Is Negative Gearing Dead - How it will impact you and your investments?

[@sparkie996]

My partner and I own two investment properties, one in the ACT and one in Queanbeyan. We have to pay land tax on the ACT property which is more than the cost of rates. Investors get absolutely nothing for land tax, no services like they get for rates, it is simply a tax that the government (and the rest of the community) benefits from, but it is passed onto renters via an increase in rent, so thank renters for all this extra money to help support police and schools and hospitals and social housing and all the other expenses land tax pays for. Any poltical party could remove land tax, and the cost of rent would drop because the rental market is compeditive each time you go to rent out the property on a new lease, but the ACT government has land tax (or renters tax) built into their budget. Land tax is levied on investment properties regardless of the property value in the ACT. In NSW land tax is only payable for properties whose land is valued over $1M+. The Queanbeyan property has a land value of about $450K which means land tax is not payable and therefore the rent for the property is less than in the ACT for a comparable property. Owning and renting property is both an investment and a business. The only reason for supplying a rental property to the market is if there is a return on investment. If there is no return on investment then the money available for investment will be redirected elsewhere. The love affair people have with property is becuase they understand it and they can value add with sweat equity into it. You can't renovate a share portfolio, you add on an extra bathroom room to gold investments and you can't predict the value of EFT's anymore than you can predict if your ball will land on black in the casio. Ynless you are the owner of a business, do you as a silent investor really know anything about the business, or are you just relying on blind luck? I don't care what I invest my retirement saving in, as long as I don't lose those savings and then become a burden on society. We are self funded retirees who have worked hard all our lives to get what we have got, and now someone what's to take all that away from us?? Both the investment properties are owned outright, there are no loans and hence no expenses exceeding income, and hence no negative gearing, just income tax that we must pay. When we go to the sell the properties to fund our retirement we will have to pay another whack of tax if the capital gain discounts are abolished. So what's the alternative? Put money into superannuation? But there are caps on how much money can be put into superannuation. And how does this benefit renters? It won't because the limited housing supply will be soaked up by cash rich migrants and competition for fewer rental properties will put even more strain on the rental market. Renters can't just become owners, they don't have the cash or even interest to buy a property. Many renters rent because they don't want to buy even if they could afford to buy. Stamp duty and all those other costs like agents fee's could be more than a year or two's rent on a property and the renter may only want to stay six months in a certain location for whatever reason and not commit themselves to purchasing. We could end up like the US where private rentals are being sold to institutional investors like Blackrock. Report: Institutional Investors Will Own Over 40% of Single-Family Rental Homes by 2030. Our lives are already controlled by government and corporations who lobby government, do we really want to take away control of our finances even more? Superannuation funds are already bohemouths searching for oppertunities to invest your retirement funds, with slogans like, past returns are no guarantee of futuer returns and expect the returns to be negative every x number of years depending on how risky the investment is. When you are retired you don't have the ability or time to ride out negative returns without it severly impacting on your lifestyle, and besides, businesses "negatively gear"all the time, it's just writing off a loss form one business or investment against another investment or income that is making a profit. Negative gearing (for those in the early stage of an investment) effectively subsidises renters and gives them a roof over their head. The payback for investors is not seeing all of their capital gains taxed 10 or 20 years down the track. And remember, if you bought a 3 bedroom single bathroom house for $100K 30 years ago and then sell it today for $1M, the notional "capital gain" is $900K, you currently get a 50% discount on the capital gain so you are paying tax on $450k. Assuming you have no other income or offsets, your tax bill for that year will be around $250k. Meanwhile other 3 bedroom houses still cost $1M, so now you have $1M - $250K = $750k, so your house is not actually worth $1M but is worth $750K, all the rest has gone in tax and you can't rebuy your own house if you wanted to with the net proceeds. This isn't a capital gain, this in reality is a capital loss!! Capital gains tax is a con to make you pay more tax on something that you already own and have paid tax along the way to own as you paid if off over the years. You are paying real money for fictional paper gains. A three bedroom house is a three bedroom house regardless of whether ot not it has a dollar figure associated with it of $100 or $1M dollars. Buy and never sell until you have to, or untill you reach retirement and your tax rate is it's lowest and you have no intention of getting back into the business of owning and renting realestate.

[@sparkie996]

Now run through ChatGPT. My partner and I own two investment properties-one in the ACT and one in Queanbeyan. We pay land tax on the ACT property, which exceeds our rates. This can feel frustrating because, unlike rates, which fund local services, land tax seems to benefit the broader community and government without directly providing us with services as property owners. This cost is often passed onto renters, which raises their rents. Some political parties could propose removing land tax, which might lead to a decrease in rent due to the competitive nature of the rental market. However, the ACT government has land tax factored into its budget, making any immediate changes challenging. In the ACT, land tax is levied based solely on the value of the land. In contrast, in New South Wales, land tax is only applicable to properties valued over $1 million. For our Queanbeyan property, the land component is valued at about $450,000, while the total value of the house and land is around $900,000. Since the land tax is only calculated on the $450,000 land value, we incur no land tax for this property, resulting in lower rent compared to similar properties in the ACT. Owning and renting property is both an investment and a business. Investors typically seek a return on their investment; without it, they might redirect their funds elsewhere. The appeal of property investing comes from its tangibility and the potential to increase value through renovations or improvements. Unlike shares or other financial assets, property allows for physical enhancement, which some investors find more manageable. I’m indifferent to the specific investment vehicle for my retirement savings, as long as I preserve those savings and avoid becoming a burden on society. As self-funded retirees who have worked hard for our assets, we feel a sense of vulnerability when discussing policies that might impact our financial security. Both of our investment properties are owned outright, meaning we don’t have loans or expenses exceeding our income, and thus, negative gearing doesn’t apply. We only face income tax. However, when we eventually sell these properties to fund our retirement, the potential removal of capital gains tax discounts could significantly impact our finances. If investors see increased costs from changes to negative gearing or capital gains tax, it could lead to a decrease in property values in the short term. This reduction would primarily stem from diminished demand, as some investors might withdraw from the market, viewing it as less profitable. Reduced investor activity could also impact rental supply and ultimately the rental market itself. Many people think renters prefer to buy homes if they could. However, it's crucial to recognize that renting is often a choice based on lifestyle or financial considerations. High upfront costs like stamp duty and agent fees can deter potential homeowners, especially if they only plan to stay in an area for a short time. Concerns have been raised about the increasing influence of institutional investors in the rental market. Reports suggest that entities like BlackRock could come to dominate single-family rentals, which may limit options for individual investors and renters alike. This trend raises questions about the balance of power in housing markets and whether policies should address such influences. Superannuation funds also represent a significant investment landscape. While they offer opportunities for retirement savings, they come with inherent risks. Past performance isn’t a guarantee of future results, and the volatile nature of investments means retirees could face challenges if negative returns occur. This is especially critical for retirees who may lack the time or ability to recover from losses. Negative gearing, while beneficial to some, does provide a kind of subsidy that contributes to housing availability. It allows investors to sustain properties and provide rental options. However, if changes lead to increased costs without corresponding benefits, we could see a shift in market dynamics that affects both investors and renters. The discussion around capital gains tax is also important. When homeowners sell a property, the tax on capital gains is levied on the profit realized from appreciation. While the tax reduces the net amount available after the sale, it also serves as a means to ensure that those who benefit from rising property values contribute to the community. The assertion that this tax results in a "capital loss" is a misunderstanding; it's a reflection of profits made on the asset. Ultimately, the real estate market is complex and influenced by numerous factors. Policy changes can lead to short-term volatility as investors and homeowners navigate the implications. While the removal of negative gearing and the capital gains discount may lead to a decline in property values, it's essential to consider the broader economic context and how various stakeholders-investors, renters, and homeowners-respond to these shifts. In conclusion, the discussion around investment properties, taxation, and the rental market is multifaceted. As we consider potential policy changes, it’s crucial to look at the broader implications for both investors and the community, ensuring that any reforms promote a balanced and fair housing market for everyone involved.

[@silversun119]

you don't have to pass the land tax cost on to your tenant. I have had to pay land tax for the first time ever this year. I live in Vic and it is a Covid recovery tax. I did not raise the rent on my tenant to cover it. That is not fair

[@thestrategystacker]

Ok

[@sparkie996]

@@silversun119 You don't have to charge your tenant anything at all if you don't want to. Why should tenants have to pay to live like property owners have to pay to live? it's just not fair that tenants should have to contribute towards all the services that the government (i e property owners) provide. Tenants should in no way be held accountable for their actions. If the tenant loses their job and can't pay rent that should become the property owners problem. If the tenant trashes the property that is because it was a banging party and the tenant should in no way be held responsible for the damage caused by others. If the tenant has pets and they destroy the house, why should the tenant be held responsible for the actions of an animal who did the damage, they didn't personally tear the carpets up or destroy the yard. Property owners should be forced to upgrade their properties with better windows and insulation and energy efficient appliances and solar panels, etc. to benefit the tenant. It doesn't matter that the property owner can't afford to pay for these upgrades or wants to demolish and redevelop the property in a couple of years time, getting the tenant cheap energy bills right now is all that is important and if owners don't comply then their taxation should be increased to force them to comply.

[@silversun119]

@@sparkie996 I am really not following the point you are trying to make

[@julianshalders6047]

The liberal Morrison government did nothing for 10yrs in relation to public housing. The working class always get stung.

[@thestrategystacker]

People have to make the most of their opportunities. No one party caters to everyone we see that time and time again. The less you need them the better off you will be.

[@sparkie996]

@@julianshalders6047 Providing public housing is a state and territory responsibility. The more $1M+ houses we build and give to immigrants the better. The government needs to spend our rates and taxes on something apart from NDIS and defense rorts and mismanagement. Besides, isn't it better for the government to provide housing and to soak up all the tradies with this work rather than to let the market determine supply and demand? The government (of all parties) has an impeccable record in being able to pick winners and turn them into losers.

[@thestrategystacker]

Totally agree look at the total loss of control and corruption with NDIS it will bankrupt the country and the money could have been spent on hospitals and not rorting providers