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State Government

Scoop

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Dec 8, 2004
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Foreign property investors should be wearing the brunt of these increases not local mum and dad investors.
 
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BT Tiger

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Jun 5, 2005
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Philosophically BT. Thoughts on maintaining a negative gearing regime for new builds? Not an axe to grind from me, as I'm not an investment property owner. More just from a philisophical perspective as to whether there would be merit to confine such a tax regime in ways to encourage extra supply.

If we could guarantee that it would increase supply then I suppose that would be acceptable.

But I think the best solution would be to limit negative gearing to a single investment property and not allow investors to keep sweeping up properties and receiving tax breaks for doing so, while simultaneously reaping the reward of those properties continually rising in value.
 
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tigersnake

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Sep 10, 2003
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The State RE Institutes are a disgrace. Spivs. Carpet Baggers. Anytime the stick their 2 bobs in its only concerned with house prices rising and maximising RE investor profits. They have zero regard for the economy, actually a lot of their advice would be extremely damaging to the economy if it was heeded.

House prices have gone up 20-30% over the last 4 years, even factoring in the correction. So any investor, to be conservative, with a property worth 600K has benefitted to the tune of $120-$200K. Sorry if my heart doesn't bleed if you have to pay another grand in tax. Disclaimer, I am a landlord.
 
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Panthera Tigris

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Apr 27, 2010
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If we could guarantee that it would increase supply then I suppose that would be acceptable.

But I think the best solution would be to limit negative gearing to a single investment property and not allow investors to keep sweeping up properties and receiving tax breaks for doing so, while simultaneously reaping the reward of those properties continually rising in value.
Or do both in the new build space?
 

The Big Richo

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Aug 19, 2010
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The home of Dusty
Interesting discussion.

I think these things should be applied with more nuance, a blanket hit on investment properties drags in people who have circumstances not really appropriate for it.

For a lot of people an investment property is effectively their super, without the means or knowledge to set up a self managed super fund provision.

Seems silly to force people to invest in super on one hand and then penalise them on the other. Much like the 3 million super provision, I think these things should be targeted based on value. Apply it to people with investment properties with a value of 2 million and above for example.

I think negative gearing is highly overblown as well, I've always considered it fool's gold. People forget negative gearing relies on your investment making a loss. Tax breaks on other income don't cancel out that loss so you are relying on capital which doesn't exist unless you sell the property and them you have to pay capital gains. If it is a long investment the capital can be substantial but so are the year on year losses.

Anyone who is negatively geared would almost always be better served with a different investment in my experience.
 
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RoarEmotion

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Aug 20, 2005
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Sounds like we should scrap all the concessions and then landlords will only buy investment properties when they make financial sense without the rorts and concessions. Or implement the Danish model where people can only buy 1 second property. Following the Denmark rule, another way to stop the ridiculous unsustainable house prices in Australia is to limit foreign ownership to people who have resided in the country for 5 years.

I understand that property investments in Australia are an attractive investment due to the concessions given to landlords, but it's really *smile* up the market. Unfortunately, with so many people now using investment properties to fund their retirement, no government will bring in thew wholesale changes that are needed to ensure housing is affordable for those not already in the game.

The average Australian in 1984 could buy a home that cost 3.3 times their annual income. In 2023, it's 10 times what the average person earns in a year. CGT concession for property investment was introduced in 1985, as was negative gearing. It's a mess, but I really don't know how it can be corrected because no government will survive if they try.
Yes
 

RoarEmotion

Tiger Champion
Aug 20, 2005
4,939
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The State RE Institutes are a disgrace. Spivs. Carpet Baggers. Anytime the stick their 2 bobs in its only concerned with house prices rising and maximising RE investor profits. They have zero regard for the economy, actually a lot of their advice would be extremely damaging to the economy if it was heeded.

House prices have gone up 20-30% over the last 4 years, even factoring in the correction. So any investor, to be conservative, with a property worth 600K has benefitted to the tune of $120-$200K. Sorry if my heart doesn't bleed if you have to pay another grand in tax. Disclaimer, I am a landlord.
Still picking winners and losers though.

Why not super?
Why not corporate profits?
Why not any share or any investment that has gone up 30% or more.

Per the other post though the property market is distorted by all the various concessions / rorts.

I have one property I held onto through separation but made it a bit more leveraged than I would like (~70%) as a potential place for my kids to move into when they are older given how difficult it will be to buy.

If you never intend to sell until you die or you move to into your property and turn it back into a PPOR then all the negative gearing never crystallises as a capital gain and can make your property cash flow positive after tax even though as a base investment it doesn’t stack up before this return. That’s certainly how I’ve thought about it. If the inheritance / death tax rules ever get changed then maybe that changes.

This clearly distorts the market but if you know it is the game then it is what it is. Buy and hold
 
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Panthera Tigris

Tiger Champion
Apr 27, 2010
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Sounds like we should scrap all the concessions and then landlords will only buy investment properties when they make financial sense without the rorts and concessions. Or implement the Danish model where people can only buy 1 second property. Following the Denmark rule, another way to stop the ridiculous unsustainable house prices in Australia is to limit foreign ownership to people who have resided in the country for 5 years.

I understand that property investments in Australia are an attractive investment due to the concessions given to landlords, but it's really *smile* up the market. Unfortunately, with so many people now using investment properties to fund their retirement, no government will bring in thew wholesale changes that are needed to ensure housing is affordable for those not already in the game.

The average Australian in 1984 could buy a home that cost 3.3 times their annual income. In 2023, it's 10 times what the average person earns in a year. CGT concession for property investment was introduced in 1985, as was negative gearing. It's a mess, but I really don't know how it can be corrected because no government will survive if they try.
Tend to agree with all of that.

Additionally, supercharged net migration since about the turn of the century is another significant lever that has added to the concoction. To put into context, long term net migration prior to that point was around 80-90k per year on average for Australia. Even taking in post war 1950s-80s era migration.

Under successive governments of both shades, since about the turn of the century it first increased to around net+120-130k per year, then +200-240k per year in the last 10 years, with this year's forecast to be +390k.
 
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tigersnake

Tear 'em apart
Sep 10, 2003
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Interesting discussion.

I think these things should be applied with more nuance, a blanket hit on investment properties drags in people who have circumstances not really appropriate for it.

For a lot of people an investment property is effectively their super, without the means or knowledge to set up a self managed super fund provision.

Seems silly to force people to invest in super on one hand and then penalise them on the other. Much like the 3 million super provision, I think these things should be targeted based on value. Apply it to people with investment properties with a value of 2 million and above for example.

I think negative gearing is highly overblown as well, I've always considered it fool's gold. People forget negative gearing relies on your investment making a loss. Tax breaks on other income don't cancel out that loss so you are relying on capital which doesn't exist unless you sell the property and them you have to pay capital gains. If it is a long investment the capital can be substantial but so are the year on year losses.

Anyone who is negatively geared would almost always be better served with a different investment in my experience.
On the super thing, I'd be interested to know what you idea of 'a lot of people' is. I'd bet its closer to 'a few people'. To qualify that, 1. not many people would have one investment property as their super. For most SMSF, it would be part of a package of investments. 2. Even those people who might have a single investment property as their super, if they purchased prior to 2019 it is ka-ching time.

Forcing people to invest in super? Not sure what this means. But if people do feel 'forced' to invest in super and they aren't rich, a balanced fund is the way to go, everyone will tell you that.

Forcing people on the one hand while penalising with the other? Thats just a negative spin way to say taxing profits. Its the way things work. Governments promote investment, then tax profits, its how the joint runs.

Negative gearing is overblown? Yes and no. Yes if you are not rich, a few people, not that many I'd say, make this mistake. (but even then, pretty good 'mistake' if you bought prior to 2019). No if you are rich. If you're a high income earner NG is a dream, effectively getting paid to make a profit. At least if your property goes up in value of course. Not all properties go up in value all the time, but most go up in value over time.

Negative gearing is not overblown when you consider that it incentivises people to make a loss, and hence pay more for a property than it is worth in terms of traditional returns. For years houses in Aus for the most part sold for 10-20 times their annual rental yield. NG has killed that dead.

Sell a property then you have to pay capital gains? You say that as if its a negative, no profit, no tax. If I sell an investment property I purchased in 2015 for a profit of $400K, I will pay CGT of approx $60-70K, walking away with $320-oddK profit. That is a bad thing?
 
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tigersnake

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Sep 10, 2003
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Still picking winners and losers though.

Why not super?
Why not corporate profits?
Why not any share or any investment that has gone up 30% or more.
Gotta pick something, and those will have their day.

Big political changes are coming when the Ys and millenials start outnumbering the boomers. Its not far off. They've, and me, had it too good for too long.
 
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RoarEmotion

Tiger Champion
Aug 20, 2005
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Sell a property then you have to pay capital gains? You say that as if its a negative, no profit, no tax. If I sell an investment property I purchased in 2015 for a profit of $400K, I will pay CGT of approx $60-70K, walking away with $320-oddK profit. That is a bad thing?

Say you bought for 500k and sold for 700k

You may have had 200K of negative gearing.

So you pay capita gains on 400k profit (700 - (500-200))

Less 50% long term capital gain.

So on 200k. After fees etc there may be 50k left over. It’s nice but not life changing.

If you never sell or use it to refinance that negative gearing capital gain never crystallises.
 

tigersnake

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Sep 10, 2003
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Say you bought for 500k and sold for 700k

You may have had 200K of negative gearing.

So you pay capita gains on 400k profit (700 - (500-200))

Less 50% long term capital gain.

So on 200k. After fees etc there may be 50k left over. It’s nice but not life changing.

If you never sell or use it to refinance that negative gearing capital gain never crystallises.
Figures don't wash with me. This scenario may happen but I can't see it. 200k of ng is a lot of years or a lot of renos, in which case the rest is moot IMO. It could happen I suppose, people can be unlucky, but even so there is still a profit. In my experience absolute worst case scenario is 30% of your profit.
 
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The Big Richo

Tiger Champion
Aug 19, 2010
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The home of Dusty
On the super thing, I'd be interested to know what you idea of 'a lot of people' is. I'd bet its closer to 'a few people'. To qualify that, 1. not many people would have one investment property as their super. For most SMSF, it would be part of a package of investments. 2. Even those people who might have a single investment property as their super, if they purchased prior to 2019 it is ka-ching time.

Forcing people to invest in super? Not sure what this means. But if people do feel 'forced' to invest in super and they aren't rich, a balanced fund is the way to go, everyone will tell you that.

I have no idea if the figures match up but my feeling is a large percentage of investment properties would be people who buy one property after they pay off their mortgage or when they sell their family home and downsize in retirement. They then use the rent to fund their retirement years, a quasi super without being part of an official fund scheme.

The government forces us all to invest in super anytime we draw a wage, I don't think they should penalise people like that just because their super isn't official, but rather load up on the genuine whales who have 2, 3, 4 and so on properties.

Sell a property then you have to pay capital gains? You say that as if its a negative, no profit, no tax. If I sell an investment property I purchased in 2015 for a profit of $400K, I will pay CGT of approx $60-70K, walking away with $320-oddK profit. That is a bad thing?

Yep, but you have to discount that profit by any loss that was incurred in the negative gearing process, as well as the deposit to buy the house.

The average negative gearing loss according to the ATO is about 9k a year, so the profit is more like 250k.

If you put up 100k to buy the house you've made 150k over 8 years, or $18,750 per year which looks good, until you consider if you only put up 100k then your losses were probably much greater due to the size of the mortgage you are carrying.

There are much more solid investment options that will produce similar returns over time without the risks and hassles or being a landlord, I think.
 

tigersnake

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Sep 10, 2003
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I have no idea if the figures match up but my feeling is a large percentage of investment properties would be people who buy one property after they pay off their mortgage or when they sell their family home and downsize in retirement. They then use the rent to fund their retirement years, a quasi super without being part of an official fund scheme.

The government forces us all to invest in super anytime we draw a wage, I don't think they should penalise people like that just because their super isn't official, but rather load up on the genuine whales who have 2, 3, 4 and so on properties.



Yep, but you have to discount that profit by any loss that was incurred in the negative gearing process, as well as the deposit to buy the house.

The average negative gearing loss according to the ATO is about 9k a year, so the profit is more like 250k.

If you put up 100k to buy the house you've made 150k over 8 years, or $18,750 per year which looks good, until you consider if you only put up 100k then your losses were probably much greater due to the size of the mortgage you are carrying.

There are much more solid investment options that will produce similar returns over time without the risks and hassles or being a landlord, I think.
I don't disagree with the 'whales' sentiment. But I'd argue all day that in the overwhelming majority of cases, if you can afford to invest on property beyond your home, you can afford to pay some tax on it.

I agree with your final comment. But not your example or the sums. You get your 100K back, plus, not minus off your 250K profit.

Anyway we could do examples at 50 paces all day long. Its the policy design and outcomes I'm concerned with. They are out-of-whack in favour of wealthy investors IMO.
 
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Baloo

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Nov 8, 2005
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Foreign property investors should be wearing the brunt of these increases not local mum and dad investors.

Despite the hysteria, foreign home ownership in Australia is about 4.6%
 

tigersnake

Tear 'em apart
Sep 10, 2003
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Despite the hysteria, foreign home ownership in Australia is about 4.6%
That is pretty high, higher than I expected anyway. Fair chunk of it would be top end. They are subjected to a lot of rules and charges us citizens are not subjected to already, but I'd be open to having a good hard look all the same.
 

Scoop

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Dec 8, 2004
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Despite the hysteria, foreign home ownership in Australia is about 4.6%
If you aren't a citizen, shouldn't be allowed more than one.

It's Dan trying to repay the money borrowed to lock us down for so long.
 

Baloo

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Nov 8, 2005
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If you aren't a citizen, shouldn't be allowed more than one.

That would work, or for their second and subsequent purchases, they get hit with a 40% Stamp Duty fee
 
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