Every year the negative gearing debate resurfaces and 2016 is no different. This year, the question of whether negative gearing will be removed has attracted commentary from both political parties and a significant amount of airtime.
So, is negative gearing something you should be worried about?
One of the golden rules of property investing is to never undertake any investment purely for tax purposes and property is no different.
Like most people, I dislike paying tax and enjoy a good tax rebate cheque but I don’t invest in property because of it. Tax benefits are a bonus, not a major reason.
I always assume that they might take it out tomorrow. Likewise, if I’m retired and don’t pay any tax, then I can’t claim any tax back from my investments anyway.
I can’t change what the government decides to do with tax, so rather than spend hours worrying about it and delaying my investing decisions, I just get on with life.
I’ve calculated that even without negative gearing, as long as property rises by 2-3 per cent over the long term, then I make money. It’s for this reason I choose to be heavily invested.
Could negative gearing cause a crash? Sure, anything is possible, but I still believe that if there’s a lack of supply and continuing increased demand then prices should still rise. Think back to when 10 per cent GST was introduced. Everyone thought the world would come to an end, but it didn’t and now we don’t even think about it.
If you are worried about what might happen, I suggest you concentrate on your numbers, work out a few different scenarios based on rates, rents and growth and then make your decision from there.
Reality is often not nearly as bad as perception. If you’re still unsure, call us on 02 9994 8944 or email us at firstname.lastname@example.org