14
Jul 2016

Negative gearing to stay

Negative gearing to stay

Written by Hudson Adviser Michal Park

So we have a result.  Was it the one we had hoped for?  Well, that entirely depends on your own personal preferences, but it undoubtedly offers no surprises (at this point anyway) about proposed changes on the horizon. 

We know that most of the proposed superannuation changes handed down in the May budget will be legislated, although there is still some debate about whether the $500K non concessional contribution lifetime cap will be adjusted.  Most in the industry (including Hudson) feel that this retrospective cap severely constrains individuals who are using their superannuation as a part of their financial plans, aspiring to be self sufficient in retirement.  One thing is for sure - it certainly reinforces the legislative risk that we know surrounds the superannuation environment.

Another certainty with the re-election of the Liberal government is the retention of negative gearing, and I for one, am relieved.  I’ll preface the rest of my Hudson Report with a disclaimer that should come as no surprise to any Hudson member – any investment should be regarded for its long term attributes and capital growth expectations long before considering any tax breaks. Having said that, negative gearing has personally afforded me opportunities to build my asset base whilst reducing my tax; and isn’t that the end game?  Working for a private practice, I can’t rely on some outrageously generous government sponsored superannuation scheme to fund my retirement; therefore I have to take calculated risks on investing my funds to provide for future capital growth.   I know the issue of negative gearing has always been a hot topic, and I don’t expect that to change.  In fact, I am sure I will receive some feedback from members who oppose my support of it (and my distaste for the aforementioned government sponsored super schemes).

One of the major criticisms of negative gearing has been this idea that it benefits only the very highest earning individuals.  There is no question that negative gearing (defined as allowing investors to offset losses from their investments to reduce their taxable  income) is more beneficial to those on higher marginal tax rates – however, ATO data reveals that 80% of individuals who claim negative gearing benefits on a property are doing so with an income of $80,000 or less.

Supporters of negative gearing often cite that any changes would be detrimental to both the housing market and the most vulnerable renters in our society.  If we hark back to the period between 1985 and 1987, the Hawke Government did indeed effectively abolish negative gearing and as a result, rents soared by 57.5% in Sydney, 38.2% in Perth and 30.0% in Brisbane during that time – cited as rents being increased by landlords to replace the “lost income”  that negative gearing provided.

The 2010 Henry Tax Review again tried to tinker with negative gearing, proposing to cap negative gearing losses to 40%, but that too fell by the wayside.

If the government needs ideas on how to reduce the woeful budget deficit, I would suggest they start by reforming the way public servants are remunerated via their superannuation plans.  Defined benefits have gone the way of the dodo bird (finally), but there remains some super schemes with enormous benefits that can not ever be matched by privately owned companies.

Financial planning isn’t restricted to individuals earning bucket loads of money.  Financial planning is about using the income that you do earn within the constraints of the legitimate tax laws (to your advantage), whilst trying to secure greater returns along the way to create wealth over the longer term.  I have no problem paying tax, I would just like to keep my tax to a minimum (call me Kerry Packer).

Source: ratecity.com.au

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14
Jul 2016

Hudson on social media

Hudson on social media

In today’s world of communication, social media is the largest growing form of online communication and home to the biggest database of people in the world. For a business to operate successfully in this day and age, it needs a presence in these forums. Hudson Financial Planning is about being current and keeping in touch with our members. It’s also about finding ways our members can reach us and making it easier for our members to share their Hudson secret with friends and family. So not being one for missing out on what’s hip and trendy and putting the “sexy” back into finance, you can now follow us on Twitter, Facebook, LinkedIn and Google+. There are so many ways of staying in touch these days, it can be overwhelming. Pick which medium suits you best.  As well as commenting on our articles on our website, we would love to hear from you through our social media. Hudson Financial Planning is about helping our members achieve their financial goals, but we are also here for those times when there is turbulence ahead. So many of our members think they have nothing to say to us until their redundancy, inheritance, shares, house or property sale comes through. How about closing the gate before the horse bolts? Talk to us to navigate a clear path through your finances. See it as a financial check up; you never know which bolts need tightening up until you see your financial mechanic.

On our social media, we are endeavouring to share relevant news items, banking, insurance and inspirational notes, as well as some of our best articles.  Our objective is to make it a light and enjoyable forum for our members and our members’ friends and contacts. Have a look and enjoy! You will find all of the links on our website or at the bottom of your email. 

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