Here is an excerpt from Noel Whittakers lastest newsletter regarding the tax deductions announced in the budget.
For years the Left have been calling for abolition of negative gearing. They should love this budget because the reduction in the tax rates will mean that the attractiveness of negative gearing will be severely diminished. Pre GST, when the top marginal rate cut in at $50,000, a person earning $60,000 a year got an effective 48.5% from the Government when they borrowed for investment. That will be just 31.5% now and this, coupled with progressive cutbacks to the depreciation rules, mean that property investment is not nearly attractive as it was five years ago. Skill in picking a bargain will now be essential.
Those of you who use neg gearing as a tax deduction and fall into this tax bracket, do you think it will effect your decision to invest or re-invest if the short term benefits disappear in the form of less deductions?
markk
Happy Hunting
http://www.kentscollections.comOnly means that the savings are reduced for the time being, since the government has taken no steps toward protecting this latest cut against inflation. Hell HECS and fuel excise tax are inflation adjusted, what about income tax?
I think the super surcharge elimination could have a more profound effect, as baby boomers close to retirement might find this a better alternative. Particularly as confidence in RE falls.
But I see no real indications that negative gearing is going anywhere, for all the rhetoric.
It won’t affect my investment decisions as I see negative gearing as a tax reduction strategy, which for me is always secondary to my investment strategy (ie, make sure you’re buying a good investment first; you will never get rich off tax deductions).
I think people investing in something just because it’s negatively geared, is as silly as investing in something just because it’s CF+
I agree with superman that super surcharge elimination may have more impact.
Cheers
Jason.Originally posted by JasonBourne:It won’t affect my investment decisions as I see negative gearing as a tax reduction strategy, which for me is always secondary to my investment strategy (ie, make sure you’re buying a good investment first; you will never get rich off tax deductions).
This is the most sensible ‘strategy’ I have ever heard in this forum and I wish everyone would listen to it and implement it!!!
Robert Bou-Hamdan
Mortgage AdviserBut Australia is still the only country that taxes retirement savings on the way into a fund, taxes the earnings of the fund and then taxes the money on the way out again.The effect of this is to turn superannuation into nothing more than a system of tax deferral: the real tax break for long-term saving in Australia is so minimal as to be hardly worth the trouble.
One of the side-effects of this, I’m convinced, has been the property investment boom of the past five years, as baby boomers use the greater tax advantages of negative gearing to bolster their savings.
Sorry, the quote in the previous post is from Kohler today pointing out that up until now it has been more tax effective to put money into investment properties rather than superannuation. The removal of the super surcharge redresses the balance a little, but the tax system still very much favours real estate investment.
http://smh.com.au/news/Business/Super-idea-back-to-flat-tax/2005/05/17/1116095963636.htmlI’m with Jason and Robert on this one.
I am not good with share trading to build wealth as i don’t have the time to sit all day and analayise charts and see wether the CEO is having it off with the secretrary, which will effect the share price because his wife found out and told “the today tonight program”.
I like to gear property (throughly researched) and still have not found a better way to build wealth over time.
resiwealth
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