Negative Gearing is OLD news…

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I read an interesting article today about the woes of negative gearing and what a drain it is on revenue.

Firstly – this article is talking about data in 2010-2011

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My rough calculations make this loss at about $8 Bn. Not the $13 Bn mentioned in the article. No mention of the $5 Bn positively geared that’s taxable?

Or am I missing something? Surely the writer isn’t suggest a taxpayer won’t be able to claim expenses like property management fees, accounting fees etc. in the overall loss? That would be like saying a share trader shouldn’t claim stockbroking fees as a deduction.

A newspaper wouldn’t beat up the headline to sell papers would it?

Not sure if the writer has included capital allowances as part of the losses…if so, that would be strange in light of the recent finding of the treasury.

Is he even saying you can’t claim depreciation of plant & equipment? Now that would be a big call.

ATO Chart

The article also highlights those 58,000 greedy well to do’s claiming $23,800 in tax deductions. Let’s forget to mention the close to 400,000 taxpayers claiming tax deductions where because the tax rate is so low the tax loss is negligible.

BUT here’s the real interesting thing…the loss referred to relates to 2010-11. Interest rates were about 1.5-2% higher. If you reduce the amount of interest paid to reflect today’s rates – is there any loss at all?

I can borrow money from CBA today at 5.19%, or for 5 years at 5.69. Guess what? Any property I buy today or would target would be getting me at least that yield – negative gearing is old news.

The other thing I find interesting about the article is – WHY PICK ON PROPERTY?

If you’re going to stop investors claiming a loss on their investments – surely those that negatively gear into shares would not be able to claim the loss either?

This is where is gets more ridiculous.

By stopping negative gearing into property, you as an investor, could still negatively gear into a listed property trust. Or even a listed property trust made up of residential houses.

Anyway, negative gearing’s a furphy – because any right-minded investor would be close to even at the moment or generally positively geared at today’s rates!


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