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To the surprise of absolutely no one, people who don't own houses don't like negative gearing.
They'll take it to an election though. Suicidal to introduce mid-cycle.
It didn't get up in 2019 because there was too much other stuff, dividend imputation et cetera.
But what about capital gains concessions? That can't be ignored, otherwise institutional and large investors will be relatively untouched.
Absolutely, why we let you halve your taxable income for investments is beyond me.
Work for your money? All of that is taxable. Let your money work for you? Ooooooh poor baby, let's half that taxable income shall we? Ooooh you didn't work at all, let me refund you 30% of your dividends back to you, oh dear, oh dear gorgeous.
It's to counter inflation. If you have an investment that you sell for 10% more after a few years, you haven't actually made 10% because inflation ate up some of your returns. So for simplicity they say after a year we'll count half of your returns as inflation and half as profits.
I feel like there would be a much more elegant solution to this than just waiving 50% of your taxable income from investments. Especially since asset prices typically go up during periods of inflation, above inflation.
Running with your example, I'll pretend I bought $1,000,000 in assets 1 year ago, inflation was 10%, and my assets returned a 10% capital gain (I'll pretend there are no dividends), and I sell for a 10% profit.
Under the current system I made $100,000 as income, and let's say I sell exactly one year after, so I'm eligible for the capital gains discount.
If I don't work, this means I only pay tax on $50,000, which is a tax bill of $5,788 (2024-25 tax brackets). Meaning your profit would be ($100,000-5,788)/$1,000,000 = 9.4212%.
If it were the full $100,00 it would be $20,788. So 7.9212% profit, in nominal terms.
You may look at this and go, SEE, you're actually making a loss so it's not fair to tax it at the full rate! But this all entirely ignores the fact that periods of inflation have almost always resulted in asset price inflation.
If they wanna make it that you pay tax only on real gains, then I'm gonna argue they ought to do the same for income from actually working. But this would be a disaster for the budget.
We're being jibbed by people who make money by not working. The argument that the asset has gone down in real terms is the investors problem. As investing involves risk which you wear in order to make a potential profit.
Stop socialising losses in the form of real value loss. That is the investors problem. I don't see how it's fair for a worker earning $100,000 to pay $20,788 in tax, but an investor to only pay $5788.
Because you work for 2 weeks then you get paid for those 2 weeks. If you earnt $1000 in 2005 and didn't get the money until today, you'd be upset because $1000 doesn't buy what it used to.
They say on average the market goes up 7% per year and inflation is about 3% per year. So it's about half.
Again, this is what we call investment risk. Investments that don't up beyond inflation are a bad investment. Which is the risk you take in order to see a potential profit.
That's not our collective problem.
Giving people a discount to subsidise their profits is not a worthwhile way to spend our tax dollars.
People still invested before this discount was granted, so I'm not really convinced it would break anything by getting rid of it
I think it makes sense to limit negative gearing. But it would be a tough sell to remove it entirely. They could limit it to a max amount per year. Maybe 20k per year.
The proposal is to limit it to one property. So small-time investors still get the full benefit of it, while larger ones (1% of investors have 25% of negatively geared properties is what they said on Insiders, I think) get cut drastically.
I wonder if they limited negative gearing to new properties it would allow established units/houses to be sold and encourage more houses and unit to be developed? Could limit it to 5 - 10 years before you lose the negative gearing benefits.
Under 40 they say ?
I'm 60 and an owner occupier (no mortgage) , my partners son is 37, he and his wife just bought their 4th house, 1ppor and 3 x "invesetment" properties.