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An Open Letter to Australian Landlords

Dear Landlords,

It’s time to admit it. You’ve been on a pretty good wicket with negative gearing. I don’t want to hear you complaining about Labor’s changes because let’s face it; you’re taking the piss to expect Australian tax payers to keep subsidising your lifestyles.

I’m hoping most of you will keep quiet and continue to fly under the tax office radar since Labor’s grandparenting their proposed changes, and you’ll therefore be able to keep using your accumulated wealth as a tax-dodge strategy. I’ve got nothing against you doing this, because it has been totally legal. But what I have got something against is the idea of you complaining about changes to end the legality of what really constitutes a massive rort causing structural wealth inequality that is bad for our entire society. You heard me. Wealth inequality is bad for all of us and that’s why it’s time you came to terms with the fact that this policy is going to change and that you should just be pleased you will continue to get away with it because you were lucky enough to start doing it before everyone realised how unfairly your wealth was accumulating. And realise we have!

We have a Prime Minister who claims it’s never been a more exciting time to be Australian. But what he really meant was that it’s never been a more exciting time than in the past 30 years to be a property-investing-Australian. Rolling equity into more and more wealth. Making money by literally just sitting on your arse, watching the rent go into your account, and the property value go up, and then using this wealth to reduce how much tax you pay. Scott Morrison showed off his economic-illiteracy this week by claiming property investors mostly earn less than $80,000 a year, when we all know the only reason the tax office has you in the ‘earning less than $80,000 a year’ bucket is because you use negative gearing to reduce your taxable income down to less than $80,000. We all know you have a tax accountant showing you how to legally reduce your taxable income to a fraction of what average workers have to pay, who own a fraction of the wealth that you own.

I am not going to sit back and accept your scare-campaign to fight these changes, because we’ve all had enough of the rich using fear to stop everyone else getting a fair deal. The mining tax fear campaign was based on lies. The carbon price fear campaign was vested interests paying to fix the result. One of Australia’s largest beneficiaries of Australia’s property speculation boom, real estate agent turned mogul John McGrath, apparently isn’t doing stand-up comedy when he ‘warned of a WEALTH KILLER TAX‘. Wealth killer? Get a grip John. For every established home sold to a first time owner-occupier, there is one less renter in the market and one less renter means one less property investment needed and at the end of this change, there is still one property, one family living in it, one family benefiting from the wealth that owning this property brings them and zero-net change in overall property wealth of the country. It’s just that the wealth is shared amongst more people, rather than being concentrated in the hands of a few. But you knew that didn’t you. Because that’s exactly what landlords are scared off. Property investors hate the idea of reducing wealth inequality because wealth inequality has been so beneficial to them. At the expense of everyone else. Well everyone else is sick of it. The party’s over. Quit your whining.

I am proud of Australia when we can have mature discussions about problems that need fixing, when we can talk about the best way to fix them. Landlords will still exist under Labor’s plans, but you will have to build new homes and if that sounds like too much effort to you, then fine, don’t do it. Becoming wealthy and building wealth, in a productive, growing economy, shouldn’t be as easy as turning up to an auction and signing a cheque. Wealth should be built through hard work, through ingenuity, through patience, innovation, entrepreneurialism, risk-taking, careful management of income and savings, doing something you love, having a career, creating jobs. Imagine how beneficial to the economy it would be if you all invested in new and established businesses rather than another negatively-geared investment property?

Professional landlords who build personal wealth by owning so many investment properties that they don’t even bother with negative gearing because they don’t have an actual job, and instead just gather rents, are the very definition of rent-seekers – the term used to describe those who take from the pie but don’t grow it. A smart country doesn’t encourage such unproductive behaviour. A smart country doesn’t stand for vested-interests fighting against smart policies and a smart country therefore gets rid of the scare-campaign Liberal government run by vested-interests who don’t want to see their privileged inequity addressed.

Labor is brave to take on the threat of another Liberal scare campaign to fight for the little guy. Landlords are not the little guys in this fight. The young family who rent your fourth investment property, who have been asking you for 6 months to fix the air-conditioning unit, which you refuse to do until your accountant confirms you can reduce your tax by doing it, who move houses every time your financial advisor tells you to sell and speculate on bigger profits elsewhere, who can’t even put a hook in the wall to hang a family portrait without your permission, who have been saving for five years for a deposit, but the longer they save, the quicker house prices rise beyond their reach, who compete on an unequal playing field with you at auctions, who just want a house for their family to get attached to, who aren’t interested in how much equity will return them when they sell, who just want a place to call home, are the little guys. I am proud to get behind Labor to fight this good fight for the little guys. I hope you can see it’s a fight you’ll lose.

Yours sincerely
Victoria Rollison

78 comments

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  1. kerri

    This is where you lose me Victoria!
    This broadbrush generalisation that all landlords are blood sucking, filthy rich, assholes simply polarises the argument.
    Many landlords earn from rent as they are unable to work anymore. Many others have worked hard to earn enough to invest in property and self fund their retirement.
    I agree negative gearing is unfair. I am totally against it but don’t paint the entire rental market as being a machine to support the rich and steal from the poor.
    Without ANY landlords, and by your description they are all such assholes they need to be lined up and shot, there would be no rental properties to allow people to move out of home or to allow migrants and asylum seekers a place to live while they build their finances to purchase a home.
    Labor’s plan is indeed sensible and well thought out but…
    this is a very narrow minded article and smacks of sour grapes.
    Can you even contemplate that there are landlords who do the right thing by their tenants? Or are they all the lowest of the low?

  2. Wally

    Victoria my brother, 3 mates I can immediately think of and myself all own rental properties, none of us are rich. In fact we were all raised by parents who were working class battlers in Melbourne’s western suburbs, we had everything essential growing up but we all worked weekends and after school to buy any extras. I was earning more from part time jobs while at school than I was paid when I commenced my apprenticeship.

    After my apprenticeship I travelled around Australia for a couple of years before settling down to start a family. For a few years I worked full time, had a 5-6 hour evening job and worked for myself in my trade most weekends. That is on average a 70hr working week excluding travel and meal breaks. Then I became self employed and eventually relocated to a rural area where I employed up to 5 workers for a decade. During this time I was nearly sent bankrupt by a builder who liquidated owing me $40k and smaller losses that would take the total to over $100k. Could have purchased a great house in Melbourne for that amount at that time.

    I have owned 4 houses, 4 rural lots of land, an industrial property and built/sold 2 flats and a spec home. It took much hard work, dedication, blood, sweat and some tears along the way but at the end of the day I came out owning a modest home and 2 investment properties. How do I fit into your view of the world? “what really constitutes a massive rort causing structural wealth inequality that is bad for our entire society” I consider myself to be an achiever who has done much for Australia, training apprentices, creating jobs and taking risks, many of which didn’t pay off.

    I don’t know if I should consider your letter to be ridiculous, self centred or bloody rude. Have you ever considered middle class investors who purchase a rental property to finance their kids education only to have a tenant destroy the property? How about the landlords who keep the rent at the same it was when tenants first moved in 15 years ago because they are good tenants and now retired so they cannot afford to live elsewhere, where do they fit in your little world? What about self employed people who have no superannuation so they invest in property?

    I do not disagree that too much wealth is controlled by too few but take off the blinkers and look at the source of the looting, the theft of money is most often by people who are executives in public companies who are being paid far too much.
    “Professional landlords who build personal wealth by owning so many investment properties that they don’t even bother with negative gearing because they don’t have an actual job, and instead just gather rents, are the very definition of rent-seekers – the term used to describe those who take from the pie but don’t grow it.”

    Don’t you think these people worked hard to get started? They provide rental properties to a market where there is demand so where would these people live otherwise? Without these landlords the population could not grow as quick so they certainly do give back.

    Basically I think you are jealous of people who have succeeded. You seem to target everyone who has prospered maybe you need to live in a communist country.

  3. Wally

    kerri

    I agree with your comment, if Victoria was a landlord I suspect she would be writing a letter describing what a pack of arseholes tenants are.

  4. Miriam English

    Hear, hear! Well said Victoria.

    Wally and Kerri I think Victoria is referring to landlords who abuse the system via negative gearing; who don’t contribute to society.

    I pay rent to an old friend and am grateful for the roof over my head.

  5. z

    A smart country doesn’t encourage such unproductive behaviour. A smart country doesn’t stand for vested-interests fighting against smart policies and a smart country therefore gets rid of the scare-campaign Liberal government run by vested-interests who don’t want to see their privileged inequity addressed.—why in this country negative gearing existed for 30 years? mining booming has covered the conflict, it would been explored much earlier otherwise. the fact of lot of high income earners rush into it further proved unfairness of it. for a country with 24 million population, more than 1 million negative gearing investors is rare in the world. mining boom has over and it is unsustainable now, Liberal Government knew this and pretend not because too many involved in. Joe Hockey had suggested in last day in parliament but said different as Treasurer

  6. z

    Joe Hockey last day’s suggestion about negative gearing is a honest and reasonable one which similar with Labor’s proposal, this has proved both parties politician all understand well this is a lingering effect of the economy

  7. The AIM Network

    Yes, that’s right, Miriam.

    Victoria is addressing this to those who take advantage of negative gearing.

  8. cornlegend

    Victoria , you draw a pretty long bow there with your scattergun attack on landlords .
    I happen to be one .
    My grandfather got burnt by the Depression and from then on avoided banks and invested in land and properties .
    my father inherited this and carried on expanding the stock, I then followed on and now , with Trusts the rental stock income employs 6 members of my family all of whom pay a significant amount in income tax.
    No property has ever been negatively geared as none are financed, and rents have always been fairly applied .
    I have had financial advisors telling me to sell while the market is at a peak, but , on some properties we have had between 500-600 applicants and there is a critical shortage of rental accom. in most areas
    Many of our tenants have been long term, and we are always working to assist our tenants in ways to attain their own properties or directing them to assistance where necessary , or as at present, looking at ways to develop low cost rentals in areas of high unemployment and low rental stock .
    I hear this “rotten landlord” thing bantered about and at times it makes me consider selling it all up, and flogging off the acreages to developers .

  9. Wally

    The AIM Network and Miriam English

    I could have agreed with until I got to the second last paragraph.

    Professional landlords who build personal wealth by owning so many investment properties that they don’t even bother with negative gearing because they don’t have an actual job, and instead just gather rents, are the very definition of rent-seekers – the term used to describe those who take from the pie but don’t grow it. A smart country doesn’t encourage such unproductive behaviour. A smart country doesn’t stand for vested-interests fighting against smart policies and a smart country therefore gets rid of the scare-campaign Liberal government run by vested-interests who don’t want to see their privileged inequity addressed.

    Is managing a property portfolio not a job?

    I look forward to a response to my comment from Victoria.

  10. diannaart

    I too thought Victoria’s article was specifically about those rort the tax system by negatively gearing their investments. The landlords who are not interested in maintaining standards (let alone improving stock) because they’re running at a loss, after all.

    Those who do not contribute to new homes, because it is easier to buy up cheap old stock and run that into the ground.

    I know there are good landlords, ones who ignore the real estate agents and keep rent at the same level as when a good tenant moves in – I thank those landlords. Situations like this become win/win; Landlord gets a good tenant and tenant remains living at the property for longer. This is good long term thinking. In other parts of the world there are specific set-rents on properties.

    The ones Victoria was referring to are those who invest in cheaply made student housing relying on fast turnover and increasing value without contributing anything.

    After escaping from my marriage I rented for many years until I could manage to buy a home again – I have experienced the good and the bad – the bad make renting a nightmare, if not life-destroying.

    When I fell ill 14 years ago, had I only been renting I could not have dealt with a landlord as I did with my mortgage lender – I would’ve been homeless if I had been renting. Even owing a mortgage gives a person more power than if renting.

    The changes I would like to see are not changes to hurt the honest landlord, only to winnow out the free-loaders.

  11. nurses1968

    I know Cornlegend since I nursed him in hospital some years ago, and would hardly see him as some rental tyrant, and he just happens to fit the “living off the earnings” category Victoria attacks.
    A mutual friend of ours “Red Ned” actually discussed some of cornies initiatives a few days ago on Independent Australia as he has a grandson in residence on Cornlegends property
    I post Red Neds comment in full

    The truth about negative gearing
    The Conversation 16 February 2016, 5:30pm

    Red Ned John Maycock • 2 days ago

    “John, I think it is time a more flexible approach was taken to rental accommodation .
    A mate of mine makes his living out of rental properties and as it has been in his family for generations
    they have a large number of properties .
    They are faced regularly with 500-600 applicants for vacant rentals
    He lives on a property, and to accomodate two young people, my grandson include has constructed
    “granny flats” for want of a better term {2 bedroom, kitchen living area , little patio etc .
    Actually, the same as you see in most Holiday parks. Both younguns are rapt in them
    His daughter who runs their business came up with the concept of building about 20 of these.
    3 br/bath/kitchen/living/sundeck/ laundry/utility room , and solar panels .
    She envisioned them as short term 6-12 month rentals to give people a chance to save a deposit
    or at least have a roof over their head.
    These could be rented at $180 a week and they would still make a healthy return
    They have the land,power, water etc and in fact they are willing to buy land in a
    Local government area that would be amenable and have high unemployment rates .
    I was talking to her last week and she has tried 3 States, 9 local government areas
    with no luck
    Three, however would agree if they were advertised as a tourist resort with short term, {1 to 2 week stays maximum}
    The dumb thing is, the 2 now constructed passed LG as they were deemed movable buildings and as their property can be described as a “farm” qualify as farm workers cottages.
    This idea stemmed from the fact that a lot of their tenants would have buckleys chance of ever
    saving a deposit with spiraling rental prices and this was a low cost {but not low quality}
    way of accommodating people while they saved for a home deposit”

    https://independentaustralia.net/politics/politics-display/the-truth-about-negative-gearing,8688

  12. irmgard kovac

    Victoria,i can’t ignore your ill informed article ,without answering.My daughter and son in law have been working a small tearoom for several years,had no contributions paid by any employer or tax concessions from the government for superannuation at their retirement.You work for an employer and he pays for you into your super fund for your retirement.They have bought a few houses and have MORTGAGES on all of them,which have to be paid and the houses are for their future,in retirement,as they won’t get employer and taxpayer funded super like you will obviously get.I realize you paid an equal amount to what the employer paid for you.They also have to pay A LARGE AMOUNT OF LAND TAX,WHICH GOES UP EVERY YEAR,RATES,INSURANCES AND FOR MAINTENANCE,NOT TO MENTION FOR THE DAMAGE MOST TENANTS LEAVE BEHIND.They have one tenant,who’s an alcoholic and hasn’t paid any rent for 3 month,and has damaged the house.They have been 3 times to VCAT and each time,he was allowed to stay,on a technicality.HE GETS FREE LEGAL AID,THEY DON’T GET ANY HELP,NOT EVEN TELLING THEM WHICH FORMS TO FILL IN,ETC.There’s so much RED TAPE ,that it is even hard for some lawyers to understand.Everything is in favour of the tenant and the landlord has practically no right,and it takes weeks almost month to get a hearing.The Government can’t have it both ways.They got rid of most of their housing commission houses and flats and now these tenants have become a big problem for private landlords.They got an agent for one house,who didn’t tell them the tenants left,didn’t do any inspections and the newly renovated house was left with broken blinds,carpets totally ruined and other damage and left in filth.Another tenants is also in arrears.My daughter is a nervous wreck from worries,about the mortgages and constant damage to their assets.My son in law is forever fixing repairing and cleaning up with my daughter which has a detrimental effect on my young granddaughter.I told them to sell them and invest the money.I sold my rental property some years ago as i was diagnosed with cancer and could not cope any longer with the stress.In Germany,you can even deduct from your tax any home improvement,repair etc that you do on your own house.If the Government cancels the negative gearing,there will be less houses build and a housing shortage created.Where will the tenants live then??? under bridges in the street or car???You don’t get it,that most investors are mum’s and dad’s that bought them for their retirement income,as the Government will not provide a pension much longer and most have not enough money in super to live decently,when they have to retire.You walk in their shoes first,and then open you big uninformed mouth.My daughter aged from all the stress and her hands look older than mine at 76 years old,from constant cleaning up,after tenants.

  13. Sue

    My partner and I are landlords. We receive no negative gearing benefit. We have worked all our lives, a lot of the time at or below the average wage. We bought property in the hope that we could do some of the things in retirement, that we went without during our working lives. We have now reached that point and are glad that we have some security in our retirement. Victoria, please don’t lump and judge us with those that use property as a way to pay less than their fair share. There are lots like us as well.

  14. Victoria Rollison

    I’m seeing a lot of comments on here from people claiming landlords are the little guys when the stats just don’t back this up. Top 20% own 70 times the wealth of the bottom 20% and this is mostly due to property investment. Reality is not your ‘I have a single case study about a landlord’ story.

  15. Brad

    Some sweeping statements here, Victoria. At the risk of jumping on the band wagon, I too, along with my partner, have AN investment property (not negatively geared), or at least our super fund does.
    It was to enable us to be self funded retirees who don’t rely on the taxpayer to cover our living expenses, that is until a coalition/greens superannuation deal made the prospect doubtful.
    I do, however, broadly agree with the policy of reducing the ability to negative gear and hope it’s extended to those who negatively gear into the stock market.

  16. cornlegend

    Victoria Rollison
    I don’t see anyone claiming to be “the little guy” but I equally don’t see the proof of the bum rap you are slamming us all with .
    The reality Victoria, is if, like the ginancial advisors suggest, we were all to flog of our investment properties there would be a whole heap of pain and homelessness .
    A direct question Victoria .
    What would you like ME to do ?

  17. Ricardo29

    I think a few people are missing the point here, this is about Negative Gearing, not about battlers pulling themselves up by their bootstraps as they go about helping their fellow battlers, this is about the wealthy who have multiple negatively-geared properties which we, the taxpayers are subsidising. Neither Victoria (if I can speak for her) nor I object to people owning as many properties as they can afford. Multiple ownership certainly does mean rental properties, but it comes back to the taxpayers subsidies. I really think some of you need to look closely at Victoria’s real targets.

  18. cornlegend

    Ricardo29
    I’ve got no problem with cracking down on negative gearing
    I have problems with this
    “Professional landlords who build personal wealth by owning so many investment properties that they don’t even bother with negative gearing because they don’t have an actual job, and instead just gather rents, are the very definition of rent-seekers – the term used to describe those who take from the pie but don’t grow it.”

  19. Kaye Lee

    Obviously we must have landlords. We can’t have 100% home ownership. I would like to see incentives to encourage people to provide low cost housing for low income earners. I also understand the plight of a business owner. No-one pays me a wage, No-one pays superannuation for me. My income is not assured. And I am 58. I have to have a plan.

  20. Wally

    Victoria Rollison

    Take off the blinkers and consider the big picture.

    I have never negative geared my companies industrial property so over time it has accrued a loss so now the loan is fully paid no tax will be paid until income exceeds the accrued loss in a few years time. The accrued loss has added significant time to the period no tax is payable because the accrued losses had to be financed, so effectively paying interest on interest. This would not occur if the property was negative geared and the losses offset against income in the year they occurred. Same scenario with negative gearing would result in the total tax offset being much less, so tax revenue overall would be greater but instead the banks have made more money.

    Have you looked into the number of rental properties that have never been or are no longer negative geared and the tax revenue they generate? Looking at 1 side of the ledger will always provide a distorted picture but from your article I don’t think that is an issue, you have landlords in your sights and you really don’t care so long as the information supports your argument.

  21. Peter Crompton

    Victoria Rollison, obviously you have no concept of what small time landlords like my wife and I go through in order to keep our hard-earned investment property. My other brother and two sisters-in-law are similar. We work our arses off to maintain our houses & we have only each bought ONE so that our kids might have something for the future. Our tenants are very often demanding and know all their rights with the RTA. We all fit into the middle income earning bracket of Australians who work so hard ; we pull in a combined income of under $120 K; we don’t send our kids to private schools & we all would tell you to get f@(;ed ! Yep! You heard us!
    The pissy amount we get back from negative gearing is probably not even worth the whinge but if the government takes this ‘perk’ away, you and your army of tenants will possibly find yourselves homeless as there will be a lot less investors willing to shell out the dollars to put rooves over your heads! What are you bitching, whinging, demanding (sometimes even centre-link dependent /savvy), going to do then?
    Previous governments have tried to get rid of negative gearing and it came back with more bells and whistles than you’d care for.
    There are more things in life to bitch about, and better ways to sort out the economy.
    Putting all landlords on notice in your open letter is offensive and says way more about you, than the landlords of Australia.
    We are sorry for what appears to be your learned helplessness. Good luck with your future landlords Victoria.

  22. Wally

    Ricardo29

    How much do we spent in rent subsidies for unemployed, pensioners and low income earners compared to tax concessions for negative gearing? Unfortunately taxation law cannot determine a bona fide investor from a rich person obtaining a tax advantage so everyone is tarred with the same brush.

  23. Carol Taylor

    Peter C, yes indeed there are hardworking Aussies such as yourself who engage in tax minimisation strategies to a minor extent, but what about the majority ultra wealthy who end up paying little or no tax…at your and your children’s expense.

  24. Wally

    Carol Taylor

    “there are hardworking Aussies such as yourself who engage in tax minimisation strategies”

    It is an insult suggesting that Peters objective is to minimise tax, I suggest that most (non rich) investors main focus is to invest for the future but to have more flexibility than locking money away in superannuation until retirement. People would get more tax relief from putting the portion of their income above the highest tax bracket threshold into superannuation than they could hope to get from a rental property.

    To begin with they don’t have to deal with tenants, they pay 15% flat rate tax on deposit and whatever they get back is tax free. When a rental property is realised they have to pay capital gains tax on any profit and like all investments there is a risk.

  25. Glenn K

    I am a landlord and have benfited greatly from negative gearing over the years, though no longer benefiting it from my positvely geared properties. I absolutley agree with Victoria on this article. This article is not attacking the small time investors. Chill out people.

  26. Backyard Bob

    Victoria gets plaudits from me for not once using “outrage” in her article.

  27. Backyard Bob

    Victoria pontificated:

    Reality is not your ‘I have a single case study about a landlord’ story.

    Then I suggest you learn the art of qualification, because for a significant part of the investor population, it is their reality. Your article was a typical piece of self-righteous bile with the usual heavy dash of concern-trolling. You know you’ve written a piece of shit as an author when people commenting feel the need to explain and defend the content.

    Some sobriety, please, Victoria.

  28. olddavey

    Folks, If you want to borrow to invest in a rental property, or any other business, please don’t expect the rest of us to subsidise you.
    As the Mad Monk used to say “Have a go”.
    Well, have a go, but do it on your own. Leave me out of it unless I can share in your profits and tax minimisation.
    Else, piss off!

  29. olddavey

    Backyard Bob,
    Why don’t you go back to your own backyard and clean up all the festering shite that’s been dropped by your beloved Liberals since the last election.
    Else, as I said in my last post, piss off!

  30. Carol Taylor

    Wally, why on earth would anyone want to make a loss rather than a profit except to minimise tax…hence the reason why the current policy is costing Australia millions pa. and why this problem needs to be addressed. Under the current scheme one receives a 50% reduction on capital gains which Labor sensibly wants to reduce to 25%. And bearing in mind (quote: chill out people) that the Labor plan is to grandfather current arrangements and to restrict negative gearing to new constructions thereby providing jobs for people other than real estate agents and solicitors..people such as brickies, plasterers and carpenters..I wonder why all the bleating?

  31. Möbius Ecko

    But, but, but Carol that will cause the deaths of young workers and it will be Pink Batts all over again.

    I had pink batts raised yesterday in a conversation when after being unable to respond to a series of economic facts I threw at this person he first said at least the Liberals stopped the massive invasion of boats and second they haven’t killed anyone like Labor did with their pink batts scheme.

    He quickly shut down the topic when I started pulling out the number of construction and mining workers jobs that occurred under Abbott and said that was different and irrelevant.

  32. Wally

    Carol Taylor

    Show me a business that does not make a loss in its infancy? I could quote so many examples I got a head rush thinking about it, NBN, all mining ventures and exploration to cite a few all make losses before returning a profit and those losses accumulate and are offset against profit in the future. This is how a normal business functions and has never changed and when the business is a company that rents property exactly the same principles apply.

    The only difference with negative gearing is that the losses do not (usually) accumulate they are offset against other sources of income within the same financial year. If you read my earlier post/s you would realise that accumulating losses can (usually will) result in a greater tax deduction than allowing the deduction at the time the loss is incurred, if the intent is to increase tax revenue I think the proposed changes fail as they only defer when the tax deduction is offset against income. But if the intent is to force investors into the new property market it will achieve the objective.

    Secondly if you had read my earlier comments you would realise that I believe capital gains should be paid on 100% of the profit because that would actually increase tax revenue and have a greater impact on those who want to make a quick buck. Because of the effect of inflation when taken into the calculation of GST payable increased CGT has less impact on long term investors and long term investors will eventually become positive geared and pay tax on rental income.

    “I wonder why all the bleating?”

    Because everybody has an opinion on negative gearing but very few actually understand how negative gearing works or the impact of the alternative scenario I have pointed out. Negative gearing opponents tend to believe that the tax deduction for interest and other costs is revoked but that is not the case, the tax deduction is just deferred until rent exceeds costs or the property is sold.

  33. Wally

    olddavey

    We may as well revoke acceptable deductions for all business operations and see all of our businesses go off shore. And by the way you do share in the profits by way of capital gains tax when the property is sold and if they own the property for long enough the tax on rental profit.

    By the way Backyard Bob is a Labor voter as am I so I think that leaves you pondering your own festering shite that just bounced back into your own backyard.

  34. cornlegend

    olddavey
    I do not borrow to invest im rental properties.
    I do not borrow. full stop
    I fully support Shortens Negative gearing initiates, and have never been involved in negative gearing.
    I take exception to the insinuation that all landlords are into investments as a “tax-dodge strategy ” and
    ” that they don’t even bother with negative gearing because they don’t have an actual job, and instead just gather rents”
    as though I was some sort of lowlife. for even renting and using the benefits of those rental properties to employ four and fund my wife and I .
    We are self funded {from investments and super} and obtain NO benefit off the Government
    I asked before, what would Victoria like me to do,?
    Sack my family who work for me, sell all the properties and kick all the tenants {some of 20 years + } onto the street ?
    We look to assist our tenants in every way ,{ happy tenants, happy landlords } and are always seeking out ways to provide more affordable rental properties for the desperate people out there competing on the rental market
    “they don’t have an actual job, and instead just gather rents””
    bullshit, talk to some landlords sometime about the time and effort required to manage a larger portfolio

  35. Wally

    cornlegend

    “I asked before, what would Victoria like me to do,?
    Sack my family who work for me, sell all the properties and kick all the tenants {some of 20 years + } onto the street ?”

    I honestly think your question goes too far above the head to be contemplated and any understanding of how hard it is to manage rental properties will never be understood. They think you sit on the corner and the money falls in your pocket.

  36. Backyard Bob

    olddavey,

    Backyard Bob, Why don’t you go back to your own backyard and clean up all the festering shite that’s been dropped by your beloved Liberals since the last election.
    Else, as I said in my last post, piss off!

    And this is precisely why persons of reason and perspicacity tend to avoid political partisanship and party membership. It’s basically soul destroying to them.

    As a retort reflecting the intellectual quality of your own, “olddavey”: why don’t you go back to your empty blog and fill it with the festering shite that constituted your post to me? You see, I added the “?” which means my question wasn’t rhetorical.

    That was kind of me, don’t you think. (see how I left off …oh. nevermind….)

  37. Backyard Bob

    Wally said,

    They think you sit on the corner and the money falls in your pocket.

    I wonder what Victoria thinks of people who invest in stocks and shares? I’m frankly scared to find out.

  38. Möbius Ecko

    I agree with those here who have stated they have investment properties, the work involved and how it appears other don’t understand how negative gearing works.

    But that doesn’t get to the problem of the top investors with multiple properties who use it as a tax dodge. They don’t have to work for it as they have agents doing it all.

    So what is the answer to them? Cap the number of properties, cap the amount, both or something else.

  39. Backyard Bob

    Crap, the editing time limit beat me. In my earlier post I would like to amend the following: “And this is precisely why persons of reason and perspicacity” to something that doesn’t imply that people who join parties aren’t sometimes persons with such qualities. I was annoyed. I’m just sick of party hackery in social media.

  40. cornlegend

    Backyard Bob
    Put me down as a party hack.
    I have never hid my Labor connections

  41. Phil

    I concur wholeheartedly with Victoria. The likes of ‘Kerri’ and ‘Wally’ et al – you guys have a profit takers guilt complex and it shows, seriously.

    The term ‘landlord’ is such an obnoxious term – utterly class laden and crass. How these rentiers squirm when the blow torch is placed against their schemes.

    I’m with Labor – kill this negative gearing scam now!!

  42. cornlegend

    Wally
    I could cash in and invest in coal

  43. cornlegend

    Phil
    I’ve got absolutely no guilt complex, in fact I’m pretty proud of the service we offer and the way {ethical} in which we do it
    I too find “landlord” a bit off .
    My daughter who now runs the firm prefers Property Management Officer

  44. Wally

    Phil

    Have you actually read and understood the comments?

    No one who has commented here is against stopping shady operators and increasing tax revenue. Some like me have different opinions on the best way to achieve the desired results and others have found Victoria’s article offensive toward them.

    As for your comment, as well as being offensive it also shows you don’t have a clue how a business or the tax system operates.

    “I’m with Labor – kill this negative gearing scam now!!”

    I doubt you even understand what the proposed changes are let alone the affect they will have.

  45. JeffJL

    I understand where Victoria is coming from and what (I think) she wished to achieve with this article. Sorry Victoria, you missed the mark.

    I like Cornlegend (although not to the same extent), are ‘failed’ property investors. Yes, that is right (if I can speak for your Cornlegend), we make a profit off our investment properties. We have been unable to make our investments loose money. This makes us poor investors judging by what Mr Turnbull et al are implying. I have never understood why people would invest to loose money. I was a little angered by the article (especially the second last paragraph).

    There is a big issue with negative gearing coupled with the 50% reduction in capital gains tax. Anybody reading around would see the graphs showing the reversal of landlords making money before negative gearing and 50% reduction were introduced to the situation today when huge, no massive, losses are made and tax income lost to the government. Not only that but the reversal of home buyers to investors in the used house market (now 93% dominated by investors from about 40%). A clear distortion of the market.

    Something needs to be done and the Labour proposal deals with it sensibly with minimum disruption to the market. (In my opinion). I support Labour’s proposal.

    Oh yeah. Half my properties have air conditioning, I do not.

  46. RosemaryJ36

    There are, in fairness, some property investors who do try to do the right thing by their tenants but there are far too many lousy property management agencies around!

  47. margcal

    At auction, the cost of a property to a negative gearer is significantly less than to a first home buyer. I want to see the playing field levelled. Who will buy the properties the negative gearers are “forced to sell”? There will not be a collapse of the rental market. First home buyers will have a much better chance to stop paying dead money to landlords and become home owners.

    Similarly to Diannaart, I would not have survived a period of unemployment if I hadn’t owned the roof over my head. And I wouldn’t survive now, as an aged pensioner, if I had to pay rent.
    I fear that my children, beaten at auction by property investors, will have great difficulty in old age if they can’t stop renting now.

  48. corvus boreus

    Backyard Bob (9:31, last line),
    Abso-phuqqen-lutely.
    I have noticed the effect that clannish party allegiance can often have upon otherwise seemingly reasonable and rational people.
    In terms of policy analysis, ‘party loyalty’ can cause perceptional dimming and blinkering, similar to donning a welding helmet in a dim room in order to read small print text. it often prevents the honest and impartial analysis of any relative merits in proposals arising from other ‘brands’, and hinders the prospect of any introspective analysis into possible flaws and failings in their own ‘side’s’ policies and performance.
    At it’s worst, strong party identification can also tend to lead to participation the mob mentality of mindless tribal barracking, where all not wearing scarves and waving banners of the same colour and logo routinelyhave sledges slung in their direction, and all refereeing decisions are seen as biased against ‘the team’.
    Nothing quite like absolute brand loyalty to induce perceptional bias and irrational prejudice.
    Phuq party hackery, it is a blight upon representative democracy and cohesive society.

    Off topic, I know, but valid nonetheless.

  49. Kaye Lee

    I don’t have a party allegiance but I find myself in the position of mistrusting anything the Coalition says. I wish I didn’t feel this way because I really don’t care who unveils the plaque as long as the hospital gets built but bitter experience makes me fact check everything they say and far too often they have been exposed telling whoppers. As I told my kids, I can cope with pretty much anything provided I am told the truth but lie to me and you are on your own.

  50. corvus boreus

    Kaye Lee,
    We all have elements of prejudice (merited or ‘other’) within our assessments, and subjecting the claims of people with consistent histories of uttering falsehoods to greater sceptical analysis is merely sound application of the precautionary principle.
    Qualified mistrust (leading to rigorous fact-checking) is very different from automatic and summary dismissal.

  51. Kaye Lee

    cb,

    I also think lots of them are dumb as posts. The idea that George Christensen is making decisions that affect my life fills me with horror.

  52. corvus boreus

    Kaye Lee,
    George Christensen is a rather ‘special’ case.
    He is a poster child for the willfully stupid and deliberately dishonest, a swaggering braggart who brays base sledges and provably false claims then denies any right of retort, and a political parasite who is attempting to gratify his own ‘grand’ ambitions by posting himself as a rallying point for rabid extremists, posing on a platform of ignorant bigotry and social division.
    I think your horror is somewhat justified.

  53. Deanna Jones

    Thank you for writing this, Victoria. The comments tell me much about the AIMN commentariat that I would prefer not to know. Property investment is fundamentally immoral and exploits the basic human need for shelter. Nobody needs more than one home. It is double dipping.

  54. Wally

    Deanna Jones

    “Property investment is fundamentally immoral and exploits the basic human need for shelter.”

    So will you be living in a car, tent or a cave until you buy your own home Deanna?

  55. Kaye Lee

    Deanna,

    Are you suggesting that everyone should stay living with their parents, assuming their parents are lucky enough to own a home, until they can afford to buy their own home? You can’t seriously be suggesting that there be NO rental properties????

  56. nurses1968

    Deanna,
    A few years back now I went through a less than amicable divorce to escape an abusive situation.
    I rent now as a nurses income would never service a mortgage.
    Where would you have me, in a battered wives shelter or a poor house ?

  57. Bighead1883

    nurses1968February 20, 2016 at 3:53 pm

    So you know Red Ned mate?
    He knows his stuff alright,especially about how insidious the Greens are about their wording and utter B/S
    On social media Greens are calling raising minor party status membership from 500 to 1500 electoral reform and so is Xenophon
    Unbelievable and I look forward to Red Ned`s view on this when I catch up with him
    ———————————————————————–

    Backyard Bob February 20, 2016 at 9:31 pm

    Your hypocrisy about being sick of “party hackery” is so positively Green
    This comments section is full of ” party hackery”
    ————————————————————————————-

    cornlegend February 20, 2016 at 10:04 pm

    Thank you for the ethical display of humanity that should be a yardstick for all landed gentry
    You sir are a shiny light [a light on the hill so to speak]
    May your PMO continue to run a tight and humane ship and the work your company does with the disabled is not only hands on but commendable- hat`s off to you

  58. billie11

    I own a rental property that was negatively geared effectively for about 5 years, at that point I ought have used the equity in that property to buy another rental property to negatively gear.

    I have no issue with no negative gearing for existing housing stock. In the interests of fairness perhaps the changes need to be implemented over 5 years.

    I had a friend who was a building sub-contractor who owned 3 rental properties as his superannuation. They were low end housing so each house lost 6 weeks rent a year, he did all the maintenance, lived frugally off the rents from 2 of the properties and the third rent was buffer. He didn’t negatively gear.

    I also know an anaesthetist who manages her tax bill with a string of negatively geared rental properties

  59. nurses1968

    Bighead1883
    Yes I know Red Ned and Cornlegend , cornie since his Hernia operation .
    I know the good work Cornie does with those suffering mental illness , one being Red Neds grandson, going the further step of not only acomodating him but employing him.
    Not all Landlords are sharks and it may surprise some the extent of the Cornlegends family in assisting and providing funds for Homeless shelters, Soup kitchens, relief worker to work in the worlds hot spots and they seek no publicity or glory for their effort .
    There are bad landlords, but don’t tie the lot in one bundle , as someone put it,they are not all ” sitting on a corner waiting for money to fall into their pockets”
    p.s.
    I know you are well aware of the relief worker to whom I refer and her dog :-]

  60. billie11

    There is the problem that its much cheaper to build on a greenfields site in the outer fringes of cities. In Melbourne and Sydney these outer fringes are so far out that less than 10% of jobs are within a 40 minute drive.

    If ALP’s changes go through there should be more new housing stock built in the inner suburbs to attract negatively geared investors. This new housing stock won’t be entry level, in inner south east Melbourne the rent for a new townhouse has to be $1000 per week.

    EXAMPLE
    Cost of land $1 million
    cost of building $700,000 – yes I know house land packages are $320,000
    two unit build has to sell for $800,000 each
    rent $1000 per week
    a professional developer notes that the $100,000 margin/profit is very slim and likely to be lost in unexpected costs

  61. Conrad

    So many landlords say “but I am not bad, but I do want to join the property-buying scramble to buy my third home bacause that is profitable for me”. That is the problem because this scramble drives up prices for people who want to buy their one home. Obviously this pushes up prices.

  62. Bighead1883

    Conrad February 21, 2016 at 11:34 am

    Which is why Labors “negative gearing policy’ is so timely
    It`s win win as new houses get built,whether outlying or [inner city] strata title units and old houses either fall in price or remain stable
    It`s relative you know because it`ll be right across the board
    If your old house in Sydney drops a little because of Labor`s negative gearing policy then where you`re buying next does so as well
    But hey don`t take my word on it,create falsehoods and bark up the wrong tree,knock yourselves out

  63. Carol Taylor

    One solution which seems to be all but forgotten is decentralisation – jobs creation in rural and regional areas, which in turn takes the pressure off housing in inner suburbia. With decentralisation you minimise the effects of greenfields developments being impossible to live in due to the unreasonable time it takes to commute to work. However, due to vested interests who are worried about nothing more than their multi-inner suburban investment properties maintaining their over-inflated value, decentralisation is to be discouraged.

  64. Kaye Lee

    Carol,

    That is why I keep advocating for high speed rail.

  65. 5ime0n

    If I may, as a renter, I am fortunate enough to have a decent landlord, at the moment. So I don’t support tarring all Landlords with the same brush. But I am also 27 years old, and even with financial resources, will be lucky to purchase my first family home before I am 35. I support any new policy that increases the chance of the first home buyer to secure a home to live in, without having to resort to dangerous bank loans.

    Perhaps I am naive and don’t have all the facts on property ownership or negative gearing, but the utter vitriol that I have read in some responses to this open letter make me ashamed to consider the AIMN a reasonable place for discussion.

  66. Michael Taylor

    5ime0n, there is one particular culprit, and unfortunately his rude commentary can be found across all articles. Best to ignore him and you’ll find that most other comments are intelligent and courteous.

  67. Kaye Lee

    5ime0n,

    Don’t tar all commenters with the same brush 😉 (though I agree points are better made without vitriol.)

    Victoria’s style is confrontational. That sometimes causes similar responses.

  68. Florence nee Fedup

    All that being proposed, is negative gearing be confined to new housing with the hope of increasing housing stock overall. What is so wrong with that.

    Those already in the system are protected by grandfather clause.

    Maybe some can explain how someone earning say $70k gets the same tax savings as someone on say $200K.

  69. Florence nee Fedup

    No one with negative gearing is forced to sell. #auspol

  70. Florence nee Fedup

    How many low income earners can now afford rental accommodation close to city centre. Most landlords will be found on outer fringes.

    I fail to understand how Labor’s proposed policies have anything to do with quality of landlords.

    Are those on low incomes that are negativity gearing really taking best option available to them. I can see many good reason to buy investment property but saving on my annual tax bill is not one of them.

    Would paying more into super or salary sacrificing return better savings with less stress. Just asking.

  71. Wally

    Something to consider when considering the full extent of negative gearing.

    Should we stop business from negative gearing as well?

    “The bigger point is that this — “negative gearing” — is exactly what any normal business does every day of the week. That’s the only way they can take a punt on expansion.

    Whether you are opening a new shop or a new factory, you have to be able to deduct the costs of the salaries you pay staff and the interest on the money you borrowed against the profits you make on your existing business.

    No business would ever consider expansion if they could not deduct these perfectly legitimate costs against their overall income to arrive at their overall taxable income and so the tax to be paid.

    CRITICALLY, it makes no difference whether the business ends up “making its profit” on the normal operation of the expansion — equivalent to rental income from an investment property; or in selling what it built up at a profit — the equivalent of selling your rental at a profit.

    It makes no difference for a business because it pays the same flat 30 per cent corporate tax rate either way.

    It can make a huge difference for an individual because the capital gain will (mostly) be taxed at a lower rate than personal income.

    This brings us to the never-discussed heart of the negative gearing issue. This is not the difference between ordinary income and capital gains tax, but our marginal tax scales.

    Negative gearing would lose most of its appeal if we also had a flat 30 per cent personal income tax rate and capital gains could then be fairly taxed as normal income.

    I say only “most” of the appeal because there’s still the appeal of basic gearing.

    Assuming ever-rising property values, if you buy two $1 million properties funded 80 per cent by borrowing, you will make twice the profit of buying one $1 million property. But it’s critical for you to be able to deduct interest against whatever income you have.

    But doing that is also riskier — as many investors found back in 1990 when they suddenly hit 18 per cent interest rates and property prices plunged.

    Since then it’s been a one-way street to wealth, with rising property prices and low interest rates. The more you geared — whether negative or not — the more you made. So yes, “negative” gearing — although a totally inaccurate term — is a perfectly legitimate tax practice. Indeed, it’s a totally logical tax practice given our tiered tax structure and differential CGT.

    It is in its way absolutely no different to the franked dividend incentive for people to buy shares. People who do are not “tax avoiding”.

    Buying property has proved the single easiest mechanism for people to build up assets. Even if it came at the cost of reducing disposable income.

    Yes, they might have ended up paying “less tax”, but they also ended up with less actual money in their pocket. And what tends to be forgotten, the bank pays more tax on the extra money it has lent.

    Good or bad, it also means there are more buyers in the market. That pushes up property buyers but also means more money is fed into the economy from the sellers.

    http://www.heraldsun.com.au/business/terry-mccrann/demonising-the-logical/news-story/ad21b3b33cccd39cc11cd6d6ac733783

  72. Backyard Bob

    I have always rented, save for a few times I have had to occupy the “family home”, such as now, and I’ve never felt particularly disadvantaged by doing so. I believe it’s possible to have a serious and sober debate about the merits or otherwise of negative gearing without morally impugning anyone. There are so many issues relating to housing in this country that we need that debate, and we don’t need to condemn people who abide by current laws and make a quid doing so by imposing our personal sociological view upon them.

    I want to see negative gearing grandparented out of existence because i think it represents a false economy and produces certain negative social consequences that I may or may not bother to elucidate, depending on the tone the discussion takes.

    I’m not averse to robust debate but this one contains moral judgements I don’t think belong.

  73. Wally

    Backyard Bob

    At the end of the negative gearing debate the government of the day will make a decision that we all will have to live with like it or lump it.

    Often when changes are made they do not bring about the desired result so before spending time and effort debating negative gearing the desired outcome/s should be defined. Is the intent to make housing more affordable, increase tax revenue, remove tax breaks from rich people or something else? All or some of these?

    I believe that the main objective of the anti negative gearing mob is to make housing more affordable. Considering interest rates are at an all time low, supply of houses and land is reasonable I don’t believe changes to negative gearing will yield the desired results. The biggest problem facing first home buyers is thee cost of houses vs. wages, increased income is the only way to solve the problem without causing undue financial stress on existing home owners with big mortgages. If changes to negative gearing cause house prices to fall (I don’t believe it will) that would be the end of many families great Australian dream.

    Beware what you wish for people it could bite you on the bum.

  74. Miriam English

    I’m pretty sure that it is only a few decades back that Australia had the highest rate of home ownership in the world. Within Australia I believe Newcastle was the highest. Those days have sadly passed. I wonder if they can be brought back. At the rate we are swallowing up our fragile ecosystems perhaps it is better that we are not building homes the way we used to. Maybe the solution is for the government to build good quality mass housing and sell the apartments to people. Investors are unlikely to do that; they’d be far more interested in getting rent money forever. No judgement, just a fact of life.

    And the country with the highest rate of home ownership now? Cuba. The Yanks hate that little country, and sure some mistakes were made there, but geez, they did some very cool things too. One of the best medical systems in the world; they export highly qualified doctors all over the planet; one of the longest average life-expectancies in the world; and extraordinary levels of home ownership. For a tiny, poverty-stricken country cut off from the rest of the world by the most powerful bully on the planet, they accomplished pretty damn amazing things.

  75. cornlegend

    Victoria,
    You hve made me look deep down inside my soul with your stinging comments
    We have 3 adjoining residential properties {rented} in a seaside town where a massive marina is being built
    Developers have hounded us to sell so they could redevelop the site with high end townhouses for the rich yachties to holiday in .
    I think we may have to evict the long term tenants,and sell.
    As Victoria said
    “they don’t even bother with negative gearing because they don’t have an actual job, and instead just gather rents, are the very definition of rent-seekers ”
    I don’t want my grandkids thinking of me in that way.
    They may end up friendless because of me :-{
    OK Victoria, you win

  76. chris

    Well said Victoria

  77. Richard Ure

    “Wealth builders” are people who maintain modest life styles and plan on being self funded retirees. For a couple, this saves the budget about $32,000 pa and continuing. Do they get any credit from this one sided “analysis”? http://bit.ly/1SVf9jr

  78. Wally

    Richard Ure

    The article you have linked to gives a very good overview of property investment and negative gearing. It also points out that what is commonly referred to as negative gearing in Australia “offsetting a loss against other income” is the result of negative gearing.

    “A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and depreciation – exceed the income it produces.”

    Labors proposed changes will not stop negative gearing on existing property they will stop the loss being offset against income from other sources.

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