Banker wrote:Which ever party promises to scrap/cap Negative Gearing will get my vote this Saturday.
Why do we allow residential housing to be used as an investment? Who benefits from exponentially increasing house prices?
Buying and selling used houses does nothing for the economy. Imagine if negative gearing was used on something productive?
Beware of superficial thinking!
There is always a response to any policy decision, and what looks like a good idea superficially can have a down side.
Paul Keating tried to scrap negative gearing on rental properties when he was in power.
Investors then sold the properties to people who bought them to live in and a shortage of rental accommodation developed.
A new form of auction emerged - people began offering agents higher rent than was advertised to try to secure the accommodation.
And, house prices increased anyway, as people became desperate to get accommodation.
PK then restored negative gearing to fix that problem he had created.
Later when prices eased back people who had stretched to the limit to buy a house in the outermost suburbs due to the rental shortage found they owed more on houses than they could get for them.
One of the other side-effects was that the price of second hand luxury cars rose because they then became a better tax deduction than property.
I divested myself of two properties as soon as he made the policy announcement, and before selling prices eased.
Six months later, I was able to sell a Porsche 930 I'd bought second-hand a few years earlier at a 40% profit.
Another example of not thinking things through was his decision to require log books for car deductibility.
I'd been happily accepting the 90% deduction for
one car the ATO always granted to doctors in private practice.
The next year, having spent the required time filling in log books and being thorough about it since I'd been forced to do it, I claimed 100% of my car and 30% of my wife's which I borrowed one day a week to establish the claim.