,234 98,554,783  Civil Engineering Professionals 45,669 8,120 17.78% 11,638 94,501,723  Finance Managers 31,871 7,428 23.31% 12,704 94,370,557  Other Medical Practitioners 28,705 5,687 19.81% 16,171 91,969,734  Truck Drivers 156,385 12,271 7.85% 7,341 90,086,700  Occupation not matched 268,178 9,955 3.71% 8,969 89,291,743  Solicitors 48,670 7,882 16.19% 11,169 88,041,058  Metal Fitters and Machinists 68,112 9,068 13.31% 9,652 87,527,705  Generalist Medical Practitioners 27,713 5,565 20.08% 15,284 85,055,480  Policy and Planning Managers 35,437 7,581 21.39% 10,863 82,357,108  Engineering Managers 26,608 6,110 22.96% 12,946 79,101,081  Bank Workers 71,565 10,291 14.38% 7,460 76,776,653  Accounting Clerks 99,457 11,117 11.18% 6,858 76,250,332  Call or Contact Centre and Customer Service Managers 92,611 9,666 10.44% 7,434 71,865,850  Other Hospitality, Retail and Service Managers 32,051 6,775 21.14% 10,402 70,476,971  Industrial, Mechanical and Production Engineers 38,505 6,398 16.62% 10,944 70,023,593  Other Engineering Professionals 30,758 5,936 19.30% 11,667 69,256,281  University Lecturers and Tutors 57,591 6,573 11.41% 10,320 67,834,573  Motor Mechanics 93,262 8,083 8.67% 7,911 63,948,617  Management and Organisation Analysts 39,006 6,484 16.62% 9,704 62,927,134  Teacher - other school 52,545 8,301 15.80% 7,472 62,030,264  Retail Managers 98,319 8,711 8.86% 6,958 60,618,133  Architectural, Building and Surveying Technicians 42,589 6,491 15.24% 9,185 59,622,685  Structural Steel and Welding Trades Workers 75,040 6,506 8.67% 8,788 57,178,473  Other Building and Engineering Technicians 22,799 4,945 21.69% 11,498 56,861,581  Electrical Engineers 22,944 4,547 19.82% 11,808 53,693,586  Sales Assistants (General) 274,795 10,551 3.84% 4,978 52,524,617  ICT Business and Systems Analysts 27,667 4,881 17.64% 10,623 51,851,013  Air Transport Professionals 14,650 3,539 24.16% 14,618 51,733,872  Purchasing and Supply Logistics Clerks 83,850 6,911 8.24% 7,178 49,613,833  Public servant - administrative service officer - levels 3-4 59,145 6,781 11.47% 7,169 48,615,418  Human Resource Managers 23,604 4,812 20.39% 9,950 47,880,217  Carpenters and Joiners 71,994 6,523 9.06% 7,180 46,840,409  Database and Systems Administrators, and ICT Security Specialists 26,895 4,438 16.50% 10,220 45,358,749  Human Resource Professionals 41,555 5,510 13.26% 7,959 43,858,111  Earthmoving Plant Operators 45,721 4,933 10.79% 8,866 43,738,515  Storepersons 133,594 6,382 4.78% 6,557 41,851,062  Internal Medicine Specialists 7,639 1,956 25.61% 20,904 40,888,249  Receptionists 116,480 7,491 6.43% 5,427 40,657,309  Plumbers 48,782 5,207 10.67% 7,409 38,580,110  Financial Investment Advisers and Managers 19,016 3,320 17.46% 11,587 38,470,843  Computer Network Professionals 23,789 3,709 15.59% 10,149 37,643,714  Production Managers 17,187 3,140 18.27% 11,961 37,557,711  Consultant - management 17,955 2,864 15.95% 12,857 36,823,741  Advertising and Marketing Professionals 38,022 4,099 10.78% 8,904 36,501,209  Technical Sales Representatives 28,369 4,060 14.31% 8,726 35,428,813  Personal Assistants 42,621 5,026 11.79% 6,892 34,643,935  Secretaries 50,053 5,336 10.66% 6,466 34,506,750  Structural Steel Construction Workers 33,607 3,293 9.80% 10,433 34,357,943  Other Miscellaneous Labourers 122,771 4,819 3.93% 7,046 33,959,004  Pharmacists 21,080 3,492 16.57% 9,698 33,867,551  Aged and Disabled Carers 122,560 6,406 5.23% 5,207 33,361,528  Other Specialist Managers 28,128 3,954 14.06% 8,429 33,329,417  Electronics Trades Workers 29,034 3,513 12.10% 9,219 32,389,349  ICT Sales Professionals 16,298 2,737 16.79% 11,792 32,276,026  School Principals 11,422 3,135 27.45% 10,258 32,160,384  Bookkeepers 38,235 4,909 12.84% 6,497 31,896,844  Consultant - IT business analyst 14,000 2,580 18.43% 12,107 31,237,666  Health and Welfare Services Managers 28,378 3,708 13.07% 8,269 30,662,491  Chefs 84,349 4,646 5.51% 6,558 30,472,883  Mining Engineers 9,471 2,127 22.46% 14,245 30,299,595  Surgeons 3,693 1,020 27.62% 29,674 30,268,299  Fire and Emergency Workers 16,558 3,202 19.34% 9,284 29,730,132  SECURITY Officers AND Guards 54,418 3,950 7.26% 7,514 29,682,195  Social Workers 36,507 4,202 11.51% 6,949 29,202,971  Vocational Education Teachers (Aus) / Polytechnic Teachers (NZ) 26,850 3,756 13.99% 7,678 28,840,309  Financial Brokers 13,388 2,442 18.24% 11,694 28,559,087  Dental Practitioners 8,533 1,864 21.84% 15,295 28,510,546  Auditors, Company Secretaries and Corporate Treasurers 16,785 2,721 16.21% 10,475 28,503,666  Other Machine Operators 36,828 3,276 8.90% 8,652 28,347,033  Defence Force Members - Other Ranks 29,157 3,304 11.33% 8,234 27,207,933  Building and Plumbing Labourers 64,835 3,584 5.53% 7,533 26,998,471  Environmental Scientists 25,310 3,379 13.35% 7,855 26,545,121  Welfare Support Workers 71,095 4,647 6.54% 5,681 26,403,198  Education Aides 79,793 5,758 7.22% 4,580 26,372,933  Commissioned Officers (Management) 10,675 2,520 23.61% 10,379 26,155,407  Training and Development Professionals 19,780 3,101 15.68% 8,378 25,981,276  Marine Transport Professionals 10,520 2,055 19.53% 12,514 25,718,116  Cafe and Restaurant Managers 48,617 3,569 7.34% 7,107 25,366,941  Public servant - administrative service officer - levels 1-2 33,774 3,720 11.01% 6,789 25,258,060  Child Carers 112,414 5,356 4.76% 4,651 24,916,024  Train and Tram Drivers 12,268 2,337 19.05% 10,659 24,911,171  Ambulance Officers and Paramedics 14,858 2,769 18.64% 8,922 24,705,401  Transport Services Managers 20,727 2,658 12.82% 9,217 24,499,186  Other Miscellaneous Clerical and Administrative Workers 39,674 3,761 9.48% 6,468 24,326,452  Occupational and Environmental Health Professionals 12,097 2,420 20.00% 9,870 23,887,482  Inspectors and Regulatory Officers 16,448 2,759 16.77% 8,592 23,705,520  ICT Support and Test Engineers 18,679 2,442 13.07% 9,621 23,495,537  Chemical, Gas, Petroleum and Power Generation Plant Operators 12,197 2,124 17.41% 11,006 23,376,951  Supply and Distribution Managers 13,284 2,305 17.35% 10,060 23,189,726  Medical Imaging Professionals 14,761 2,592 17.56% 8,942 23,177,983  Bus and Coach Drivers 37,301 3,390 9.09% 6,822 23,127,189  Insurance, Money Market and Statistical Clerks 24,998 2,908 11.63% 7,739 22,507,021  Architects and Landscape Architects 17,812 2,445 13.73% 9,122 22,304,477  Manufacturers 19,802 2,452 12.38% 8,875 21,762,411  ICT Support Technicians 26,951 2,531 9.39% 8,525 21,578,526  Corporate Services Managers 9,669 1,930 19.96% 11,014 21,257,814  Other Factory Process Workers 58,981 3,107 5.27% 6,818 21,186,038  Aircraft Maintenance Engineers 10,406 1,991 19.13% 10,438 20,782,802  Other Construction and Mining Labourers 19,319 2,100 10.87% 9,883 20,755,568  Anaesthetists 3,105 891 28.70% 22,829 20,341,408  Geologists and Geophysicists 10,987 1,714 15.60% 11,482 19,681,841  Prison Officers 13,296 2,250 16.92% 8,649 19,460,528  Commercial Cleaners 97,986 3,628 3.70% 5,206 18,890,511  Psychologists 17,530 2,427 13.84% 7,773 18,866,993  Travel Attendants 12,214 2,119 17.35% 8,536 18,088,342  Nursing Support and Personal Care Workers 66,332 3,368 5.08% 5,320 17,918,242  Physiotherapists 18,957 2,440 12.87% 7,215 17,605,343  Cartographers and Surveyors 11,463 1,852 16.16% 9,231 17,096,529  Midwives 17,132 2,381 13.90% 7,143 17,008,545  Research and Development Managers 10,903 1,750 16.05% 9,603 16,805,710  Other Stationary Plant Operators 16,199 1,872 11.56% 8,948 16,751,975  Chemical and Materials Engineers 8,032 1,396 17.38% 11,987 16,734,165  Graphic and Web Designers, and Illustrators 32,104 2,556 7.96% 6,507 16,634,334  Electrical Engineering Draftspersons and Technicians 10,438 1,703 16.32% 9,737 16,583,384  Medical Laboratory Scientists 12,533 1,982 15.81% 8,282 16,415,115  Safety Inspectors 8,442 1,563 18.51% 10,480 16,380,530  Medical Technicians 25,798 2,493 9.66% 6,552 16,334,644  Chemists, and Food and Wine Scientists 12,801 1,820 14.22% 8,797 16,011,803  Crane, Hoist and Lift Operators 10,185 1,545 15.17% 10,331 15,961,570  Transport and Despatch Clerks 17,021 1,768 10.39% 8,865 15,674,797  Other Miscellaneous Technicians and Trades Workers 23,781 1,968 8.28% 7,962 15,670,417  Senior Non-commissioned Defence Force Members 7,390 1,797 24.32% 8,453 15,191,307  Public Relations Professionals 15,848 1,983 12.51% 7,649 15,169,693  Food and Drink Factory Workers 40,454 2,290 5.66% 6,541 14,980,544  Retail Supervisors 23,082 1,869 8.10% 7,558 14,126,052  Electrical Distribution Trades Workers 11,085 1,603 14.46% 8,754 14,032,910  Telecommunications Trades Workers 15,001 1,687 11.25% 8,292 13,989,509  Credit and Loans Officers 9,211 1,688 18.33% 8,252 13,929,505  Other Sales Assistants and Salespersons 67,695 2,689 3.97% 5,023 13,508,069  Hotel and Motel Managers 13,817 1,713 12.40% 7,843 13,436,655  Urban and Regional Planners 9,441 1,592 16.86% 8,303 13,218,804  Airconditioning and Refrigeration Mechanics 14,669 1,633 11.13% 7,959 12,997,887  Financial Dealers 4,907 758 15.45% 16,954 12,851,602  Checkout Operators and Office Cashiers 120,301 2,674 2.22% 4,796 12,826,218  Consultant - engineering 5,441 1,009 18.54% 12,666 12,780,096  Life Scientists 15,223 1,620 10.64% 7,817 12,664,678  Product Assemblers 34,907 2,030 5.82% 6,209 12,605,506  Journalists and Other Writers 16,621 1,638 9.86% 7,692 12,601,129  Payroll Clerks 14,785 1,804 12.20% 6,870 12,394,468  Gardeners 36,234 2,020 5.57% 5,900 11,919,172  Couriers and Postal Deliverers 24,826 1,918 7.73% 6,165 11,825,695  Education Advisers and Reviewers 11,772 1,546 13.13% 7,566 11,697,095  Tourism and Travel Advisers 21,178 1,873 8.84% 6,192 11,599,007  Other Natural and Physical Science Professionals 7,867 1,047 13.31% 11,033 11,552,402  Sports Coaches, Instructors and Officials 25,099 1,556 6.20% 7,388 11,496,007  Sportspersons 12,528 1,015 8.10% 11,313 11,483,093  Electronics Engineers 6,921 1,068 15.43% 10,720 11,449,599  Deck and Fishing Hands 11,051 1,169 10.58% 9,710 11,351,786  Special Education Teachers 13,628 1,685 12.36% 6,651 11,208,199  Mechanical Engineering Draftspersons and Technicians 9,033 1,142 12.64% 9,680 11,055,363  Early Childhood (Pre-primary School) Teachers 19,871 1,866 9.39% 5,903 11,015,125  Counsellors 13,690 1,598 11.67% 6,846 10,941,366  Civil Engineering Draftspersons and Technicians 9,145 1,184 12.95% 9,114 10,792,066  Motor Vehicle and Vehicle Parts Salespersons 11,563 1,292 11.17% 8,251 10,660,399  Archivists, Curators and Records Managers 11,255 1,298 11.53% 8,082 10,491,462  Science Technicians 16,223 1,454 8.96% 7,163 10,415,493  Occupational Therapists 13,778 1,695 12.30% 6,140 10,408,617  Forklift Drivers 31,942 1,480 4.63% 7,007 10,370,566  Psychiatrists 2,611 600 22.98% 17,188 10,313,220  Concreters 19,651 1,342 6.83% 7,644 10,259,290  Freight and Furniture Handlers 10,600 1,060 10.00% 9,656 10,236,037  Consultant - human resources 7,385 1,153 15.61% 8,829 10,179,920  Agricultural and Forestry Scientists 8,705 1,272 14.61% 7,784 9,902,155  Telecommunications Technical Specialists 6,843 1,065 15.56% 9,146 9,740,919  Keyboard Operators 20,039 1,626 8.11% 5,930 9,642,633  Delivery Drivers 36,723 1,567 4.27% 6,006 9,411,715  Middle School Teachers (Aus) / Intermediate School Teachers (NZ) 8,450 1,234 14.60% 7,534 9,297,186  Call or Contact Centre Workers 33,338 1,509 4.53% 6,111 9,222,571  Dental Assistants 25,074 1,644 6.56% 5,496 9,035,751  Telecommunications Engineering Professionals 5,823 890 15.28% 10,132 9,017,842  Veterinarians 7,781 965 12.40% 9,086 8,768,353  Intelligence and Policy Analysts 7,927 1,065 13.44% 8,117 8,645,569  Judicial and Other Legal Professionals 2,528 560 22.15% 15,307 8,572,296  Pharmacy Sales Assistants 34,517 1,657 4.80% 5,082 8,421,273  Artistic Directors, and Media Producers and Presenters 9,556 1,011 10.58% 8,309 8,400,502  Other Information and Organisation Professionals 12,322 1,137 9.23% 7,253 8,247,112  Hairdressers 33,884 1,620 4.78% 5,077 8,225,013  Waiters 104,053 1,670 1.60% 4,918 8,214,548  Librarians 11,310 1,219 10.78% 6,721 8,193,242  Other Hospitality Workers 33,785 1,334 3.95% 6,122 8,167,347  Court and Legal Clerks 14,323 1,211 8.45% 6,738 8,160,546  Other Cleaners 36,017 1,506 4.18% 5,355 8,065,217  Cabinetmakers 17,965 1,300 7.24% 6,171 8,023,380  Land Economists and Valuers 4,692 865 18.44% 9,267 8,016,046  Kitchenhands 82,077 1,623 1.98% 4,861 7,890,948  Ministers of Religion 16,635 1,643 9.88% 4,654 7,648,008  Models and Sales Demonstrators 19,036 1,323 6.95% 5,746 7,603,225  Other Mobile Plant Operators 10,754 949 8.82% 7,981 7,574,648  Nurse Managers 4,101 762 18.58% 9,883 7,531,420  Actuaries, Mathematicians and Statisticians 4,355 659 15.13% 11,163 7,356,735  Painting Trades Workers 16,921 1,135 6.71% 6,416 7,282,755  Nurse Educators and Researchers 5,857 928 15.84% 7,779 7,219,626  Optometrists and Orthoptists 4,373 739 16.90% 9,741 7,198,957  Film, Television, Radio and Stage Directors 8,434 811 9.62% 8,697 7,053,461  Plasterers 13,959 1,047 7.50% 6,654 6,967,102  Conveyancers and Legal Executives 8,896 908 10.21% 7,599 6,900,443  Insurance Agents 8,406 844 10.04% 8,174 6,898,953  Speech Professionals and Audiologists 8,339 991 11.88% 6,840 6,779,138  Electronic Engineering Draftspersons and Technicians 5,928 772 13.02% 8,764 6,766,520  Bar Attendants and Baristas 86,120 1,348 1.57% 4,986 6,721,537  Printers 7,826 833 10.64% 8,011 6,673,240  Automotive Electricians 6,810 780 11.45% 8,329 6,496,897  Butchers and Smallgoods Makers 16,788 1,018 6.06% 6,373 6,487,860  Dental Hygienists, Technicians and Therapists 6,032 808 13.40% 7,942 6,417,926  Fashion, Industrial and Jewellery Designers 7,389 730 9.88% 8,697 6,349,445  Consultant - financial investment 2,695 456 16.92% 13,864 6,322,031  Cooks 33,836 1,229 3.63% 5,076 6,239,312  Packers 40,350 1,255 3.11% 4,968 6,235,290  Child Care Centre Managers 8,320 944 11.35% 6,600 6,230,444  Fitness Instructors 16,057 1,090 6.79% 5,709 6,223,525  Consultant - marketing and public relations 4,579 633 13.82% 9,668 6,119,942  Economists 3,496 542 15.50% 11,287 6,118,006  Private Tutors and Teachers 13,225 1,009 7.63% 6,033 6,087,391  Multimedia Specialists and Web Developers 7,115 658 9.25% 9,010 5,929,008  Enrolled and Mothercraft Nurses 14,773 1,106 7.49% 5,352 5,920,395  Mail Sorters 8,753 913 10.43% 6,216 5,675,382  Gaming Workers 8,283 627 7.57% 9,000 5,643,419  Livestock Farmers 11,006 1,029 9.35% 5,418 5,575,523  Importers, Exporters and Wholesalers 4,329 568 13.12% 9,780 5,555,345  Panelbeaters 10,996 814 7.40% 6,774 5,514,196  Other Education Managers 2,985 581 19.46% 9,379 5,449,247  Bakers and Pastrycooks 18,839 945 5.02% 5,761 5,444,605  Primary Products Inspectors 4,901 744 15.18% 7,285 5,420,339  Bricklayers and Stonemasons 11,102 783 7.05% 6,902 5,404,894  Conference and Event Organisers 8,547 820 9.59% 6,541 5,363,729  Metal Engineering Process Workers 12,145 682 5.62% 7,850 5,353,845  Ticket Salespersons 9,786 752 7.68% 7,110 5,347,392  Other Farm, Forestry and Garden Workers 24,800 980 3.95% 5,362 5,254,998  Retail and Wool Buyers 4,259 584 13.71% 8,978 5,243,513  Legislators 4,024 558 13.87% 9,238 5,155,085  Timber and Wood Process Workers 13,398 820 6.12% 6,086 4,990,669  Human Resource Clerks 9,157 803 8.77% 6,113 4,908,989  Sheetmetal Trades Workers 9,347 698 7.47% 6,962 4,859,501  Crop Farmers 10,482 769 7.34% 6,266 4,819,200  Paving and Surfacing Labourers 13,394 774 5.78% 6,216 4,811,911  Performing Arts Technicians 10,814 670 6.20% 7,167 4,802,389  Greenkeepers 13,833 857 6.20% 5,505 4,718,134  Welfare, Recreation and Community Arts Workers 7,760 801 10.32% 5,797 4,643,996  Consultant - real estate representative 1,902 376 19.77% 12,219 4,594,542  Social Professionals 7,095 626 8.82% 6,996 4,379,676  Paper and Wood Processing Machine Operators 6,273 488 7.78% 8,857 4,322,287  Apprentice or trainee - electrician 19,663 698 3.55% 6,177 4,311,599  Toolmakers and Engineering Patternmakers 3,652 512 14.02% 8,194 4,195,447  Housekeepers 28,444 718 2.52% 5,794 4,160,645  Livestock Farm Workers 28,282 924 3.27% 4,453 4,115,162  Licensed Club Managers 3,562 444 12.46% 9,160 4,067,375  Clay, Concrete, Glass and Stone Processing Machine Operators 6,080 446 7.34% 8,743 3,899,753  Handypersons 10,739 705 6.56% 5,482 3,864,832  Interior Designers 4,957 522 10.53% 7,398 3,861,916  Meat, Poultry and Seafood Process Workers 29,957 749 2.50% 5,094 3,816,129  Actors, Dancers and Other Entertainers 11,102 524 4.72% 6,926 3,629,266  Dietitians 4,573 515 11.26% 6,913 3,560,695  Railway Track Workers 5,319 405 7.61% 8,678 3,514,843  Glaziers 7,478 499 6.67% 7,025 3,505,614  Beauty Therapists 16,651 710 4.26% 4,870 3,458,004  Amusement, Fitness and Sports Centre Managers 4,327 437 10.10% 7,818 3,416,808  Consultant - occupational health and safety 1,785 341 19.10% 9,970 3,400,019  Music Professionals 5,428 400 7.37% 8,327 3,331,132  Chiropractors and Osteopaths 2,617 337 12.88% 9,785 3,297,688  Miscellaneous type not specified 16,334 288 1.76% 11,425 3,290,669  Consultant - sales assistant (retail) 5,668 512 9.03% 6,301 3,226,286  Plastics and Rubber Production Machine Operators 5,757 396 6.88% 7,866 3,115,216  Cafe Workers 28,667 703 2.45% 4,428 3,113,064  Crop Farm Workers 38,116 671 1.76% 4,481 3,007,210  Gallery, Library and Museum Technicians 6,320 480 7.59% 6,060 2,909,173  Binders, Finishers and Screen Printers 4,749 383 8.06% 7,530 2,884,050  Other Health Diagnostic and Promotion Professionals 4,072 420 10.31% 6,569 2,759,052  Consultant - tax accountant 1,447 280 19.35% 9,799 2,743,848  Barristers 1,574 174 11.05% 15,730 2,737,130  Motor Vehicle Parts and Accessories Fitters 10,837 415 3.83% 6,580 2,730,876  Garden and Nursery Labourers 16,391 555 3.39% 4,908 2,724,166  Industrial Spraypainters 5,672 399 7.03% 6,787 2,708,403  Insulation and Home Improvement Installers 5,264 385 7.31% 6,775 2,608,439  Animal Attendants and Trainers 8,626 405 4.70% 6,124 2,480,607  Agricultural, Forestry and Horticultural Plant Operators 10,697 436 4.08% 5,545 2,417,681  Vehicle Painters 6,878 370 5.38% 6,504 2,406,482  Caravan Park and Camping Ground Managers 2,472 440 17.80% 5,269 2,318,759  Podiatrists 2,501 315 12.59% 7,270 2,290,067  Hotel Service Managers 4,435 297 6.70% 7,623 2,264,228  Wall and Floor Tilers 5,660 356 6.29% 6,334 2,255,162  Laundry Workers 11,531 463 4.02% 4,848 2,244,828  Consultant - construction manager 1,104 205 18.57% 10,906 2,235,902  Teachers of English to Speakers of Other Languages 3,542 304 8.58% 7,314 2,223,532  Veterinary Nurses 9,218 480 5.21% 4,607 2,211,471  Photographers 5,512 350 6.35% 6,279 2,197,685  ICT Trainers 1,893 251 13.26% 8,530 2,141,196  Sewing Machinists 6,025 426 7.07% 4,950 2,108,982  Shelf Fillers 16,340 445 2.72% 4,690 2,087,050  Debt Collectors 4,135 316 7.64% 6,542 2,067,312  Nurserypersons 5,010 346 6.91% 5,919 2,048,137  Inquiry Clerks 2,993 303 10.12% 6,607 2,002,083  Mixed Crop and Livestock Farmers 3,408 299 8.77% 6,570 1,964,551  Engineering Production Systems Workers 2,392 226 9.45% 8,278 1,870,925  Caretakers 3,768 301 7.99% 6,193 1,864,366  Other Clerical and Office Support Workers 4,824 272 5.64% 6,852 1,863,881  ICT Sales Assistants 4,616 221 4.79% 8,364 1,848,650  Funeral Workers 3,207 269 8.39% 6,833 1,838,344  Library Assistants 5,715 319 5.58% 5,728 1,827,499  Insurance Investigators, Loss Adjusters and Risk Surveyors 1,514 228 15.06% 7,994 1,822,752  Consultant - environmental 1,719 207 12.04% 8,674 1,795,612  Meat Boners and Slicers, and Slaughterers 10,474 313 2.99% 5,636 1,764,138  Graphic Pre-press Trades Workers 2,388 228 9.55% 7,591 1,730,973  Complementary Health Therapists 3,045 267 8.77% 6,448 1,721,757  Domestic Cleaners 10,795 357 3.31% 4,707 1,680,649  Printing Assistants and Table Workers 3,340 208 6.23% 7,828 1,628,255  Consultant - medical 766 123 16.06% 13,214 1,625,335  Automobile Drivers 4,109 219 5.33% 7,389 1,618,267  Plastics and Rubber Factory Workers 4,061 239 5.89% 6,560 1,568,046  Auctioneers, and Stock and Station Agents 1,950 204 10.46% 7,670 1,564,804  Signwriters 3,223 246 7.63% 6,286 1,546,499  Apprentice or trainee - bricklayer, or carpenter and joiner 17,120 302 1.76% 5,068 1,530,665  Jewellers 2,263 216 9.54% 7,079 1,529,178  Product Quality Controllers 2,464 183 7.43% 8,211 1,502,765  Vehicle Body Builders and Trimmers 3,010 228 7.57% 6,553 1,494,280  Authors, and Book and Script Editors 2,389 209 8.75% 7,128 1,489,922  Precision Metal Trades Workers 3,127 226 7.23% 6,554 1,481,362  Car Detailers 12,482 269 2.16% 5,300 1,425,713  Other Accommodation and Hospitality Managers 1,612 191 11.85% 7,345 1,403,007  Wood Machinists and Other Wood Trades Workers 3,618 205 5.67% 6,765 1,386,981  Food Trades Assistants 9,426 276 2.93% 4,996 1,379,090  Consultant - sales representative (wholesale) 1,231 164 13.32% 8,361 1,371,244  Floor Finishers 3,469 200 5.77% 6,848 1,369,655  Boat Builders and Shipwrights 2,719 189 6.95% 7,148 1,351,081  Massage Therapists 5,270 233 4.42% 5,728 1,334,709  Clothing Trades Workers 3,004 219 7.29% 6,083 1,332,260  Education Professionals 2,769 150 5.42% 8,839 1,325,913  Chief Executives, General Managers and Legislators - type not specified 1,572 121 7.70% 10,850 1,312,882  Gallery, Museum and Tour Guides 4,217 216 5.12% 5,900 1,274,560  Fast Food Cooks 25,030 254 1.01% 4,970 1,262,605  Consultant, apprentice or trainee - personal service or travel 2,324 216 9.29% 5,658 1,222,273  Agricultural Technicians 1,845 141 7.64% 8,628 1,216,665  Recycling and Rubbish Collectors 2,793 155 5.55% 7,831 1,213,953  Switchboard Operators 2,894 170 5.87% 7,124 1,211,085  Forestry and Logging Workers 5,195 217 4.18% 5,571 1,208,961  Florists 3,478 195 5.61% 6,042 1,178,196  Telemarketers 8,203 214 2.61% 5,403 1,156,343  Driving Instructors 1,271 159 12.51% 7,152 1,137,261  Apprentice or trainee - plumber 8,638 189 2.19% 5,896 1,114,433  Fencers 3,626 174 4.80% 6,290 1,094,576  Special Care Workers 2,959 180 6.08% 6,031 1,085,720  Other Personal Service Workers 4,999 195 3.90% 5,327 1,038,951  Service Station Attendants 5,112 206 4.03% 4,998 1,029,725  Roof Tilers 3,358 192 5.72% 5,338 1,024,959  Engineering Professionals - type not specified 786 60 7.63% 16,102 966,163  Shearers 5,800 224 3.86% 4,196 939,998  Upholsterers 1,958 144 7.35% 6,505 936,760  Aquaculture Farmers 1,652 103 6.23% 8,917 918,543  Apprentice or trainee - automotive mechanic or electrician 10,269 144 1.40% 5,676 817,389  Mixed Crop and Livestock Farm Workers 3,886 152 3.91% 5,296 805,084  Photographic Developers and Printers 1,615 122 7.55% 6,325 771,675  Betting Clerks 2,460 117 4.76% 6,491 759,500  Consultant, apprentice or trainee - security and correctional services 590 79 13.39% 9,361 739,547  Diversional Therapists 1,812 124 6.84% 5,616 696,400  Survey Interviewers 3,033 131 4.32% 5,283 692,074  Apprentice or trainee - mechanical trades engineering trades worker 4,986 100 2.01% 6,482 648,257  Consultant - clinical nurse 423 74 17.49% 8,522 630,664  Visual Arts and Crafts Professionals 2,633 107 4.06% 5,839 624,825  Consultant - urban and regional planner 368 59 16.03% 10,201 601,899  Outdoor Adventure Guides 2,035 96 4.72% 6,187 594,004  Consultant - insurance (clerical) 869 91 10.47% 6,482 589,881  Textile and Footwear Production Machine Operators 1,470 88 5.99% 6,377 561,212  Sales assistant - type not specified 63,447 94 0.15% 5,870 551,786  Apprentice or trainee - electronics or telecommunications trades worker 3,261 103 3.16% 5,284 544,307  Metal Casting, Forging and Finishing Trades Workers 1,263 75 5.94% 7,221 541,606  Apprentice or trainee - food trades worker 10,648 102 0.96% 4,958 505,722  Canvas and Leather Goods Makers 1,108 63 5.69% 7,278 458,514  Indigenous Health Workers 2,781 79 2.84% 5,409 427,360  Filing and Registry Clerks 1,974 92 4.66% 4,407 405,530  Consultant, apprentice or trainee - justice and legal services, insurance claims investigation 561 55 9.80% 7,323 402,778  Apprentice or trainee - clerical services 984 59 6.00% 6,134 361,909  Personal Care Consultants 903 60 6.64% 4,818 289,115  Street Vendors and Related Salespersons 1,274 56 4.40% 5,159 288,944  Apprentice or trainee - information technology technician or telecommunications technical specialist 578 26 4.50% 9,474 246,327  School Teacher - type not specified 1,126 29 2.58% 8,267 239,743  Aquaculture Workers 1,908 36 1.89% 6,244 224,811  Apprentice or trainee - metal fabrication engineering trades worker 4,308 45 1.04% 4,470 201,185  Apprentice or trainee - automotive - other 2,600 32 1.23% 5,466 174,933  Visual Merchandisers 304 16 5.26% 8,914 142,630  Factory Process Workers - type not specified 3,306 22 0.67% 6,235 137,182  Natural and Physical Science Professionals - type not specified 343 10 2.92% 13,686 136,862  Machine and Stationary Plant Operators - type not specified 525 15 2.86% 8,587 128,818  Apprentice or trainee - miner 277 14 5.05% 8,691 121,680  Apprentice or trainee - cleaning services 944 22 2.33% 5,339 117,474  ICT Professionals 669 10 1.49% 11,537 115,377  Apprentice or trainee - care and community services 378 16 4.23% 5,690 91,041  Cleaners and Laundry Workers - type not specified 3,229 17 0.53% 5,091 86,559  Apprentice or trainee - miscellaneous technicians or trades worker 664 12 1.81% 6,913 82,961  Apprentice or trainee - hair dresser 3,805 18 0.47% 4,380 78,845  Construction and Mining Labourers. Construction worker - type not specified 270 6 2.22% 12,612 75,675  Office Managers and Program Administrators - type not specified 541 15 2.77% 4,894 73,418  Apprentice or trainee - financial services 394 16 4.06% 4,445 71,134  Vending Machine Attendants 576 11 1.91% 5,970 65,678  Apprentice or trainee - printer or graphic artist 390 11 2.82% 5,893 64,831  Apprentice or trainee - health and welfare support services 379 14 3.69% 4,490 62,873  Apprentice or trainee - horticultural trades worker 1,683 15 0.89% 4,122 61,843  Apprentice or trainee - animal attendant, trainer or shearer 537 16 2.98% 3,038 48,611  Apprentice or trainee - sport and recreation 457 6 1.31% 8,096 48,576  Mobile Plant Operators 278 4 1.44% 12,134 48,536  Apprentice or trainee - deck or fishing hand, or autoglazier 232 8 3.45% 5,858 46,868  Apprentice or trainee - business services 863 11 1.27% 3,987 43,865  Apprentice or trainee - tiler or plasterer 1,673 14 0.84% 3,061 42,854  Building and Engineering Technicians - type not specified 190 6 3.16% 6,795 40,775  Business and Systems Analysts, and Programmers - type not specified 81 5 6.17% 8,022 40,113  Personal Carers and Assistants 1,310 9 0.69% 4,410 39,698  Apprentice or trainee - wood trades worker 595 6 1.01% 5,950 35,702  Design, Engineering, Science and Transport Professionals - type not specified 54 1 1.85% 33,464 33,464  Labourer - type not specified 2,794 7 0.25% 4,081 28,570  Apprentice or trainee - transport and distribution driver 119 5 4.20% 4,332 21,660  Road and rail drivers - type not specified 546 5 0.92% 4,029 20,146  Midwifery and Nursing Professionals - type not specified 73 3 4.11% 5,439 16,319  Apprentice or trainee - hospitality 456 4 0.88% 3,803 15,213  Apprentice or trainee - agricultural or medical technician 437 2 0.46% 6,630 13,260  Apprentice or trainee - storeperson 271 5 1.85% 2,488 12,440  Apprentice or trainee - floor finisher 1,432 6 0.42% 2,055 12,330  Medical Practitioners - type not specified 12 2 16.67% 5,004 10,009  Architects, Designers, Planners and Surveyors 92 1 1.09% 9,887 9,887  General Clerical Workers - type not specified 109 3 2.75% 2,626 7,880  Food Process Workers - type not specified 260 1 0.38% 4,368 4,368  Hospitality Workers - type not specified 1,649 2 0.12% 1,688 3,376  Apprentice or trainee - farm, forestry or garden worker 272 1 0.37% 2,277 2,277  Apprentice or trainee - food, drink or meat processor 136 1 0.74% 1,030 1,030  Media Professionals - type not specified 78 1 1.28% 266 266    *Notes:* The ATO dataset does not include occupation for about 2.5 million taxpayers - 192,537 of whom reported rental losses. Those taxpayers have been excluded from the table.Occupations with 0 per cent of taxpayers listed as claiming rental losses have been excluded from the table.  https://www.abc.net.au/news/2016-04-...pation/7357718

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## DavoSyd

> I guess he'll have satisfy this lot if he wants to survive.

  yeah - that's right, because being a coalition PM is about "satisfying" people LOL!!  :Rofl:

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## Marc

Carpenters and Joiners 71,994 6,523 9.06% 7,180 46,840,409    
Come on ... fess up ... who did it?  :Rofl5:

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## UseByDate

> No, however if you are reaching into your pocket to cover the losses you may well be better off and safer to put that amount in super and cut the risk while picking up a 100% tax deduction for your trouble. Mind you it isn't that simple there are multiple factors that impinge on both and neither can be guaranteed to do better than the other.

  I am not sure what this means.
 You can make a contribution to superannuation with your own money (non-deducted contribution) ie money that you have already paid income tax on and not pay contribution tax or you can make a contribution with salary before any tax, (deducted contribution) but then the contribution would be taxed at 15% for the majority of tax payers. In both cases you are paying tax.

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## UseByDate

> It is a form of income if you sell it, and there would be serial renovators who buy, renovate, and sell their principal residence for profit. Im not sure if they pay tax on that income (other than stamp duty)?

  Serial renovators don't have to pay CGT on the profit when they sell but the the ATO does set limits on either how long you have to live in the property or the number of renovations you can do in a certain period of time (I can't remember which) to qualify for exemption.    

> Some other counties do tax the capital gains of the principal residence -  notably Japan and the US, so obviously it can be done as part of a  workable tax system. Ireland taxes the development of the principal  residence, and Spain taxes capital gains of the principal residence but  allows roll-over exemptions if buying another house.

  The USA does have CGT on main residences but there does seem to be legal means to avoid paying it. Ie if you are married and have lived in the house for at least 2 years you do not pay CGT on the first $500,000 of profit. If you move before the profit hits $500,000 you will not pay any CGT on your house.   https://www.thebalance.com/sale-of-your-home-3193496  
 PS I have no personal experience of American CGT and property but I was aware of massive exemptions.

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## Bigboboz

> Now now, get back in the queue. I am first in line and next on the phone with the accountant

  The suspense is killing me, how does $1k gain (pre tax) become a $4k loss (pre or post tax)???

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## chrisp

I think it was Marc who mentioned claiming laundry expenses on one’s tax return. Interestingly, these is this article in the newspaper today - https://www.theage.com.au/business/s...03-p51txy.html

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## r3nov8or

> I think it was Marc who mentioned claiming laundry expenses on one’s tax return. Interestingly, these is this article in the newspaper today - https://www.theage.com.au/business/s...03-p51txy.html

  If you have bigger things going on, don't draw the crabs with a petty $150 for clothes/laundry

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## Marc

> The suspense is killing me, how does $1k gain (pre tax) become a $4k loss (pre or post tax)???

  Bob ... I believe that comment was done in haste by ... who was it again? ... without thinking. Tax is always proportional to the change in income and unless there is a fine, reducing one's income will produce a reduction in tax that is proportional, even in the case of a tax bracket change.  
I love the post by Bedford with all that detailed information.  
The last entry is so revealing!  Media Professionals - type not specified 78 1 1.28% 266 266    "Media" the refuge of those occupying the pinnacle of the pretend high moral ground, where the land is scarce and the air is thin and where talking down to the plebeian is easy ... and where envy and hate is the fuel that moves the fingers on the keyboard.  As for the laundry claims, this is done by accountants by default, and I agree that it is a stupid risk to take for very little gain.  Biggest con are vehicle expenses. I remember a court case where a large group of airport workers that all used the same accountant, claimed vehicle expenses to go to and from work, because they had to carry gumboots and wet gear, too bulky to carry on public transport. The claims were actually perfectly legal and went on for years, until someone decided to be nasty and rang the ATO saying it was all a ruse. The case landed in court and the accountant defended over 1000 workers in court for almost a year, but lost when the airline manager, lied to the court saying there was lockers for all. The lockers where not big enough for a briefcase and restricted to a few hundred. Lesson learned, thread carefully with tax returns even if you are right.

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## UseByDate

> I dont have any issue paying my taxes, and that would include capital gains tax on the principal residence if it were part of the taxation system. [Three times now].

  Example situation.
 There are two houses next to each other and are priced at $100,000 each. You buy one of the houses. After 10 years the value of your house is $200,000. The other house is also now valued at $200,000. You sell your house for $200,000 and buy the one next door for $200,000. Now you have realised a capital gain but you have made no profit. You are in exactly the same situation as you were before the transaction. Same house (value) and same money in the bank.
 Should you have to pay CGT on the notional $100,000 capital gain you made?

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## Marc

> Example situation.
>  There are two houses next to each other and are priced at $100,000 each. You buy one of the houses. After 10 years the value of your house is $200,000. The other house is also now valued at $200,000. You sell your house for $200,000 and buy the one next door for $200,000. Now you have realised a capital gain but you have made no profit. You are in exactly the same situation as you were before the transaction. Same house (value) and same money in the bank.
>  Should you have to pay CGT on the notional $100,000 capital gain you made?

  That is a god way to demonstrate that the concept of profit or gain, can not be applied as a blanket rule. The house was not improved, no value was added, no real profit was made, nothing was gained, since everything else in the same market would be valued the same way and there is no way to make a real gain, but for the tax office. 
You sold one house and bought the same identical house, you are just as before and shouldn't need to pay a cent in capital gain since there was no gain.

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## DavoSyd

> Example situation.
>  ---
>  You are in exactly the same situation as you were before the transaction. Same house (value) and same money in the bank.

  you are not _really_ in exactly the same position; you stand to realise $200k profit on your next house sale (in your 'house prices double every 10 years' scenario).

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## DavoSyd

FYI - a recent UNSW eJournal article:  http://www.austlii.edu.au/au/journal...axR/2019/5.pdf

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## UseByDate

> you are not _really_ in exactly the same position; you stand to realise $200k profit on your next house sale (in your 'house prices double every 10 years' scenario).

  If you repeat the process in another ten years ie sell for $400k and buy for $400k you still do not profit from the transaction. :No:

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## DavoSyd

> If you repeat the process in another ten years ie sell for $400k and buy for $400k you still do not profit from the transaction.

  well, you might only profit when you leave that sort of business. 
unlike a goods and services enterprise, whereby you could profit whilst running the business...

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## DavoSyd

in your example string, 
you have choices: 
at juncture 1 - take your 200k (100k "profit") and leave, or reinvest the 200k and wait ten years
at juncture 2 - take your 400k (200k "profit" ) and leave, or reinvest the 400k and wait ten years 
at juncture 2 - take your 800k (400k "profit" ) and leave, or reinvest the 800k and wait ten years 
et cetera... 
see how you are in a slightly different position each time?

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## UseByDate

> well, you might only profit when you leave that sort of business. 
> unlike a goods and services enterprise, whereby you could profit whilst running the business...

  I can repeat my original example as many times as you like and I still won't make a profit. I still have the same house and the same money. My situation has not changed. My example works with appreciation or depreciation of property valuations. Owning a house to live in is not a business.

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## UseByDate

> in your example string, 
> you have choices: 
> at juncture 1 - take your 200k (100k "profit") and leave, or reinvest the 200k and wait ten years
> at juncture 2 - take your 400k (200k "profit" ) and leave, or reinvest the 400k and wait ten years 
> at juncture 2 - take your 800k (400k "profit" ) and leave, or reinvest the 800k and wait ten years 
> et cetera... 
> see how you are in a slightly different position each time?

  Surely at “juncture 2” if I leave with $400k I would make $300k not $200k. I started with $100k and now have $400k.
 What you are describing is a potential profit I could make, not an actual profit as with my initial example. I would hate to have a situation where the tax office taxes you on your potential profits and not your actual profits.
 Do you think that your principal residence should be subject to CGT and if so, when?

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## DavoSyd

yeah, sounds about right, you gotta pay tax on everything these days!

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## chrisp

So, if I buy some shares, and they go up in value, and I sell them for a nice profit, I shouldn’t have to pay tax on them because it’d cost me the same to buy them back again!   :Roflmao2:  
Good of luck with that argument!

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## Bigboboz

> Example situation.
>  There are two houses next to each other and are priced at $100,000 each. You buy one of the houses. After 10 years the value of your house is $200,000. The other house is also now valued at $200,000. You sell your house for $200,000 and buy the one next door for $200,000. Now you have realised a capital gain but you have made no profit. You are in exactly the same situation as you were before the transaction. Same house (value) and same money in the bank.
>  Should you have to pay CGT on the notional $100,000 capital gain you made?

  For an investment, it doesn't matter, do you now have more money than you had before? If yes that's a profit. If you have less, that's a loss. 
If there were two investment options that netted the same profit of $100k after 10 years but 1 was via income payments and the other capital gains but both pay $100k over and above the investment outlay, why should these two investment positions have different tax outcomes? The discount creates distortions in investment behaviour as the UNSW article below states.

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## Bigboboz

> Bob ... I believe that comment was done in haste by ... who was it again? ... without thinking. Tax is always proportional to the change in income and unless there is a fine, reducing one's income will produce a reduction in tax that is proportional, even in the case of a tax bracket change.

  I did get that but even with better numbers the logic doesn't hold.  More income will only improve the investment's returns, regardless of the tax outcome. We're in agreement.

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## r3nov8or

> ... why should these two investment positions have different tax outcomes? The discount creates distortions in investment behaviour as the UNSW article below states.

  And that's exactly what the discount set out to achieve! That is, more people investing in housing so the government doesn't need to (not nearly as much as it otherwise would).

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## DavoSyd

> And that's exactly what the discount set out to achieve!

  it was?   

> That is, more people investing in housing so the government doesn't need to (not nearly as much as it otherwise would).

  so the 50% CGT discount applies only to housing assets? not all CGT assets? 
i also thought housing supply was largely handled at the state level? not federal?

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## DavoSyd

> And that's exactly what the discount set out to achieve!

  an interesting aside in this piece:   

> It’s notable that two of the three members of the review that advised Howard on CGT changes were from the finance sector – John Ralph from the Commonwealth Bank and Bob Joss from Westpac. That’s the sector which has done so well, on paper at least, from the housing bubble. And all three members were managers or board members of large corporations – the stakeholders who, as I explained last week, have a vested interest in taxation arrangements favouring retention of earnings over payment of dividends. For these stakeholders corporate growth always trumps other objectives.

  https://johnmenadue.com/julian-cribb...right-in-1985/

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## UseByDate

> So, if I buy some shares, and they go up in value, and I sell them for a nice profit, I shouldn’t have to pay tax on them because it’d cost me the same to buy them back again!   
> Good of luck with that argument!

  Straw man argument.
 Shares are purchased as an investment. When you buy and sell you are resetting the purchase price for future CGT calculations, so of course tax is payable.
 Buying a home is not an investment. Most people prefer to live in a house and not on the street. To realise any profit you would have to make yourself homeless.
 You have stated before that you would be happy to pay CGT on your home. When would you prefer to pay it? On the sale of your home or on the potential capital gain each year?

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## UseByDate

> For an investment, it doesn't matter, do you now have more money than you had before? If yes that's a profit. If you have less, that's a loss. 
> If there were two investment options that netted the same profit of $100k after 10 years but 1 was via income payments and the other capital gains but both pay $100k over and above the investment outlay, why should these two investment positions have different tax outcomes? The discount creates distortions in investment behaviour as the UNSW article below states.

  With the multiple quoting, the context of my example has been lost. I was referring to your home (principal place of residence) not an investment property. If you have to pay CGT on your home when you move, the CGT could be substantial. Where are you going to get that money from?

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## DavoSyd

> Buying a home is not an investment.

  aren't homes exempt from CGT?

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## UseByDate

> aren't homes exempt from CGT?

  Yes, now they are, if you live in them for more than one year, but some people think they should be taxed.

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## DavoSyd

> With the multiple quoting, the context of my example has been lost. I was referring to your home (principal place of residence) not an investment property.

  no. you were *very* non-specific:   

> Example situation.
> There are two houses next to each other and are priced at $100,000 each. You buy one of the houses. After 10 years the value of your house is $200,000. The other house is also now valued at $200,000. You sell your house for $200,000 and buy the one next door for $200,000. Now you have realised a capital gain but you have made no profit. You are in exactly the same situation as you were before the transaction. Same house (value) and same money in the bank.
> Should you have to pay CGT on the notional $100,000 capital gain you made?

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## DavoSyd

> Yes, now they are, if you live in them for more than one year, but some people think they should be taxed.

   'some people'?  
like economists? or politicians?

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## UseByDate

> 'some people'?  
> like economists? or politicians?

  And Chrisp

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## chrisp

> Straw man argument.
>  Shares are purchased as an investment. When you buy and sell you are resetting the purchase price for future CGT calculations, so of course tax is payable.
>  Buying a home is not an investment. Most people prefer to live in a house and not on the street. To realise any profit you would have to make yourself homeless.
>  You have stated before that you would be happy to pay CGT on your home. When would you prefer to pay it? On sale of house or on the potential capital gain each year?

  
I don’t think that we are in disagreement! 
I made the post (unfortunately, without quoting other posts) and it was aimed at the argument that property investors should be exempt from CGT due to (a) the principal residence being exempt, and (b) that is would cost them the same to acquire a similar property after they’ve sold it. 
I do think that there is merit in the basics of life being exempt from tax (food, housing, health, etc.) whereas I do think that investments should be taxed as they are in effect income (although sometimes a sporadic income).

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## chrisp

> And Chrisp

  
NO! You are misrepresenting my views.

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## DavoSyd

> And Chrisp

  oh OK, right! 
so it's a personal discussion between you and chrisp?   :Rolleyes:  
gotcha, i will cease and desist.

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## UseByDate

> no. you were *very* non-specific:

  When I set out my example I also included Chrisp's quote where he was referring to paying CGT on your home. I should have made it clearer in my example that I was referring to homes for those unable to understand context.

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## r3nov8or

> so the 50% CGT discount applies only to housing assets? not all CGT assets?

  No, but "mums and dads" generally feel that rental property is a safer long term investment than other types. (It's a common perception, and not worthy of detailed debate)   

> i also thought housing supply was largely handled at the state level? not federal?

  Federal gov't "hands back" tax revenue for all sorts of uses. Never fairly for us poor VICs  :Smilie:

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## johnc

> Yes, now they are, if you live in them for more than one year, but some people think they should be taxed.

  Your residence is not taxed, period, what has twelve months got to do with it. The twelve month period only applies to indexation or 50% discount on capital gains on investment assets.

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## DavoSyd

> (It's a common perception, and not worthy of detailed debate)

  what* is* debatable is the perception (i.e. your actual comment) that CGT discount was introduced to improve housing stocks.   

> And that's exactly what the discount set out to achieve! That is, more people investing in housing so the government doesn't need to (not nearly as much as it otherwise would).

  well, infact:   

> Howard's tax adviser John Ralph said the [CGT] cut would "encourage a greater level of investment, particularly in innovative, high-growth companies". Instead, investors dived into real estate.

  and thus   

> Before the change, houses cost 2½ to three times household disposable income. Afterwards, they cost four times disposable income.

  https://www.smh.com.au/opinion/capit...16-gmvict.html 
whoopsie!

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## UseByDate

> Your residence is not taxed, period, what has twelve months got to do with it. The twelve month period only applies to indexation or 50% discount on capital gains on investment assets.

  Tax is not as simple as that. https://www.ato.gov.au/General/Capit...ain-residence/  _"use your home to produce income (such as renting it out, running a home business or flipping your home) – you don't get the full main residence exemption and may need to know your home's market value at the time you first used it to produce income “_ 
 If you “flip your home” ie buy and sell for a profit in a short period of time you don't qualify for full exemption. The ATO does not specify what a short period of time is (to my knowledge) and it also includes other variables. As a “rule of thumb” if you live in the house for one year (does not guarantee exemption) you will  probably not be deemed to have “flipped” it. 
 I am not up to date with current tax law, and probably never was, so a lot of my knowledge may be out of date. It would be prudent to check with the ATO if you intend to “flip” your home.

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## toooldforthis

FWIW
There wasnt much difference between the *original* method of calculating CGT and the 50% discount one (at least in the instances I was familiar with):
 I think my dates are right?
CGT was introduced 1985.
Originally the tax payable was discounted for CPI.  Also since the CG was to be taxed in one FY but the gains were over the life of the investment there was a formula applied to reflect this. In 1999 these adjustments were replaced by the 50% discount on CG to calculate tax payable.
At the time my ex and I were selling and I remember doing the calcs and if we waited to sell under *the new 50% CGT regime the tax payable was the ~same as if we sold under the existing CGT rules*, so there was no(tax) point in delaying the sale listing.  _Thats not to say, of course,going forward after 2000 when CG on property really started to kick in the calculations for both calcs would still be similar - hig property capital gains and low CPI. Dunno. Someone smarter and with more time than me could research the formulas and plug all the variables into a spreadsheet_ __  But for some to to blindly assert that CGT getsa 50% cut compared to previous is misleading. *furthermore*: The new discount method wasn't introduced to kickstart property investment (it applied to all CG) - in fact it was called a _discount_ by the treasurer as a political sell, knowing full well that in some cases the tax payable would be higher under the new method. The real reasons property investment took off was the dereg of the banks and them turning on the credit taps - prices rose in accordance with available credit. Another significant reason (denied for years) was all the foreign capital coming into the residential market.

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## chrisp

> It is not as simple as that. https://www.ato.gov.au/General/Capit...ain-residence/ 
>  If you “flip your home” ie buy and sell for a profit in a short period of time you don't qualify for exemption. The ATO does not specify what a short period of time is (to my knowledge) and it also includes other variables. As a “rule of thumb” if you live in the house for one year (does not guarantee exemption) you will  probably not be deemed to have “flipped” it. 
>  I am not up to date with current tax law, and probably never was, so a lot of my knowledge may be out of date. It would be prudent to check with the ATO if you intend to “flip” your home.

  I don’t think that it is a ‘time’ thing, but rather an ‘intention’ thing that decides whether it is exempt or not. See the example at https://www.ato.gov.au/General/Prope...ng-properties/ 
It’s probably a grey area for the ATO to police.

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## UseByDate

> I don’t think that it is a ‘time’ thing, but rather an ‘intention’ thing that decides whether it is exempt or not. See the example at https://www.ato.gov.au/General/Prope...ng-properties/ 
> It’s probably a grey area of the ATO to police.

  I agree that it is complicated but you are subject to a ruling by the tax office. It is very difficult, if not impossible, to determine intent. The ATO would use many factors to *rule on intent* and two that come to mind would be occupancy time and past history of the tax payer.
House “flipping” may not involve any renovation at all. Buy cheap and sell expensive in a short period of time. 
The example of Fred and Sally is, in my mind, silly. How would the ATO obtain the information stated?   *"Example: Renovation as a profit-making activity*
 Fred and Sally are married with two children. They renovated their  home, substantially increasing its value. After watching many of the  home improvement shows and seeing how other people have bought,  renovated and sold properties for a significant profit, they decide to  investigate the purchase of another property to renovate and make a  profit.
 They consider many properties, costing out the renovations, the costs  of buying and selling and timeframes to complete the renovations. Their  research shows that they could also make a significant profit.
 Fred and Sally sell their current home and purchase a new property,  which they move into while completing the renovations. They plan out the  renovation in stages, including the costs and any contractors needed to  complete the work. The renovation runs to schedule and, when completed,  they list the property for sale and it sells for a profit.
 Because the property renovation activities were planned, organised  and carried on in a business-like manner, the purpose of buying the  property was to renovate it and make a profit, and the renovations were  carried on in a similar manner to other property renovation businesses,  Fred and Sally have entered into a one-off profit-making activity."

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## r3nov8or

> and thus      _Before the change, houses cost 2½ to three times household disposable income. Afterwards, they cost four times disposable income._     https://www.smh.com.au/opinion/capit...16-gmvict.html 
> whoopsie!

  All the better for those who invest. Over the decades it has mattered very little which mainstream investment path one chooses. The key is to choose one (or more) and do it. Those that don't, complain.

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## DavoSyd

> All the better for those who invest. Over the decades it has mattered very little which mainstream investment path one chooses. The key is to choose one (or more) and do it. Those that don't, complain.

  i.e.    

> if youre having a go youll get a go

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## UseByDate

> oh OK, right! 
> so it's a personal discussion between you and chrisp?   
> gotcha, i will cease and desist.

  No it is not. 
  If anyone has anything to contribute to the discussion all are at liberty to do so.

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## UseByDate

> Bedford,   *If capital gains tax on the principal residence was part of a fair and equitable taxation system, I’d happily pay it.* 
> My beef with negative gearing _and_ capital gains tax is that I, and other tax payers, (call them ‘hard working Australians’) are propping up and subsidising property speculation. This is inequitable. 
> I have no issue with any investment that anyone’s wishes to partake in, just as long as they use their own funds/money/borrowings and leave the Australia’s hard working tax payers out of it. If it is such a good investment, they they don’t - and shouldn’t - need the general tax payer to subsidising them.  
> Now see see if you can get a straight answer out of Marc - I challenge you!

   

> NO! You are misrepresenting my views.

  It is difficult to understand your views with regard to CGT on principal residences. I stated that I believed you to be in favour of the tax. 
 The taxation system is always fair and equitable by definition (cough). More seriously, you have stated that you would be happy to pay CGT on your principal residence if the taxation system was fair and equitable. If you are in favour of a fair and equitable tax system, and I presume you are, then it follows that you would be happy to pay CGT on your principal residence and therefore be in favour of it.

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## chrisp

> Yes, now they are, if you live in them for more than one year, but some people think they should be taxed.

   

> 'some people'?  
> like economists? or politicians?

   

> And Chrisp

   

> It is difficult to understand your views with regard to CGT on principal residences. I stated that I believed you to be in favour of the tax. 
>  The taxation system is always fair and equitable by definition (cough). More seriously, you have stated that you would be happy to pay CGT on your principal residence if the taxation system was fair and equitable. If you are in favour of a fair and equitable tax system, and I presume you are, then it follows that you would be happy to pay CGT on your principal residence and therefore be in favour of it.

  Another member (for some reason) seemed to be fixated on where or not I would support a CGT on the principal residence. I replied multiple times that *if* it where part of a fair and equitable taxation system, then I would be happy to pay it. It’s a big-if as I wouldn’t support it in isolation of other changes in the tax system. 
I wasn’t advocating for a CGT on the principal residence at all, just replying to another member. 
I hardly think that the taxation system is ‘always fair and equitable by definition’, which is probably why the negative-gearers are so defensive about their tax perks!   :Smilie:

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## Marc

> All the better for those who invest. Over the decades it has mattered very little which mainstream investment path one chooses. The key is to choose one (or more) and do it. Those that don't, complain.

  Agreed. Those that pretend to ride the big white horse of morality, complaining about "speculators" have a) no real understanding of the rules of the game b) no inclination, stamina or guts to do anything themselves, c) will always brush with tar anyone that makes more money than them ... and that is most likely a large section of the population.  
The main failure of the CGT is that the difference between purchase and sale is considered income as if such income was produced the day of the sale, when in fact it is a passive increase in price due to inflation and increased demand over 10/20/30 or 40 years yet it still is whacked on top on any other income and not only crammed all into one tax return, but treated as income and falls within the crass inequity of the "progressive" system by which the higher income earner pays more tax than the lower income earner, not only in amount but in percentage, for the exact same profit on an identical house, only because "he can afford it".
CGT to be equitable, should apply on the yearly increments of the value of a property, and such tax should be calculated for each year at the marginal tax rate paid historically and not all in one go, pushing the investor into several tax brackets above his normal rate of tax. 
Another solution is to charge a flat rate of tax on what is wrongly deemed to be "profit"  
A CGT on principal home would cripple most one property owners who will never be able to move. 
The only true fair and equitable tax is one flat rate of tax for anyone on any income from $1000 to $1000,000,000
And no "claims" of any description.
Would save me a bundle in accountant fees.

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## DavoSyd

> which is probably why the negative-gearers are so defensive about their tax perks!

  but can you imagine the rancor if BS had become PM? 
it would have been electric! :eek:

----------


## Bigboboz

> With the multiple quoting, the context of my example has been lost. I was referring to your home (principal place of residence) not an investment property. If you have to pay CGT on your home when you move, the CGT could be substantial. Where are you going to get that money from?

  News to me that anyone thinks your home should be taxed for capital gains (this thread or elsewhere).  Your home doesn't attract CGT, so discount or no discount is irrellevant.

----------


## Bigboboz

> what* is* debatable is the perception (i.e. your actual comment) that CGT discount was introduced to improve housing stocks.  Howard's tax  adviser John Ralph said the [CGT] cut would "encourage a greater level  of investment, particularly in innovative, high-growth companies".  Instead, investors dived into real estate.

  Correct. Discount should apply to 'new' investments not existing 'stock', tricky to define perfectly but that's the concept where it makes sense.

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## Bigboboz

> Another member (for some reason) seemed to be fixated on where or not I would support a CGT on the principal residence. I replied multiple times that *if* it where part of a fair and equitable taxation system, then I would be happy to pay it. It’s a big-if as I wouldn’t support it in isolation of other changes in the tax system.

  I am against CGT on principal residences regardless of other taxation changes as it would disentivise people to move to where the work is (for that person).  Stamp duty does this currently and creates terrible outcomes of people either turning down or not going after jobs because of the location, or alternatively end up travelling long distances. 
Stamp duty is roughly 5% of the property's value, realtor an other fees/costs another 2%+ again of the property value, not your equity means you're almost wiped out if you only have 10-20% equity. Either way it's a tonne of cash and acts as a distortion to people's behaviour when looking for work.

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## Bigboboz

> All the better for those who invest. Over the decades it has mattered very little which mainstream investment path one chooses. The key is to choose one (or more) and do it. Those that don't, complain.

  Hmmm your point doesn't argue whether the CGT discount should be there or not.  The discount creates an unhealthy economic and taxation distortion.  Agree people should invest more and do rather than whinge.

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## Bigboboz

> The main failure of the CGT is that the difference between purchase and sale is considered income

  Do you now have more money than you did before?  Plenty of people trade equities not for the dividends but to buy low sell high. They're doing it for a return, ie income. Same %$# different method.   

> as if such income was produced the day of the sale, when in fact it is a passive increase in price due to inflation and increased demand

  Why does it matter how the wealth increase arose? From an investment perspective which comes back to currency not if you have the same number of houses or not, profit was made.  Profits get taxed. If the investment is sold for a loss, it can be used to offset other profit.   
With regard to paying it only on sale, that's the only really workable option as anything other than this time is a paper profit, plus this is the only time cashflow is available to meet the tax payment.   
No one likes paying taxes but they are necessary for a working society.  What they shoudl be is minimised in total which is why small government is the best government but it's not what we get from either mob that takes their turn.  Impart becasue in each election cycle they pump out the vote buying payments...elections are expensive and I'm not talking about the direct costs of holding one!

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## r3nov8or

> Correct. Discount should apply to 'new' investments not existing 'stock', tricky to define perfectly but that's the concept where it makes sense.

  New properties as rental investments already get the "special building write-off" in addition to everything else existing property investors can claim (it also applies to capital works to extend existing). There is enough incentive to build new for rental purposes. Maybe BS missed this one...

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## DavoSyd

> New properties as rental investments already get the "special building write-off" in addition to everything else existing property investors can claim (it also applies to capital works to extend existing). There is enough incentive to build new for rental purposes. Maybe BS missed this one...

  yet 90% of domestic investors don't buy new stock?    https://www.macrobusiness.com.au/201...gearing-liars/

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## r3nov8or

> yet 90% of domestic investors don't buy new stock?    https://www.macrobusiness.com.au/201...gearing-liars/

  Lies, damned lies and statistics. (Because most houses are already built  :Smilie:  ) 
I wonder how many buy less than two years old, rather than experience the lag until the new property achieves occupation...

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## DavoSyd

> I wonder how many buy less than two years old, rather than experience the lag until the new property achieves occupation...

  I dunno?  
maybe the latest Housing Industry Association Performance of Construction Index (PCI) report could provide you with some insight?

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## UseByDate

> Your home doesn't attract CGT, so discount or no discount is irrellevant.

  That is news to me. My home (principal residence) *is* subject to CGT.
 There seems to be a general impression that your home is exempt from CGT but while that may be true for the majority of homes it is not true for all homes. Discount or no discount is relevant.

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## r3nov8or

> That is news to me. My home (principal residence) *is* subject to CGT.
>  ...

  Very interested in how this happened. Part-use as rental property at some stage? I'm guessing...

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## Marc

From "The overwhelming case against Capital Gain Tax" https://www.forbes.com/sites/danielm.../#6915debd3b0a  It turns out that there are many reasons why the capital gains tax harms economic performance. Clemens, Lammam and Lo explain the "lock-in effect."  Capital gains are taxed on a realization basis. This means that the tax is only imposed when an investor opts to withdraw his or her investment from the market and realize the capital gain. One of the most significant economic effects is the incentive this creates for owners of capital to retain their current investments even if more profitable and productive opportunities are available. Economists refer to this result as the "lock-in" effect. 
Capital that is locked into suboptimal investments and not reallocated to more profitable opportunities hinders economic output. ...Peter Kugler and Carlos Lenz (2001)...examined the experience of regional governments ("cantons") in Switzerland that eliminated their capital gains taxes.  
The authors’ statistical analysis showed that the elimination of capital gains taxes had a positive and economically significant effect on the long-term level of real income in seven of the eight cantons studied. Specifically, the increase in the long-term level of real income ranged between 1.1 percent and 3.0 percent, meaning that the size of the economy was 1 percent to 3 percent larger due to the elimination of capital gains taxes.
Then the authors analyze the impact of capital gains taxes on the "user cost" of capital investment.Capital gains taxes make capital investments more expensive and therefore less investment occurs. ...Several studies have investigated the link between the supply and cost of venture capital financing and capital gains taxation, and found theoretical and empirical evidence suggesting a direct causality between a lower tax rate and a greater supply of venture capital. ...Kevin Milligan, Jack Mintz, and Thomas Wilson (1999) sought to estimate the sensitivity of investment to changes in the user cost of capital...and found that decreasing capital gains taxes by 4.0 percentage points leads to a 1.0 to 2.0 percent increase in investment.
Next, they investigate the impact on entrepreneurship.Capital gains taxes reduce the return that entrepreneurs and investors receive from the sale of a business. This diminishes the reward for entrepreneurial risk-taking and reduces the number of entrepreneurs and the investors that support them. The result is lower levels of economic growth and job creation. ...Analysing the stock of venture capital and tax rates on capital gains from 1972 to 1994, Gompers and Lerner found that a one percentage point increase in the rate of the capital gains tax was associated with a 3.8 percent reduction in venture capital funding.
Last but not least, the authors also discuss the impact of capital gains taxation on compliance costs, administrative costs, and tax avoidance. They also look at the marginal efficiency cost of capital gains taxation and report on some of the research in that area.Dale Jorgensen and Kun-Young Yun (1991)...estimate the marginal efficiency costs of select US taxes and find that capital-based taxes (such as capital gains taxes) impose a marginal cost of $0.92 for one additional dollar of revenue compared to $0.26 for consumption taxes. ...Baylor and Beausejour find that a $1 decrease in personal income taxes on capital (such as capital gains, dividends, and interest income) increases society’s well-being by $1.30; by comparison, a similar decrease in consumption taxes only produces a $0.10 benefit. ...the Quebec government’s Ministry of Finance...found that a reduction in capital gains taxes yields more economic benefits than a reduction in other types of taxes such as sales taxes. Reducing the capital gains tax by $1 would yield a $1.21 increase in the GDP.
Here's my video on the topic, which explains that the right capital gains tax rate is zero. https://youtu.be/_yXINN1tD54

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## DavoSyd

> My home (principal residence) *is* subject to CGT.

  the truth will out.  
I was wondering why you were pushing such a strange barrow.

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## Bigboboz

> That is news to me. My home (principal residence) *is* subject to CGT.
>  There seems to be a general impression that your home is exempt from CGT but while that may be true for the majority of homes it is not true for all homes. Discount or no discount is relevant.

  Mine haven't been, what are you doing differently? Some form of income aspect?

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## Bigboboz

> From "The overwhelming case against Capital Gain Tax" https://www.forbes.com/sites/danielm.../#6915debd3b0a

  Ahhh tax impacts all economic activity. The arguments apply to more than just CG. This is why taxes need to be minimised in total.

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## UseByDate

> the truth will out.  
> I was wondering why you were pushing such a strange barrow.

  That's weird. You seem to have an unusual fetish about my barrow. Come on,  fess up, have you been peeking at my barrow in secret?  :Blush7:

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## UseByDate

> Very interested in how this happened. Part-use as rental property at some stage? I'm guessing...

   

> Mine haven't been, what are you doing differently? Some form of income aspect?

    I have lived in my home and it has been my principal residence from new.
 I have not lived in any other home or claimed any other home as my principal residence since acquiring my present home.
 It has not been used to produce income. Eg it has not been rented to other people or companies or been used to run a business.
 I have owned no other real estate while living in my present home. 
Tax law is complicated and it is best not to generalise your own personal experiences to the general population at large.

----------


## johnc

> Tax is not as simple as that. https://www.ato.gov.au/General/Capit...ain-residence/  _"use your home to produce income (such as renting it out, running a home business or flipping your home) – you don't get the full main residence exemption and may need to know your home's market value at the time you first used it to produce income “_ 
>  If you “flip your home” ie buy and sell for a profit in a short period of time you don't qualify for full exemption. The ATO does not specify what a short period of time is (to my knowledge) and it also includes other variables. As a “rule of thumb” if you live in the house for one year (does not guarantee exemption) you will  probably not be deemed to have “flipped” it. 
>  I am not up to date with current tax law, and probably never was, so a lot of my knowledge may be out of date. It would be prudent to check with the ATO if you intend to “flip” your home.

  Well I am up to date, you are straying into exceptions, when the home is not a primary residence but begins to become something else. There is plenty of case law and some interesting interpretations of transactions on the fringe. it is not something suitable for here or discussed in a general way. However what I said is correct your main residence is capital gains tax free period. What you are pointing out is homes that you may well live in but are also using for other purposes. You need to keep things simple when dealing in generalisations as we do on these chat sites.

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## Cecile

> Serial renovators don't have to pay CGT on the profit when they sell but the the ATO does set limits on either how long you have to live in the property or the number of renovations you can do in a certain period of time (I can't remember which) to qualify for exemption.

  CGT isn't one of my main tax topics any more but there are indicators of when you're an investor and subject to CGT, and when you're a property developer (ie, in business.)  Serial renovators MAY be classified as being in business, in which case their projects may be considered "trading stock."  Totally different methods of claiming deductions, GST registration may be required.  Even a single development could be considered an isolated transaction and subject to GST registration and other "am I in business" rules.  Trust me when I say that a lot of people get this wrong, and end up audited and subject to very large fines and penalties.  Claiming "I didn't know" is not a valid excuse. 
Main residence CGT exemption can only apply to a single property at a time, and there are certain criteria that you have to meet. 
In all honesty, it's a very complex topic and best left to the experts.

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## toooldforthis

> CGT isn't one of my main tax topics any more but there are indicators of when you're an investor and subject to CGT, and when you're a property developer (ie, in business.)  Serial renovators MAY be classified as being in business, in which case their projects may be considered "trading stock."  Totally different methods of claiming deductions, GST registration may be required.  Even a single development could be considered an isolated transaction and subject to GST registration and other "am I in business" rules.  Trust me when I say that a lot of people get this wrong, and end up audited and subject to very large fines and penalties.  Claiming "I didn't know" is not a valid excuse. 
> Main residence CGT exemption can only apply to a single property at a time, and there are certain criteria that you have to meet. 
> In all honesty, it's a very complex topic and best left to the experts.

  correct.
ALL the serial renovators I have met here in Perth have all set up companies for the purpose. Purely for tax reasons and controlling profits. They soon realised that the CGT exemption for PPOR isn't worth it when doing renos as a business. Also, opportunity cost - with a company they can buy/sell when profit taking suits and hold multiple properties.
I am not talking about people who buy/sell every few years.

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## pharmaboy2

> FWIW  *furthermore*: The new discount method wasn't introduced to kickstart property investment (it applied to all CG) - in fact it was called a _discount_ by the treasurer as a political sell, knowing full well that in some cases the tax payable would be higher under the new method. The real reasons property investment took off was the dereg of the banks and them turning on the credit taps - prices rose in accordance with available credit. Another significant reason (denied for years) was all the foreign capital coming into the residential market.

  Wow, very much on the money TOFT.  There’s one thing to add though, and that’s that interest rates were on the way down at the time and there’s a new reality of 4 and 5% interest rates where it was 10 or 11% at the time. 
Also, Australians don’t value houses as a multiple of their income, they value buying a house in the same way as rent, ie as a monthly payment.  When you look at housing costs related as a percentage of household net income in a monthly payment, you can see why the doom and gloom predictions of housing crashes for the last 2 decades haven’t come to fruition

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## r3nov8or

> ... Australians don’t value houses as a multiple of their income, they value buying a house in the same way as rent, ie as a monthly payment.  ...

  There's been a couple of mentions of "generalisations". This one is "next level"  :Smilie:

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## Marc

> ......I do think that there is merit in the basics of life being exempt from tax (food, housing, health, etc.) whereas I do think that investments should be taxed as they are in effect income (although sometimes a sporadic income).

  We have gone from one lefties bugbear, subtracting expenses from profits, aka "negative gearing" to another boogyman, the capital gain tax discount, (how dare they give a tax discount to the capitalist bourgeois pigs? ).
You post confirms what transpires all along from the left of politics.  
They believe tax to be the instrument by which the state punishes the (pig) wealthy and confiscate his (ill-gotten) gains in any way possible. The "basics of life" whatever they are, must be free of tax, everything else (that I don't care about because I don't have it) must be heavily taxed. I remember Paul Keating that drives a pitiful 200 kg car, saying that 4wd should be "taxed off the road". It is all about coercing others to conform with one's own ideas. 
Without the chance to make a good profit, the investor goes somewhere else, and so go the taxes that pay for the left little perks. 
Investing is a gamble that brings losses and profits. It is not sitting on a chair for 30 years and hope for a decent super. It is taking risk, gamble, lose, and eventually, may be, with good winds, also win. If that win is not worth the risk taken, the business is a dud.  
The left looks with envy only to the profit made and in their ignorance think only in appropriation of some of the gains, without considering what it takes to get there. And don't even mention that perhaps they too should be taxed, for example with a flat rate of tax. 
There is nothing new in this approach to life, yet it is rare when such sentiment become so blatantly obvious.

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## Bedford

> Hi all, 
>       Ive been looking at the performance of my PV system since it has       now been installed and operating for a bit over a year. I thought       that Id look over an one year interval to see how it is going.

  Did you receive a subsidy/rebate from   

> other tax payers, (call them hard working Australians)

   when installing this system?   

> So, over the year, I paid $1137.53 for the electricity that I       imported, and I received $729.61 for the energy that was exported.       This resulted in a net electricity bill of $407.92.

  Have you, or will you add this $729.61 to your income for income tax purposes?

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## johnc

> Did you receive a subsidy/rebate from  
>  when installing this system?   
> Have you, or will you add this $729.61 to your income for income tax purposes?

  Hate to rain on your parade here Bedford, gain on power bills on a domestic PV system are not statutory income it is not to be declared. Plenty of ATO rulings just a google away if you look. While this is obviously just a dig, lets not whip up any angst amongst the great unwashed.

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## Marc

John ... highlighting an obvious inequality to make a point, and I hope it does whip up angst among the great unwashed. 
Rebate to prise the good citizen that allows the taxpayer to pay for his solar panels, (that exist only because the collective idiocy of "CO2 is pollution") and chastise the entrepreneur who takes a risk to prosper. 
From time to time it is good to remember humanity's incommensurable stupidity.

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## Bedford

> Hate to rain on your parade here Bedford, gain on power bills on a domestic PV system are not statutory income it is not to be declared. Plenty of ATO rulings just a google away if you look. While this is obviously just a dig, lets not whip up any angst amongst the great unwashed.

  Thanks for part answering for Chris. 
Yes I am well aware of the rulings and thank you for confirming that Chris makes a tax free gain on this. 
Could you also confirm if the "great unwashed" assisted the purchase with subsidies or rebates? 
Like you'd have to be pretty stupid to fund it yourself if the  

> hard working Australians

   would donate towards it.

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## DavoSyd

> gain on power bills on a domestic PV system are not statutory income it is not to be declared.

  it is also argued that PV subsidies have wider social & economic benefits accruing - not only to individual owners but to the energy system and consumers more broadly. 
but PV investors are not being outright 'speculative' profit seekers - they are investing with other motives.

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## chrisp

I see that the elephant-in-the-room is becoming apparent.  
I did deliberately use the expression ‘hard working Australians’ that politicians are so fond of parroting. The expression has become a sort of motherhood statement for politicians as a justification for tax perks and helping the ‘hard working Australians’ to ‘get ahead’ in life. 
Fascinatingly, just about everyone would consider themselves to the ‘hard working’ - and I do agree that on the whole that they would be correct (and I suppose that why it is sort of a motherhood statement!). However, ‘hard working’ has somehow become synonymous for ‘success’ (or read it as ‘wealth’ if you prefer) and has a connotation that the ‘unsuccessful’ are not hard working. This is a false dichotomy as there are people who are indeed hard working but aren’t successful, as there are people who don’t work hard but are successful. 
So, back to that elephant...   

> *To summarise, the 10-year investment has cost Jill 10 x $9,450 = $94,500. The gain is $441,786 (= $517,786 - $76,000) after tax. A net gain/profit after-tax and costs of $347,286.* 
> If the 50% capital gains tax discount didn’t exist, Jill’s income for the year would have been $655,462 (= $76,000 + 579,462) and she would pay $268,055 in tax (plus MC levy, etc,). A take home income of $387,407. After deducting the costs over ten years, this corresponds to a net gain/profit (after tax) of $216,907.

  What ‘hard work’ did Jill do to earn her extra $350,000? What work did she do that contributed to her extra wealth. The pragmatic answer is that it is just how the system works, good luck to her, and anyone can participate if they wish. 
But the real question is - why does she need a tax-payer subsidy?

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## johnc

> Thanks for part answering for Chris. 
> Yes I am well aware of the rulings and thank you for confirming that Chris makes a tax free gain on this. 
> Could you also confirm if the "great unwashed" assisted the purchase with subsidies or rebates? 
> Like you'd have to be pretty stupid to fund it yourself if the would donate towards it.

  Absolutely, and so they should, of course. 
Actually that is going to be the next hurdle, as solar pv gets greater penetration the burden of high power prices will eventually fall on those who can least afford it as well as those is social housing in particular and renters in general. There are some tentative steps to make changes in this area but nowhere near enough is being done for that group. The panels have really got to the point where you could remove subsidies and restrict government rebates to those on low incomes with interest free loans they can pay back out of the savings. Again there are some efforts there but not everyone can access them.

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## r3nov8or

> Absolutely, and so they should, of course. 
> Actually that is going to be the next hurdle, as solar pv gets greater penetration the burden of high power prices will eventually fall on those who can least afford it as well as those is social housing in particular and renters in general. There are some tentative steps to make changes in this area but nowhere near enough is being done for that group. The panels have really *got to the point where you could remove subsidies and restrict government rebates to those on low incomes with interest free loans they can pay back out of the savings.* Again there are some efforts there but not everyone can access them.

  But they are usually renting. So more tax breaks needed for the landlord to provide solar PV on their investments!  :Wink:  
And also incentives to not charge more rent based on the power bill savings renters will 'enjoy'.  :Wink:   :Wink:

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## Marc

> .... Fascinatingly, just about everyone would consider themselves to the ‘hard working’ - and I do agree that on the whole that they would be correct (and I suppose that why it is sort of a motherhood statement!). However, ‘hard working’ has somehow become synonymous for ‘success’ (or read it as ‘wealth’ if you prefer) and has a connotation that the ‘unsuccessful’ are not hard working. This is a false dichotomy as there are people who are indeed hard working but aren’t successful, as there are people who don’t work hard but are successful. 
> So, back to that elephant... 
> What ‘hard work’ did Jill do to earn her extra $350,000? What work did she do that contributed to her extra wealth. The pragmatic answer is that it is just how the system works, good luck to her, and anyone can participate if they wish. 
> But the real question is - why does she need a tax-payer subsidy?

  Chris ... you will need to define "hard work" and understand that hard work does not lead to success. Most likely the opposite is true. Hard work as in long hours at a menial or high stress job, only isolates the person from opportunities and the bigger picture, that is required to be seen in order to establish a successful strategy.  
Politicians love to talk about hard work and prise the hard worker because that is what the hard worker likes to hear, and rightly so. 
The cost of hard work (generalisation only mind you) is, as i said before, isolation from essential information, and the development of an "us and them" mentality that further alienates the hard worker in question.   
Economic success requires access to large chunks of time, to perform mostly unpaid work in order to get the business started, access to capital or good credit and much more. It is this enormous opportunity cost that has to be counterbalanced by a larger than average chance of returns ... and the reason all intelligent government, not weighted down by marxist ideas of populism,  encourage and facilitate all the functions required for business to prosper.
Prosperous business pay taxes and allow government photo opportunities, pretending it is their money they "give" to those they believe worthy of "their" largess.  
What you are missing with your late rhetorical question, is that negative gearing is not a subsidy but a tax principle, not to tax the cost of producing profits. 
The tax reduction after one year of tenure, has a dual purpose. To reduce the time between purchase and sale, rooting out quick flips, and also stimulate the interest for investors, that need large profits to offset large risk and the very large personal cost of doing business.  
Only someone alien to what requires to be successful in business can look at someone who holds a property for 20 years and make some money with envy. 100% or 200% in 20 years is in fact a joke in any real business situation and only attracts the amateur.
Many would be horrified at the realisation that 1000% plus is the norm for many business in terms of one or two years. 
Is this "wrong"? Certainly in many people's mind it is, as I have found out over decades of running personal development courses. 
For many years i have told folks that every person has a number floating above their head, representing what that person thinks it is "right" to earn. That figure is astonishingly small, and surprisingly easy to find out. 
Even more surprising is to find how hard it is to tell people that it is their handicapped aspirations that hold them back. 
The biggest argument people use to defend their ideas about theirs and other people's earnings ... mostly other peoples, is that the other's apparent excess earnings is immoral, or realised at the expense of themselves and other equally "exploited" people.  
What follows is of course that there is a background noise of "tax the bastards" and some out of tune and ignorant government, due register that noise and act accordingly killing the golden egg goose. 
Bottom line, all business need stimulus in different forms. Make he business flat and dull and profits dry out, not enough tax so others need to pay more.
Catch 22. The idea that the pie is limited, you know the say, only so much to go around, is false. The pie is in fact infinitely large because it depends from you and me and we can make it as big as we want ... and the government allows ... and if here is no good, there is always somewhere else.  :Smilie:

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## Bedford

> So, back to that elephant...       Originally Posted by *chrisp*    *To  summarise, the 10-year investment has cost Jill 10 x $9,450 = $94,500.  The gain is $441,786 (= $517,786 - $76,000) after tax. A net gain/profit  after-tax and costs of $347,286.*    If the 50% capital gains tax discount didnt exist, Jills income for  the year would have been $655,462 (= $76,000 + 579,462) and she would  pay $268,055 in tax (plus MC levy, etc,). A take home income of  $387,407. After deducting the costs over ten years, this corresponds to a  net gain/profit (after tax) of $216,907.  
> What hard work did Jill do to earn her extra $350,000? What work did she do that contributed to her extra wealth. .

  Maybe she did the maintenance on it , or?   

> But the real question is - why does she need a tax-payer subsidy?

  Maybe she doesn't, did you need a subsidy for solar panels? 
There is no elephant in the room, it just looks that way to you as you don't know what you're talking about. 
Chris I tried to help you understand what you're banging on about when you first posted the quote above, but you chose to ignore me. 
You have put together a few numbers to suit your own agenda and left 90% out. 
Considering just how many property investors are on this forum, I think what you're stating is just making you look silly to a whole lot of people.

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## UseByDate

> CGT isn't one of my main tax topics any more but there are indicators of when you're an investor and subject to CGT, and when you're a property developer (ie, in business.)  Serial renovators MAY be classified as being in business, in which case their projects may be considered "trading stock."  Totally different methods of claiming deductions, GST registration may be required.  Even a single development could be considered an isolated transaction and subject to GST registration and other "am I in business" rules.  Trust me when I say that a lot of people get this wrong, and end up audited and subject to very large fines and penalties.  Claiming "I didn't know" is not a valid excuse.  Main residence CGT exemption can only apply to a single property at a time, and there are certain criteria that you have to meet. 
> In all honesty, it's a very complex topic and best left to the experts.

  Main residence CGT exemption can apply to two properties at a time for a period of up to six months.   https://www.ato.gov.au/general/capit...ain-residence/ *Moving to another main residence* If you acquire a new home before you dispose of your old one, both dwellings are treated as your main residence for up to six months if:  you lived in your old home and it 	was your main residence for a continuous period of at least three 	months in the 12 months before you disposed of it  	you did not use it to produce 	assessable income (such as rent) in any part of that 12 months 	when it was not your main residence  	the new dwelling becomes your main residence.  	
 So if you sell your old home within six months of acquiring the new one, both dwellings are exempt for the whole period between when you acquire the new one and dispose of the old one.

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