Comment on Negative gearing reform is back, but young voters now hold the power
DavidDoesLemmy@aussie.zone 5 days agoIt’s to counter inflation. If you have an investment that you sell for 10% more after a few years, you haven’t actually made 10% because inflation ate up some of your returns. So for simplicity they say after a year we’ll count half of your returns as inflation and half as profits.
MisterFrog@aussie.zone 5 days ago
I feel like there would be a much more elegant solution to this than just waiving 50% of your taxable income from investments. Especially since asset prices typically go up during periods of inflation, above inflation.
Running with your example, I’ll pretend I bought $1,000,000 in assets 1 year ago, inflation was 10%, and my assets returned a 10% capital gain (I’ll pretend there are no dividends), and I sell for a 10% profit.
Under the current system I made $100,000 as income, and let’s say I sell exactly one year after, so I’m eligible for the capital gains discount.
If I don’t work, this means I only pay tax on $50,000, which is a tax bill of $5,788 (2024-25 tax brackets). Meaning your profit would be ($100,000-5,788)/$1,000,000 = 9.4212%.
If it were the full $100,00 it would be $20,788. So 7.9212% profit, in nominal terms.
You may look at this and go, SEE, you’re actually making a loss so it’s not fair to tax it at the full rate! But this all entirely ignores the fact that periods of inflation have almost always resulted in asset price inflation.
If they wanna make it that you pay tax only on real gains, then I’m gonna argue they ought to do the same for income from actually working. But this would be a disaster for the budget.
We’re being jibbed by people who make money by not working. The argument that the asset has gone down in real terms is the investors problem. As investing involves risk which you wear in order to make a potential profit.
Stop socialising losses in the form of real value loss. That is the investors problem. I don’t see how it’s fair for a worker earning $100,000 to pay $20,788 in tax, but an investor to only pay $5788.
DavidDoesLemmy@aussie.zone 4 days ago
Because you work for 2 weeks then you get paid for those 2 weeks. If you earnt $1000 in 2005 and didn’t get the money until today, you’d be upset because $1000 doesn’t buy what it used to.
They say on average the market goes up 7% per year and inflation is about 3% per year. So it’s about half.
MisterFrog@aussie.zone 4 days ago
Again, this is what we call investment risk. Investments that don’t up beyond inflation are a bad investment. Which is the risk you take in order to see a potential profit.
That’s not our collective problem.
Giving people a discount to subsidise their profits is not a worthwhile way to spend our tax dollars.
People still invested before this discount was granted, so I’m not really convinced it would break anything by getting rid of it