Who are the real bludgers?

Date
    March 13, 2013
    The Age

Welfare dependency, most agree, is an ugly thing. It is also a loaded term that brings to mind bludgers addicted to government benefits.

We're not thinking, of course, of the 44 per cent of taxpayers who get more in benefits than they pay in. Who dares suggest ''working families'', even if quite well off, are guilty of some sort of moral failing for accepting state handouts?    

It seems the better off feel entitled to better treatment by government. Their status as wealth generators is a passport to ''diplomatic immunity'' from accusations of sponging off the state - however disproportionate to need their benefits and tax concessions may be. Similarly, while age pensioners get the biggest slice of $132 billion in welfare spending (36 per cent of the budget), they are seen to have earned the right to be dependent on government - even those living in $1 million-plus homes. Pensioners and their assets are untouchable, too.

The young, unemployed and single mothers are subject to a different standard. They get lower benefits, often too low to keep them out of poverty, but are treated as a morally suspect underclass that lives off taxpayers who have worked hard for everything they have.      :(


The young jobless have even been accused of being ''job snobs'' who just need to get off their bums to find work. Under-30s in areas with unskilled job vacancies may lose benefits under the Coalition, which also wants long-term unemployed under 50 to work for the dole. Their ''free ride'' is set to end.      

Single mums have already copped it. The Gillard government shifted them from a single parent benefit to Newstart, which allows fewer hours of paid work before payments are cut. The government disregarded the impact on low-income families to save $728 million over four years.

However, much better-off ''working families'' who have come to rely on government to boost their finances seemingly have little to fear from the bipartisan savings drive.      :(

Families with children are the second-biggest recipients of welfare spending - about $34 billion a year. Most goes on family tax benefits A and B, but there are also childcare benefits and rebates, paid parental leave, schoolchildren's and baby bonuses and carer allowances. The full list of family benefits is very long.

Many who receive family welfare are, on any reasonable definition, not needy. Couples with two children in the middle 50 per cent range of incomes ($80,000 to $135,000) may qualify for most or all of the above benefits. One partner can earn up to $150,000 and the second up to $25,623 and they can still get something from Family Tax Benefit B, which costs about $4.5 billion a year.

A reality check on incomes: 50 per cent of households had incomes below $65,000 in the 2011 census. Half of all workers earn $50,000 or less.

Given how much welfare money goes to middle and high-income families, you'd think the budget costs of ''middle-class welfare'' would be a natural target for savings, especially when Abbott has declared: ''The fiscal position will always be better under the Coalition because budget surpluses and reducing debt, paying back debt, that's in our DNA.''

Yet family payments seem to be off-limits. The Coalition even proposes to add Abbott's $3 billion-a-year paid parental leave plan so benefits for high-income earners are proportionate to their earnings.      :(

When last year's budget trimmed the baby bonus for households with incomes of up to $75,000 in the six months after birth, this was said to be a ''vicious and savage'' attack on families. But just because maternity allowances are an Australian tradition - Labor started them at five pounds in 1912 - that does not mean we can afford to make such benefits an inviolable universal entitlement.

What about private health cover, which gets government support worth $5 billion a year? Policy holders received a 30 per cent rebate on premiums regardless of incomes until the government legislated last year to reduce rebates for single people earning more than $83,000 (the top 20 per cent) and families more than $166,000. Rebates cut out at $129,000 and $258,000. The saving is $2.4 billion over three years.

Abbott vows to restore the full rebate for all as soon as possible, for the usual genetic reasons. ''Private health insurance is in our DNA. That is why we exist as a political movement, to give more support and encourage people who want to get ahead.''

They're getting ahead all right, especially via superannuation. Tax concessions cost $32 billion a year, but any move to stem the bleeding has the beneficiaries and their advocates screaming ''class war''.      :(

They're also winning that war hands down, by the way. Super concessions work by taxing contributions and earnings at 15 per cent instead of a taxpayer's marginal rate, so the benefit expands the more you earn. Treasury calculates the top 5 per cent of earners get 37 per cent of the value of concessions. The average male's total super balance as they near retirement isn't worth even half the top earners' average tax concessions of $520,000.

Health and superannuation benefits fatten up the industries as well. Benefits that supplement low incomes are also a de facto subsidy for bosses who can boost their own incomes by paying people less than they could live on without state help.   :(

Far too many Australians on good incomes have come to rely in many ways on an overstretched welfare budget, one that began as a safety net for the truly needy. This culture of entitlement represents a greater and more insidious moral failing than applies to the vulnerable few whose dependency we scorn.    

John Watson is an Age senior writer.

Read more: http://www.theage.com.au/comment/who-are-the-real-bludgers-20130312-2fyf3.html#ixzz39earn58I

Mr Crook (well the author) has identified welfare churn


Quote:

In 2010–11, Australia’s welfare state, which includes health, education and income support payments, accounted for approximately $316 billion in government expenditure and 65% of total government expenditure. By way of comparison, Australia’s three levels of government received $358 billion in tax revenue in 2010–11, of which $138 billion was received through income tax payments. • Of the $316 billion spending on the welfare state, approximately half, or $158 billion, can be attributed to tax-welfare churn. Tax-welfare churn, the process of levying taxes on people and then returning those taxes to the same people in the form of income support payments and welfare services, simultaneously or over the course of an individual’s lifetime, continues to be a problem in Australia. Churn imposes a number of social and economic costs such as high taxes, administration costs, inefficiency, rent-seeking, paternalism, and welfare dependency.

Mind you, if you remove the churn, then the churn managers (AKA - Public Servants) would experience lots of job losses.

No argument from me.  Eliminate the middle class welfare.  That is where the payment of net tax comes into the equation.

Remove the churn and even you Mr Crook would see that the cost of Govt is bourne by an ever decreasing amount of actual tax-payers.  :(

Roughly 25%.  A minority enslaved by the majority in our ochlocracy... :(

Swagman wrote on Aug 7^th, 2014 at 9:43am:

Mr Crook (well the author) has identified welfare churn Quote: In 2010–11, Australia’s welfare state, which includes health, education and income support payments, accounted for approximately $316 billion in government expenditure and 65% of total government expenditure. By way of comparison, Australia’s three levels of government received $358 billion in tax revenue in 2010–11, of which $138 billion was received through income tax payments. • Of the $316 billion spending on the welfare state, approximately half, or $158 billion, can be attributed to tax-welfare churn. Tax-welfare churn, the process of levying taxes on people and then returning those taxes to the same people in the form of income support payments and welfare services, simultaneously or over the course of an individual’s lifetime, continues to be a problem in Australia. Churn imposes a number of social and economic costs such as high taxes, administration costs, inefficiency, rent-seeking, paternalism, and welfare dependency. Mind you, if you remove the churn, then the churn managers (AKA - Public Servants) would experience lots of job losses. No argument from me.  Eliminate the middle class welfare.  That is where the payment of net tax comes into the equation. Remove the churn and even you Mr Crook would see that the cost of Govt is bourne by an ever decreasing amount of actual tax-payers.  :( Roughly 25%.  A minority enslaved by the majority in our ochlocracy... :(

You're not comparing like with like here.

You are ignoring the huge tax benefits that are mostly received by high-income earners (superannuation concessions, negative gearing, concessional rate of taxation on capital gains, concessional taxation on trusts, etc), a point that you never acknowledge.

The amount paid out in superannuation concessions alone will exceed the total amount spent on the aged pension by 2016-17. More money is lost to consolidated revenue with these concessions than is spent on social security payments. The wealthy are living large on unnecessary largesse from the government.

There is no actual difference between a tax concession and a payment from the government. In both cases, the recipient ends up with more money and that extra money reduces the balance in consolidated revenue. No difference.

Both of you, crookie and bam, are right to identify the takers without need in the middle and uppermiddle classes.
What's the political solution to this? Both main parties are going to keep churning it out because of the marginal seat votes, or as Latham called them - the aspirational voters.
Doesn't divert from the takers at the other end of the scale though. I would maintain there is a sizeable minority whose sole aim in life is to live off the welfare state.
I don't argue though that there are not in a lot of cases good reasons for that attitude. I mean, if you grow up in a household with two previous generations of unemployment, it's going to be difficult to follow the example.
But that in turn doesn't mean all & every kind of effort should not be made to turn it round. Can it be done painlessly? Don't know.

Bam wrote on Aug 7^th, 2014 at 10:14am:

There is no actual difference between a tax concession and a payment from the government. In both cases, the recipient ends up with more money and that extra money reduces the balance in consolidated revenue. No difference.

No argument from me.  You are just describing Net Tax.  I talk net tax and you Lefties howl me down?  :(


Bam wrote on Aug 7^th, 2014 at 10:14am:

You are ignoring the huge tax benefits that are mostly received by high-income earners (superannuation concessions, negative gearing, concessional rate of taxation on capital gains, concessional taxation on trusts, etc), a point that you never acknowledge. The amount paid out in superannuation concessions alone will exceed the total amount spent on the aged pension by 2016-17. More money is lost to consolidated revenue with these concessions than is spent on social security payments. The wealthy are living large on unnecessary largesse from the government

You are going to have to elaborate.

What superannuation concession are you describing?

How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses.

bogarde73 wrote on Aug 7^th, 2014 at 10:42am:

Both of you, crookie and bam, are right to identify the takers without need in the middle and uppermiddle classes. What's the political solution to this? Both main parties are going to keep churning it out because of the marginal seat votes, or as Latham called them - the aspirational voters.

It's not so much the aspirational voters in general, but the aspirational voters that are swinging voters. They make up the largest cohort of swinging voters, so naturally they benefit disproportionately from largesse.

Governments ignore the unemployed at their peril. Unemployed people who are swinging voters usually vote against incumbent governments. When we had full employment, any government that allowed unemployment to exceed 2% was in trouble. It doesn't happen as much these days because the goalposts have been shifted and the unemployed have been shafted.


Quote:

Doesn't divert from the takers at the other end of the scale though. I would maintain there is a sizeable minority whose sole aim in life is to live off the welfare state.

It is unfair to single out all social security recipients just to ensure that this tiny minority is "punished". A small minority of people will attempt to exploit various financial systems, and it does not matter what that system is. The numbers are similar.

A great many more people exploit the taxation system than exploit social security. Many people make up bogus tax deductions just to get more money from the government.

How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses.

I have asked that question many times, especially of old Rusty. But they don't get it, they just can't understand that income means revenue less expenses.

Many people make up bogus tax deductions just to get more money from the government.

Probably most rather than many, speaking from my experience in a former life as a tax agent. You wouldn't believe the hostility I received when I told them to go somewhere else.

Bam wrote on Aug 7^th, 2014 at 11:03am:

and the unemployed have been shafted

How are they being shafted?  ::)


Bam wrote on Aug 7^th, 2014 at 11:03am:

Unemployed people who are swinging voters usually vote against incumbent governments.

Depends whether they want work or just to sit on the dole without hassle.


Bam wrote on Aug 7^th, 2014 at 11:03am:

It is unfair to single out all social security recipients just to ensure that this tiny minority is "punished".

They aren't, and it's not punishment,  it's encouragement to look for work.

It's unfair that some individuals have to work 40 hr weeks to pay for themselves whilst others do sweet effall and live off the public purse.

bogarde73 wrote on Aug 7^th, 2014 at 11:04am:

How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses. I have asked that question many times, especially of old Rusty. But they don't get it, they just can't understand that income means revenue less expenses.

The structure of negative gearing is all wrong, and it is used as a vehicle for income destruction for tax purposes. Its interaction with the concessional rate of capital gains is particularly unfair.

I have always advocated the abolition of negative gearing and replacing it with a fairer system that is harder to rort. Instead of negative gearing, apply any losses against future profits for that property including the sale of the property. The only way someone can apply a loss against other income is if they sell the property and still have an undischarged loss; then it's a real loss and not a pretend paper loss. Capital gains should also be taxed at full value because capital losses are tax deducted at full value.

Swagman wrote on Aug 7^th, 2014 at 11:16am:

Bam wrote on Aug 7th, 2014 at 11:03am: and the unemployed have been shafted How are they being shafted?  ::)

Not enough jobs.

Your unfounded attitude towards the unemployed blinds you to these simple truths.


Swagman wrote on Aug 7^th, 2014 at 11:16am:

Bam wrote on Aug 7th, 2014 at 11:03am: Unemployed people who are swinging voters usually vote against incumbent governments. Depends whether they want work or just to sit on the dole without hassle.

More than 95% of unemployed people want to work, but not all of them are swinging voters.


Swagman wrote on Aug 7^th, 2014 at 11:16am:

Bam wrote on Aug 7th, 2014 at 11:03am: It is unfair to single out all social security recipients just to ensure that this tiny minority is "punished". They aren't, and it's not punishment,  it's encouragement to look for work. It's unfair that some individuals have to work 40 hr weeks to pay for themselves whilst others do sweet effall and live off the public purse.

Yes, it is so unfair on the poor jobless people who would love to be working but who cannot find a job. There's work available - but no jobs. Exploitative bosses all around the country are making their staff work a total of more than $70,000,000,000 worth of unpaid overtime a year. That unpaid overtime, if monetised as new jobs, would create about one million new jobs and add billions of taxes to the budget bottom line.

Swagman wrote on Aug 7^th, 2014 at 10:47am:

Bam wrote on Aug 7th, 2014 at 10:14am: There is no actual difference between a tax concession and a payment from the government. In both cases, the recipient ends up with more money and that extra money reduces the balance in consolidated revenue. No difference. No argument from me.  You are just describing Net Tax.  I talk net tax and you Lefties howl me down?  :(

Probably because you don't generally define it. You also rarely discuss all the largesse claimed by the wealthy and when it is discussed your argument changes. Here, for example, you're claiming that negative gearing is "legitimate" yet Australia's unrestricted negative gearing regime is the most generous property tax concession in the world and is rorted openly. It costs billions of dollars a year. We don't need it, and other fairer systems are available that will still provide for fair tax deductions but not so as to provide a vehicle for tax rorts.


Swagman wrote on Aug 7^th, 2014 at 10:47am:

Bam wrote on Aug 7th, 2014 at 10:14am: You are ignoring the huge tax benefits that are mostly received by high-income earners (superannuation concessions, negative gearing, concessional rate of taxation on capital gains, concessional taxation on trusts, etc), a point that you never acknowledge. The amount paid out in superannuation concessions alone will exceed the total amount spent on the aged pension by 2016-17. More money is lost to consolidated revenue with these concessions than is spent on social security payments. The wealthy are living large on unnecessary largesse from the government You are going to have to elaborate. What superannuation concession are you describing?

Income tax deductions on superannuation contributions.

Superannuation contributions are taxed at a flat 15% for all taxpayers, and the wealthy receive most of this concession disproportionate to their earnings. Some low income earners actually pay a higher rate of tax on their contributions, while high-income earners can reduce their tax by a huge amount. It is being rorted on a massive scale: high-income earners over the preservation age can dump most of their income into super, receive the 15% tax concession, then take it straight out again.

There are better ways to encourage savings that don't cost tens of billions of dollars a year.


Swagman wrote on Aug 7^th, 2014 at 10:47am:

How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses.

Deductions against income are legitimate expenses, but the structure of negative gearing is not. Once that loss can be applied against other income, it ceases to be a legitimate deduction against expenses incurred for that asset.

Deductions against income are legitimate expenses, but the structure of negative gearing is not. Once that loss can be applied against other income, it ceases to be a legitimate deduction against expenses incurred for that asset.

Do you understand what negative gearing is? It is merely the aggregation of sources of income and strands of expenditure for the tax entity, be it individual or corporate.
What you are saying is not the law but what you would like it to be.

bogarde73 wrote on Aug 7^th, 2014 at 12:14pm:

Deductions against income are legitimate expenses, but the structure of negative gearing is not. Once that loss can be applied against other income, it ceases to be a legitimate deduction against expenses incurred for that asset. Do you understand what negative gearing is? It is merely the aggregation of sources of income and strands of expenditure for the tax entity, be it individual or corporate. What you are saying is not the law but what you would like it to be.

Yes - the discussion point is whether or not changes are needed and in what areas.  From what I can see, recent governments have a dismal showing in the economy, so something needs to be done to rein in excessive borrowing and spending on 'dead stock' that produces nothing.  Someone said that the money invested in property would be better put to use in funding industry and real infrastructure.

Something to look at.

Many a current tax dodge could be banished overnight with the stroke of a pen.

Grappler Deep State Feller wrote on Aug 7^th, 2014 at 3:02pm:

Many a current tax dodge could be banished overnight with the stroke of a pen.

Depends upon why there is a tax dodge.

The whole purpose of providing a tax concession / deduction / rebate is to provide incentive to individuals to spend their hard earned in a certain way that is beneficial to society.

Negative gearing is designed to attract investment into residential property to provide housing for rents.

The private health insurance rebate is designed to shepherd higher income earners to pay more into the health system.

Removing them could cause more damage or wind up costing the tax-payer.

If a high income earner is going to be taxed to death in Australia he might just take his dollars and go somewhere else.

Superannuation concessions are incentives to plough money away for retirement so that future tax-payers don't have to pay for you.
   

Swagman wrote on Aug 7^th, 2014 at 3:55pm:

Grappler Deep State Feller wrote on Aug 7th, 2014 at 3:02pm: Many a current tax dodge could be banished overnight with the stroke of a pen. Depends upon why there is a tax dodge. The whole purpose of providing a tax concession / deduction / rebate is to provide incentive to individuals to spend their hard earned in a certain way that is beneficial to society. Negative gearing is designed to attract investment into residential property to provide housing for rents. The private health insurance rebate is designed to shepherd higher income earners to pay more into the health system. Removing them could cause more damage or wind up costing the tax-payer. If a high income earner is going to be taxed to death in Australia he might just take his dollars and go somewhere else. Superannuation concessions are incentives to plough money away for retirement so that future tax-payers don't have to pay for you.

Good point on incentive - the question is rapidly becoming whether or not those tax concessions etc are actually doing any good for the country as a whole.

I don't see industrial-sized property hoarding as the industry we should be having here...  it produces nothing but social and economic divides and diverts a lot of money into long-term non-productive things.

As for superannuation - that is one mighty big unbalance for many - those with little (I'm one) get to pay a proportionately high amount from super as costs etc, while deriving no benefit from it.

There should simply be an upper limit on what you can put away at the concessional rate.  After that you pay tax.

The whole tax/cost structure of superannuation is chaotic in my eyes and has too many holes in it.

Governments need to decide whether they wish to tax super now or later - but not  both while providing bolt-holes to leave it in a fund etc.

Simply - to me - super is yours at retirement age, no 'take it and lose tax' or 'leave it in and take a periodic payment of the interest'.  You either pay tax on it then or as you put it away - one way not both.

Swagman wrote on Aug 7^th, 2014 at 3:55pm:

Negative gearing is designed to attract investment into residential property to provide housing for rents.

It does this remarkably poorly. It's more profitable from a tax evasion point of view to leave the property empty, especially if the property is increasing in value faster than the amount of the foregone rent.

Negative gearing pushes up the price of housing by about 10% (Moody's), which feeds into higher mortgages, higher rents, higher wages to service these housing costs - and that includes a minimum wage that has to be higher as well.


Quote:

The private health insurance rebate is designed to shepherd higher income earners to pay more into the health system.

The private health insurance rebate is an unnecessary scheme that costs more in rebates than it saves in health expenditure. It is growing at an unsustainable rate due to over a decade of premium increases far in excess of inflation, and it encourages bloat in the private industry. We can achieve better value by abolishing this rebate, putting some of the savings into health and pocketing the rest as savings. Abolishing the rebate will make the private health industry leaner and more efficient.


Quote:

Removing them could cause more damage or wind up costing the tax-payer.

No, they do not. Abolishing negative gearing will save the budget about $5 billion and abolishing the private health insurance rebate about $3 billion (assuming some of the rebate funds are redirected into health expenditure). There are savings to be found here, we just need a government with the cojones to make these necessary cuts.


Quote:

If a high income earner is going to be taxed to death in Australia he might just take his dollars and go somewhere else.

I doubt it. High income earners have it too damn good in Australia to go elsewhere even if some of these rorts were abolished. The flow-on effects of abolishing the rorts and waste will benefit everyone.


Quote:

Superannuation concessions are incentives to plough money away for retirement so that future tax-payers don't have to pay for you.

Numerous high income earners are using the superannuation concessions as a vehicle for tax avoidance, putting the money in and then taking it straight out again to get 15% tax. If they are taking it straight out again, they are not saving for retirement. Why should high income earners get a 35% reduction in their tax while low income earners pay 15% more? Where's the incentive to save for low income earners?

Bam wrote on Aug 7^th, 2014 at 11:16am:

bogarde73 wrote on Aug 7th, 2014 at 11:04am: How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses. I have asked that question many times, especially of old Rusty. But they don't get it, they just can't understand that income means revenue less expenses. The structure of negative gearing is all wrong, and it is used as a vehicle for income destruction for tax purposes. Its interaction with the concessional rate of capital gains is particularly unfair. I have always advocated the abolition of negative gearing and replacing it with a fairer system that is harder to rort. Instead of negative gearing, apply any losses against future profits for that property including the sale of the property. The only way someone can apply a loss against other income is if they sell the property and still have an undischarged loss; then it's a real loss and not a pretend paper loss. Capital gains should also be taxed at full value because capital losses are tax deducted at full value.

There is a very appropriate article in todays Australian; "politicians' skin in housing game puts paid to reform:
It is stated that about 95% of House of rep's and 91% of Senators own real estate, they own 563 properties, on average 2.5 properties per member, and ironically, it does not matter which party they belong to.
No wonder Australia has one of the dearest real estate in the world, excluding most young people from owning their own place to live in.

hawil wrote on Aug 7^th, 2014 at 8:15pm:

Bam wrote on Aug 7th, 2014 at 11:16am: bogarde73 wrote on Aug 7th, 2014 at 11:04am: How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses. I have asked that question many times, especially of old Rusty. But they don't get it, they just can't understand that income means revenue less expenses. The structure of negative gearing is all wrong, and it is used as a vehicle for income destruction for tax purposes. Its interaction with the concessional rate of capital gains is particularly unfair. I have always advocated the abolition of negative gearing and replacing it with a fairer system that is harder to rort. Instead of negative gearing, apply any losses against future profits for that property including the sale of the property. The only way someone can apply a loss against other income is if they sell the property and still have an undischarged loss; then it's a real loss and not a pretend paper loss. Capital gains should also be taxed at full value because capital losses are tax deducted at full value. There is a very appropriate article in todays Australian; "politicians' skin in housing game puts paid to reform: It is stated that about 95% of House of rep's and 91% of Senators own real estate, they own 563 properties, on average 2.5 properties per member, and ironically, it does not matter which party they belong to. No wonder Australia has one of the dearest real estate in the world, excluding most young people from owning their own place to live in.

In other words, our parliament is not truly representative of the population as a whole. The plutocrats are in charge!

Nothing will change in our rea sector - until it's too late.

If unemployment and interest rates both rise, will the market crash?

I wonder what it's like to have a 1/2 million mortgage - crazy if you ask me.

No debt = no worries!

Australian real estate is a bubble that is growing unsustainably. We should aim to keep prices steady for a couple of decades and allow incomes to catch up to house prices.

If that happens, it is unlikely to hurt the economy. Real estate prices in Germany have been stable for about 20 years and Germany is the strongest economy in Europe.

Bam wrote on Aug 7^th, 2014 at 10:47pm:

hawil wrote on Aug 7th, 2014 at 8:15pm: Bam wrote on Aug 7th, 2014 at 11:16am: bogarde73 wrote on Aug 7th, 2014 at 11:04am: How is negative gearing a tax concession?  Do you disagree that expenses incurred in earning income should be tax deductible as that is essentially what negative gearing is?  Borrow money to acquire an income producing asset and the expenses incurred are legitimate business expenses. I have asked that question many times, especially of old Rusty. But they don't get it, they just can't understand that income means revenue less expenses. The structure of negative gearing is all wrong, and it is used as a vehicle for income destruction for tax purposes. Its interaction with the concessional rate of capital gains is particularly unfair. I have always advocated the abolition of negative gearing and replacing it with a fairer system that is harder to rort. Instead of negative gearing, apply any losses against future profits for that property including the sale of the property. The only way someone can apply a loss against other income is if they sell the property and still have an undischarged loss; then it's a real loss and not a pretend paper loss. Capital gains should also be taxed at full value because capital losses are tax deducted at full value. There is a very appropriate article in todays Australian; "politicians' skin in housing game puts paid to reform: It is stated that about 95% of House of rep's and 91% of Senators own real estate, they own 563 properties, on average 2.5 properties per member, and ironically, it does not matter which party they belong to. No wonder Australia has one of the dearest real estate in the world, excluding most young people from owning their own place to live in. In other words, our parliament is not truly representative of the population as a whole. The plutocrats are in charge!

You are very right; Australia is not a Democracy, but a Plutocracy, governed for the benefit of the elite.

Bam wrote on Aug 8^th, 2014 at 9:33am:

Australian real estate is a bubble that is growing unsustainably. We should aim to keep prices steady for a couple of decades and allow incomes to catch up to house prices. If that happens, it is unlikely to hurt the economy. Real estate prices in Germany have been stable for about 20 years and Germany is the strongest economy in Europe.

Is there any real point in that?
After all in 20 years you might have $1.5M houses and average wages at $100,000 per annum.  Food would be at exhorbitant prices as would everything else.
All you are doing is shifting the relative prices of everything, and creating a giant inflation spiral.

http://www.youtube.com/watch?v=A1iXXKmq58g

Grendel wrote on Aug 8^th, 2014 at 7:50pm:

Bam wrote on Aug 8th, 2014 at 9:33am: Australian real estate is a bubble that is growing unsustainably. We should aim to keep prices steady for a couple of decades and allow incomes to catch up to house prices. If that happens, it is unlikely to hurt the economy. Real estate prices in Germany have been stable for about 20 years and Germany is the strongest economy in Europe. Is there any real point in that? After all in 20 years you might have $1.5M houses and average wages at $100,000 per annum.  Food would be at exhorbitant prices as would everything else. All you are doing is shifting the relative prices of everything, and creating a giant inflation spiral.

If that was the median house price, that would be highly undesirable. House prices of 15 times annual incomes would lead to heavily-indebted households. If that price bubble collapsed the consequences for the Australian economy would be catastrophic.

Housing affordability has been an issue in Australia for years. The Howard government commissioned a Productivity Commission inquiry in 2003, but despite that not much has changed.

We hear governments banging on about debt being bad, but the real problem in Australia isn't government debt but private debt. High housing prices make that situation worse.

The reason why I mentioned Germany as an example is because Germany has a strong economy and stable house prices. Germany is also a nation that values hard work and they are a nation of savers, not borrowers.

Australians are amongst the hardest workers in the world also...  I don't get your point.

Grendel wrote on Aug 8^th, 2014 at 11:15pm:

Australians are amongst the hardest workers in the world also...  I don't get your point.

House prices in Australia are growing significantly faster than inflation and wages in some places and this cannot be sustained for much longer.

Grendel wrote on Aug 8^th, 2014 at 11:15pm:

Australians are amongst the hardest workers in the world also...  I don't get your point.

The Australian workers, according to you may be the hardest workers in the world, but they are not efficient, which is not the workers fault, but bad management; I found that out some 50 years ago.
I was only a factory worker then, but the inefficiencies I saw really shocked me, but life was still good, due to Australia riding on the sheep's back and high wheat prices, then replaced by the minerals boom, but what will happen when both are gone?

hawil wrote on Aug 10^th, 2014 at 11:54am:

Grendel wrote on Aug 8th, 2014 at 11:15pm: Australians are amongst the hardest workers in the world also...  I don't get your point. The Australian workers, according to you may be the hardest workers in the world, but they are not efficient, which is not the workers fault, but bad management; I found that out some 50 years ago. I was only a factory worker then, but the inefficiencies I saw really shocked me, but life was still good, due to Australia riding on the sheep's back and high wheat prices, then replaced by the minerals boom, but what will happen when both are gone?

The biggest crash in history of a nation.  You see that right now with the policies of successive governments trading off the futures and lives of a significant percentage of Australians by controlled endemic unemployment.  Instead of the country as a whole going broke only those people are those going broke and will remain broke for life.  Such a policy will soon reach rollover point - at which the ship of state will go belly-up - that is what is behind your Fascists in Canberra chopping away at the dole and pensions etc in the futile hope that somehow they can stop this process.

However - as I've said for years - they are busy stocking up their lifeboat - more of a luxury cruiser - on the ship, and they will not suffer when it rolls over and goes down with all hands.

A short term policy concept that is desperately in need of overhaul with the reintroduction of genuine infrastructure in industry and production and a Feed Your Own First policy initiative.

Your comment about PPM  - Piss Poor Management - is totally true.  Most of these clowns without the rorts and props would fail at a corner shop or running a household.