Negative gearing. It’s back on the discussion table. It’s a contentious subject. Some people want it; other’s don’t.
I would hazzard a guess that the two camps fall this way.
- WANT IT: Anyone who has an investment property and mitigates the weekly rental shortfall through the negative gearing tax law.
- DON’T WANT IT: Anyone who doesn’t have a rental property.
I could be wrong. Maybe there’s some overlap or I’ve got my “human nature thinking cap” on backwards. But, I feel pretty confident the two camps fall this way; or at least close to this way.
Now, here’s where I must admit, I don’t understand either camp.
Why?
You like negative gearing. Why?
Well for the people that want negative gearing I have a question. Why would you want to make a loss?
After all, in order to apply the negative gearing tax laws, you have to make a loss. And, that’s a good deal for who? Or should I say “whom?” (Help me out here English majors!)
I’ve been there. I’ve done the negative gearing thing. It’s not fun. I used to hope like crazy that my properties would grow in value. If they do, all is fine. But, what if they don’t? What if we have a housing crash here in Australia like the one they had over in the USA? Oh no! I don’t even want to think about it!
Does the phrase, “sleepless nights” mean anything to you?
So, negative gearing means taking a loss; or breaking even at best. Not exciting. And, taking a loss or breaking even, doesn’t pay the bills.
I personally would rather steer clear of negative gearing. I would rather have each property making a handy profit each week, month and year.
You don’t like negative gearing. Why?
Now, for people who are against negative gearing, I have a question. Why would you want to drive property rents even higher?
“How so?” You ask.
Well, we could delve into theories and debate them all day. But, why not just look back to history for the last time the government did away with negative gearing? What happened?
That’s right, rents went skyward. For more on this just pick up Jan Somers book, Building Wealth through Investment Property. She explains it very well.
To Keep or Not to Keep? That is the question.
Keep the negative gearing tax law or get rid of it. For me, it doesn’t matter.
You see, as a full time property investor, my main income is from rent. I don’t have any job income to offset. Therefore, negative gearing doesn’t apply in my case.
That’s ok. I’m not interested – any more – in taking losses to get a tax break. I’d rather have income and/or profit and pay the tax.
But, for those who want negative gearing to stay, there’s some good news. I came across and article that says the government is not going to tamper with it. The article, Government not contemplating changes to negative gearing: Wayne Swan is fairly interesting to those with strong feelings either way.
What’s your feeling? Negative gear or not to negative gear?