How very disappointing Malcolm
In his 2005 tax policy paper, Malcolm Turnbull described negative gearing and the CGT discount as a “sheltering tax haven” that is “skewing national investment away from wealth-creating pursuits, towards housing”, and has caused a “property bubble”. Turnbull also acknowledged that “Australia’s rules on negative gearing are very generous compared to many other countries” and that “the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future”.
Moreover, in 2014 Turnbull acknowledged that the tax system favours richer older people over younger working Australians: “Looking at Australia’s tax regime you would say that it is too tough on people earning income… but is incredibly concessional to older people who have made their money…”
The International Monetary Fund found in September 2015 that, starting around the turn of the millennium, Australian house prices have become radically disconnected from real per capita GDP – “house price inflation has greatly exceeded income growth … and has exceeded the OECD average”.
Since 1997 price-to-income and price-to-rent ratios have nearly doubled. Sydney’s price to income ratio of 12.2 makes it the second least affordable city in the world, behind Hong Kong. Melbourne ranks fourth. It turns out that London and San Francisco are cheap by comparison.
Our current tax arrangements are seriously distorting. The ready availability of large amounts of leverage to buy residential property – much more than for shares or any other asset class – combined with negative gearing and concessional capital gains tax rates, leads to a distorted market for housing.
More money flows into it than otherwise would. That drives up prices and creates significant risks to financial stability, as the financial system inquiry warned. The Australian economy is already badly unbalanced, with too much capital being channelled into unproductive land/housing and not enough into productive enterprise.
Not only has the Abbott/Turnbull/Abbott? government got no new policies, Turnbull is now resorting to using Abbott lines.
In June 2015, Tony Abbott said:
“Millions of Australians have mortgages and the last thing they want to see is the decline in the value of their most important asset. (Mr Shorten) is someone who wants to be the prime minister of Australia and he wants your house to be worth less.
Do not trust this man with your house price, do not trust this man with your superannuation, do not trust this man with your future and do not trust this man with the government of Australia because what he wants is your house to be worth less.”
Which is remarkably similar to Malcolm’s current line:
Every homeowner in Australia has a lot to fear from Bill Shorten. The consequence of [Labor’s policy] will be a decline in property prices
…what Bill Shorten has done, he has set out to smash the residential housing market… That will lower the price of property… Bill Shorten is going to gnaw away at that equity. His policies will make your home worth less…
Bill Shorten’s policy is calculated to reduce the value of your home.
Former Reserve Bank governor Bernie Fraser said “The current negative gearing (and related capital gains) tax arrangements… divert savings and resources away from potentially more productive investments into (sometimes speculative) property investments to take advantage of the tax concessions. This does nothing to improve economic growth (or the budget bottom line).”
Furthermore, tax incentives for investing in housing “can accentuate short term fluctuations in house prices and sustain long term increases in house prices which far outstrip increases in the earnings of most Australians”.
“This last-mentioned consequence, plus the fact that the benefits of the concessions flow disproportionately to people on higher incomes, make the current measures manifestly unfair.”
Scott Morrison has said that rents will skyrocket, basing his assertion on a report written by BIS Shrapnel which says Sydney apartment rents would be $40 higher in 2026 if negative gearing were limited, because landlords would pass on in full to tenants the value of the lost tax concession.
The chief executive of the Grattan Institute, John Daley, disagreed saying some of the assumptions in the report didn’t pass the “giggle test”. The vast majority of 50 economists surveyed by the McKell Institute also disagreed with the report which even the authors quickly stated was not modelling Labor’s policy.
Turnbull has forsaken what he knows to be true for the attack dog approach. How very disappointing.
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z -
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Return to home pageSo Turdbull believes that it’s OK for workers on $37,000 p.a. to subsidize workers who want to invest via the tax system, I beg to differ.
To quote Bill Shorten from question time earlier this week – “Why won’t new Malcolm just agree with old Malcolm?”
Such a disappointment.
Every single person agrees that house prices are over-inflated due to the overly generous incentives to invest in housing and the vast majority of the benefit/wealth is going to older wealthy Australians and diverts investment money from more productive endeavours.
Government policy has resulted in this mess and now the government is too gutless to do anything about it.
and how totally predictable.
I was talking to my brother yesterday. He has often appalled me by voicing views brainwashed into him by Murdoch’s right-wing media. Yesterday was surprise. He said that Malcolm Turnbull is turning out to be a surprisingly weak leader and that he’s just a more charismatic Tony Abbott.
I was thoroughly delighted by this statement as it means millions of ordinary Australians are almost certainly thinking the same thing.
He really hated Tony Abbott’s attack-dog attitude. No doubt that’s why Abbott got the boot in favor of Turnbull — public disapproval. It’s nice to see Turnbull’s gloss wearing off.
Turnbull turns blind on several problem but insist on his own party backbench’s interest. he become a blind on property bobble, also affordability, and has forgot fairness of taxation, he also ignore to the high proportion of mortgage threat to banking system, multiple houses owners are enjoying negative gearing, he said that they are all low income
“the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future”
That is a very interesting point, maybe CGT concessions should be indexed on a sliding scale to the level of gearing and the period of ownership. If a property has been owned for a long period and positive geared for 10 years only apply CGT to 50% of the profit from sale but for a property owned for a short ownership term and negative geared for the entire period levy CST at 100%.
Interesting observation that responses during Parlimentary question time about negative gearing indicates that the government has spent more resources talking about, (and down) Labors policy than promoting an alternative. The PM states they are “still” working on it.
One would suspect the past two and a half years, plus another six whilst in opposition would have been enough to figure out some kind of policy besides “stop the boats”!
Oh, Australia, I morn for you! 30 totally wasted months by, firstly an “do nothing” inept PM, followed by a “do nothing” sweet talker!
Clean livin,
If they’d done nothing I would be happy. Instead they got rid of carbon pricing, the mining tax, the NBN, Indigenous legal aid, the increase to the superannuation guarantee and the low income co-contribution, the signed funding agreements for hospitals and education and so many other things. They have dragged us backwards at an astonishing rate. “Stop the Boats”, “school chaplains” and “more coal”. beaut.
Wally,
That is an idea worth investigating.
Malcolm used to be an interesting person, then he became Tony Abbott with a smile….now even the smile has gone.
we don’t need to worry about negative gearing. given the present rate of progress, back-sliding and innovation by the incumbent t—ts there won’t be an economy to worry about!
House prices in Sydney only really fluctuate at the very top end exactly where Turnbull sits. I’m assuming he only needs to negatively gear his parliamentary salary because the rest is hidden in the Caymans but he is so self obsessed that even this small attack from Labor has caused him to raise his voice and depart from any sense of truth or logic.
Love your work normally Kaye but seriously, you’re disappointed? That suggests you actually thought Turdface would change things? Really?
Kaye Lee, please tell me you have sent this to Shorten and Bowen (along with every other Labor MP and senator). If their PR team hasn’t yet been able to find these statements by Turnbull and call him on them then perhaps your work will help. Sincere thanks for your ongoing fight.
Garth, will they listen? Of course they won’t. I reckon someone will have to grab Shorten and shake it into him.
Anything that reduces the price of housing is a good thing in my mind. Far too much of people’s wealth is tied up in the mirage of capital gains on housing. Yet when you sell your current home for a high price, you then have to pay more for the next house, unless you move away to a less desirable location.
Living in an area some 100 kilometres from Sydney, I see our local house prices jumping because people sell a two-bedroom fibro house in say Pymble and come here and see a four-bedroom brick house with a decent garden, and they don’t hesitate to pay what is asked, because they think it’s good value. Don’t try moving in the other direction, your house sale here will not get you a decent home in the Sydney area.
I’m also puzzled because negative gearing on property will not be helping anyone without a house, or anyone saving for a house or people with only one house. It is only of benefit to investors, so why would ordinary home owners care?
You may be right Michael but when Turnbull has said things in the past that directly contradict his current hysterical ranting then he needs to be called on it (i’m specifically referring to the first two paragraphs in Kaye Lee’s piece). Whether or not they might listen to the info in any particular article from AIMN I just hope you continue to send them to the Labor party (and any other credible smaller parties and independents) so the fabulous work that you all do might contribute in the fight in parliament to bring these fraudsters the justice they deserve.
I read one economist who correctly pointed out that it’s only the wealthy who can afford to wear a loss/negatively gear – so much for the ‘mums and dads’ investors myth.
It also came to mind, why should people who studiously pay their taxes subsidise those who chose to minimise theirs.
This inept government has spent so much time complaining about Labor’s negative gearing ,which is a scare tactic that isnt working,and a whole lot of lies ,they are to gutless to come up with an alternative of their own.
Turnbull is ruled by Abbott and his back room boys ,
it’s plain as the nose on your face he won’t do anything to rock the boat,
It really beggers belief to think what this inept disfunctional government has install for Australia
they really aren’t able to run a government,
Malcom will be rolled after the election ,then Who will take his place,
Carol Taylor
“one economist who correctly pointed out that it’s only the wealthy who can afford to wear a loss/negatively gear”
I don’t agree with this statement but if it is true the proposed changes will have little if any effect. The changes will stop people claiming a loss on an investment property (purchased after a set date that is an existing property) against other income but it will not stop the losses from accruing and being offset against future profit generated by that property. So the changes will affect mum and dad investors who rely on the tax deduction within the current financial year more than it will affect wealthy investors who can afford to carry the loss into the future.
If there is a decrease in house prices due to the changes it may bring speculators back into the market who were responsible to a great extent in the initial blowout during the Howard governments days. Much of this problem was created by reducing the percentage of profit that capital gains was applied to, speculators would by the worst house in the street to make a quick buck and the lower priced housing stock first home owners were looking for disappeared.
Matters are further complicated because the high price of houses also increased purchase costs; stamp duty, agents fees and conveyencing costs have all risen making it very expensive to sell a home and to buy another. First home buyers want a house that will suit their needs for a long time rather than buying a smaller home and upgrading within a few years like us baby boomers did to get into the housing market and their logic is correct.
Don’t forget that capital gains tax can be avoided altogether if the proceeds from the sale of an investment property are paid into a superannuation fund. This is an area that needs to be addressed along with whatever other changes are made. I was astounded a few years ago when people I know sold land for double the price they paid and put the money into the wives superannuation for just over 12 months (she was 63 going on 64) and avoided paying any CGT on a large sum of money.
Excellent Article Kaye. I think more and more people are noticing every day that Turnbull is just Abbott in disguise. I am appalled that they can strongly advocate for punitive social security measures, which cause people and communities real harm, yet fiercely defend and protect the tax breaks for people who own more than one home. They are looking more and more out of touch every day.
John Daley..wasn’t he the bloke who carved up Hockey on AQ last year?
A convincing performer who shone a light of the more unsavoury aspects of aussie nature, in the workings- through of negative gearing policy over quite some time.
It is time for the LNP to ditch Malcolm and bring back Tony .
Purely for entertainment value
I always wondered about those Peta Cretin eggs in Tonys fridge but it seems I need not have worried
Sounds like Tony was on the job
“A new book has exposed the deep dysfunction at the heart of the Abbott government and revealed the former prime minister was warned he should dump his chief of staff Peta Credlin, partly because of a “perception” they were having an affair.
According to an extract published in The Australian, Senator Fierravanti-Wells went to Mr Abbott the night before the failed first attempt to unseat him last February.
She told the then-prime minister he had to remove Ms Credlin, arguing colleagues considered her responsible for many of the government’s problems, and they were prepared to take out their frustrations on him.
Senator Fierravanti-Wells is quoted in the book as telling Mr Abbott “politics is about perceptions”.
“Rightly or wrongly, the perception is that you are sleeping with your chief of staff. That’s the perception, and you need to deal with it.
Oakes has written about another anecdote from the book provided by a Liberal MP.
The MP recalled being invited to dine with Mr Abbott and Ms Credlin and watched Ms Credlin use her fork to feed Mr Abbott mouthfuls of food from her plate.
As the meal was ending the MP recalled Ms Credlin put her head on Mr Abbott’s shoulder and said she was tired.
She’ll be right luv
https://vine.co/v/OFQ0XVaIxx9
Here are just some of the LNP’s policies, 1 stop labor from stopping the boats,2 make the rich richer 3… thats it no more , here are some of Labors policies, 1 a fair and equal society, plus ….http://www.alp.org.au/positive_policies/.
Same Lies as Abbott, Same Policies as the Abed one, all you need to do is slip your agile legs into a pair of red budgie smugglers and Voila, Tone is back again. You voice your policies in clear and invotive diatribe. Waffle, Waffle and 3 bags full. I think the people of Australia can see through your Lies. Be Honest Mr. Turnbull, that is all the voters ask for. I know that will never happen. You are the same as Abbott .