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Putting The “Negative” Back Into Negative Gearing!

“Well, for most middle-income people it (negative gearing) is the one chance they’ve got to build some wealth.”
Scott Morrison, Treasurer

Mm, so it’s official! According to our Treasurer, simply working and trying to save won’t be enough to build wealth. We need to invest!

Mr Morrison has also informed us that two-thirds of people who are taking advantage of negative gearing have a taxable income less than $80,000, while Mr Turnbull has been telling us that Labor’s policy will send prices down if you already own a house and up if you want to buy one.

Now I think we should just take them at their word for the moment and accept that everything that they’re saying is correct, although Turnbull’s simultaneous rise and fall statement is rather reminscent of Tony Abbott’s promises to reduce or eliminate taxes, impose no new ones, not cut spending to Health, Education, the ABC, pensions, etc, and still bring the Budget back to surplus in his first term of government.

Most of you probably have some idea how negative gearing works by now. An investor – who’s probably simultaneously a mum and dad, if you listen to Scottie – takes out a loan to buy a property. They then rent this property out. Because the rent doesn’t cover the cost of the interest (as well as the rates, repairs and real estate agent who manages the property), there is a loss which is deducted from the investor’s other income. Over time, the property experiences a capital gain and when it’s eventually sold, tax is paid at the capital gain rate which – for most investors – will be less than if they’d originally paid income tax on it.

So like I said, let’s take Scottie and Malcolm’s mums & dads investor on $80,000 a year.

Assuming that it’s only a single person, one needs also needs to assume that they’ve paid off their house and only have one credit card with a $20,000 dollar limit, because with mortgage repayments of $1500, the “how much can I borrow calculator won’t lend them anything at all. But for the sake of argument, let’s assume that there a two of them earning $80,000. With the same assumptions the calculator now gives them enough to buy a dog kennel. No land, just the kennel.

Mm, ok, let’s rip up the credit card and presume they have no living expenses and that they own their own home. Great! Now they can borrow enough to buy a house.

So let’s say they decide to borrow enough to buy in a decent area where they’ll attract the sort of tenants that’ll look after their house. You know, no riffraff. Buying in Melbourne let’s assume that they buy something for half a million – that gets them a nice flat somewhere. If they wanted to borrow a little more for a million they could buy in a decent middle class area and…

Oh wait! They’re only earning $160,000 a year. And they’re borrowing.

Borrowing!

Shouldn’t they be living within their means? Isn’t that what the Liberals told us ad infintum?

Ok, this is different. It’s borrowing to invest. Labor were borrowing to do things like build the NBN, and that wasn’t an investment…

Oh wait, yes it was. But the Liberals promised it faster and cheaper. Under the Liberals we’ll get it in 2016. Well, it would have been if it wasn’t for the fact that we’ve had to buy enough copper that it could fit round Malcolm Turnbull’s ego. You see, the some of the copper was old and it needed replacing.

Anyway, the thing is that when governments borrow, it’s bad and it could leave their children with debt, but when mums & dads borrow to invest in real estate it’s a good thing because real estate could never go bad unless Labor get in power and then it’ll all go bad and these mums & dads will lose their money and leave their children with debt and . . .

Hang on, I’m getting confused again. I best ask Peter Costello to explain. He’ll know what to do. He’s a wiz with money. Why I remember him announcing that we were going to sell our gold reserves back in the late 90s. We got about $300 an ounce. Some people suggested that it might have been better to sell it slowly over time, because as Australia was a gold producer, a fire sale like that could reduce the price for our miners and mean less tax for the government. But old Pete knew what he was doing. In the years after the sale, gold steadily rose and is now worth over three times that. Shame we can’t sell it again.

Well, I hope this has made it all clearer for you. When governments invest it’s bad, but when mums & dads invest it’s good and if they lose money because of the housing market dropping, it’s Labor’s fault!

And as for the cost of a new home being out of the price range of young home buyers, Joe Hockey had the answer to that. Just get a better job! He did.


Is it just me, or does anyone else find it strange that both Abbott & Credlin have denied the affair but not that she said he couldn’t do the job without her or most of the other claims about her bullying behaviour. The other thing that I thought strange was that Abbott’s statement argument that his government wasn’t dysfunctional because of stopping the boats, repealing the carbon and mining taxes and its start on Budget repair, but given all those things occurred in 2014, one has to ask what had he done lately? His statement was akin to me arguing that you can’t accuse me of drink driving because I did a breath test in my early twenties. Oh, I guess the drink driving analogy may have sounded like I was having a go at Peta’s little indiscretion. And by indiscretion, I meant her drink driving non-fine, non-conviction because although she was over the legal limit, she had a letter from the Eternally General Brandis, not anything that she’s denied doing with Tony Abbott.

 

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18 comments

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  1. John Kelly

    Morrison seems to have a problem with facts and their sources. From this point on, every so called statistical fact he offers should be examined with great scepticism. In an election year, he will be tossing “stuff” around like confetti. Someone needs to be on the ball.

  2. Rossleigh

    Keep up the good work, John and I’ll just keep repeating what the Liberals say and have people call it “satire”!
    Which, btw, reminds me. We all have to give Neil of Sydney credit. He does it so well. I’ve been looking to see if he’s coming down to Melbourne for the Comedy Festival but he must be too much in demand in his home state…

  3. Jennifer Meyer-Smith

    Morrisscum’s examples of ordinary people who might partake of negative gearing assumes they are in sufficiently paid and secure employment.

    The fact is many teachers are NOT because they are on contract or casual.

    He also assumes they are in secure two income relationships coz I can tell you that an ordinary teacher alone does NOT get $80k per year.

    I had a bank jockey joke at me once that he knew my income was meagre coz I was a teacher. Even little brown nosers like to joke at how middle level professionals like teachers are poorly paid, so why does Snotty think that is a good example?

    Conceivable possibilities are, if such people conducted such negative gearing activities outside of the metropolitan areas of major cities. I have personal experience of such endeavours, as outlined in another thread.

  4. jim

    Hey great post again, heck it’s 7.30 I;m going to watch another episode of the Liberal party on”our” ABC see ya.

  5. Jennifer Meyer-Smith

    Grammar in last post not quite up to my usual exemplary standard but you get the gist.

  6. gangey1959

    Jennifer.
    can we PLEASE agree on scotty’s name. You reckon it’s Morrisscum, with a capital. I reckon it’s moronsson, without.
    Maybe we should hold a plebiscite. Either way, there is no doubt that he? hasn’t a clue, but I would hate for our dear readers to think there might be 2 of the bastards.
    You are way better at this than I, so I will bow to your wisdom.

  7. Audioio

    “when government’s borrow”

    What’s a “borrow” and why does the government possess one?

  8. Marty

    I like your articles. I really do, but…. can you please, please, please get somebody to proof-read them prior to publishing? I really strain to find your intended meaning, sometimes. Here are some examples from the above:

    “Mr Morrison has also informed us that two-thirds of people are taking advantage of negative gearing have a taxable income less than $80,000” – Is there meant to be a ‘who’ after ‘people’?

    “An investor – whose probably…” That should be -who’s-.

    There are many more such errors.

    We all make the occasional mistake with spelling and grammar and most of us can divine your meaning, but unfortunately a lot of the articles I read here are just a struggle to the point of sometimes making me want to stop reading.

    Just letting you know. All-in-all I really like this site and the information available here. Keep up the good work!

    W.

  9. Michael Taylor

    Thanks Marty. I’ll go in and fix those errors.

    We don’t have proof readers as each author has the autonomy to post their own articles, so it’s up to them to check their own work before it is published. But having said that, if someone from our admin team notices a mistake they will quickly jump in and fix it.

  10. jimhaz

    Negative gearing is government subsidy. They got rid of many renewable energy subsidies, and things like tariffs and they ramp FTA’s, so under their ideology they should also do the same with NG. The only reason they don’t is self-protection of and from their vote base and self-interest.

    It seems pollies take an Hypocrisy Oath.

    “I swear by Menzies the Ming, and Howard the Honest, likewise Murdoch and Packer, and call all the gods and goddesses to witness, that I will observe and keep this underwritten oath, to the utmost of my power and judgment.

    I will reverence those masters who taught me the art of hypocrisy and deception. Equally with big business, will I allow them things necessary for their gluttony, and will consider their lobbyists brothers. I will give them policies with an expectation of reward or payback; and I will impart all my acquirement, instructions, and whatever I know, to my parties supporters, as to my own; and likewise to all my faction, who shall bind and tie themselves by a professional oath, but to none else.

    With regard to healing those not like us, I will devise and order for them the best propaganda diet, according to my judgment and means; and I won’t care if they suffer hurt or damage.

    Nor shall any man’s entreaty prevail upon me to administer aid to anyone; neither will I counsel any man to do so. Moreover, I will give no sort of medicine to any pregnant woman, with a view to destroy the child [Editor’s note: added by Abbott).

    Further, I will comport myself and use my knowledge in a devilish manner.

    I will have dirt files and leak information, but will commit that affair entirely to my staff so I cannot be blamed.

    Whatsoever environment I may enter, my visit shall be for the convenience and advantage of myself; and I wont refrain from doing any injury or wrong from falsehood, and (in an especial manner) from acts of an amorous nature, whatever may be the rank of those who it may be my duty to cure, whether mistress or servant, bond or free. [Editor’s note: Abbott wanted this out, but was overruled).

    Whatever, in the course of my practice, I may see or hear (even when not invited), whatever I may happen to obtain knowledge of, if it be not proper, I will keep sacred and secret within my own breast, to use when needed.

    If I faithfully observe this oath, may I thrive and prosper in my fortune and profession, and live in the estimation of posterity; or on breach thereof, may others at least be worse off!”

  11. Jack Straw

    Great article. The Libs would sell their Grandmothers to keep Negative Gearing as is.

  12. Douglas Pye

    I’m genuinely concerned that the current Government (along with the MSM) are outright lying to the faces of our Australian constituency.

    Seriously, following on from Abbott’s barefaced lies leading up to the last Fed. election, and the current very real disdain for respectful governance, should we (the Aus. public) be deeply concerned about what can be coming ‘down the line’ ?? ……. given the conservatives win the coming Fed. election!

    Do ‘they’ expect to do ‘another Howard’ and win ‘the battlers’ with tax cuts etc. ? The current ‘noise’ is all about rubbish ! Whilst there’s impending ‘flack’ hovering on the World Stage !

    Great article Rossleigh … thank you.

  13. Jennifer Meyer-Smith

    gangey1959,

    on the contrary, Sir, you are equally entitled to call Snotty M whatever you like.

    jimhaz,

    good rendition of the LNP ‘oath’. Just one thing, would it apply also to the few female representatives involved? It only seems to use specific male gender references in its dictates!

  14. jimhaz

    I didn’t want to go far from the original Hippocratic oath, which is from BC times.
    https://en.wikipedia.org/wiki/Hippocratic_Oath

    ..and conservatives are misogynists by tradition. They really don’t want to stretch the limited “power base’ to women, as that limits the opportunity market for their own megalomaniac power desires. This is on top of the natural sexual interaction based misogyny most of the population, female or male, possess.

  15. Jennifer Meyer-Smith

    jimhaz,

    I accept your explanation, as long as the rest of us more enlightened types exercise a better standard of gender inclusive language that unquestionably refers to women and men in all facets of life.

  16. gangey1959

    Jennifer.
    In that case, I vote for moronscum. Got it all covered

  17. Thursday

    We have been so manipulated by the Get Rich Quick Schemes in Australia. We have all lost it. We are losing our souls to money.
    What will we remember on our deathbed the great times with friends and the struggles we overcame or the 25 houses you bought?
    We do live in a community. Stop turning residential housing into a get rich scheme for the few.
    Stop, look around and smell the roses and put your energies into something worthwhile Australians.
    Greed is an addiction like many other things. There are so many issues going on in this in this once Egalitarian country.
    Have you ever wondered?
    Why is our suicide rate is so high? Because we are a very indifferent society. And in the end we get the society we deserve.

  18. Jennifer Meyer-Smith

    Hear, hear Thursday.

    gangey,

    moronscum sounds appropriate.

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