[a13xb]

Negative gearing is only one piece of the puzzle. There is also a 50% CGT discount if you hold an investment for more than a year.

And yes, it applies to shares too, but it's not possible to get this amount of debt leverage for buying shares.

There is also 100% CGT exemption if the property is owner-occupied. The worst part is that it extends up to 6 years after you move out (e.g. to rent somewhere cheaper). So you can buy a property, live in it for a year (at which point it's deemed primary residence), then rent it out for up to 6 years, move back in for a year, rinse, repeat, and avoid paying any CGT when you sell. Obligatory: none of this is tax advice.

[wycx]

Centrelink has been speculatively invoicing people to recover undeserved welfare payments based on crude data matching with income tax datasets.

How nice it would be if they did some data matching to determine who was actually living in a property as their primary residence, vs. changed their mailing address to that of their residential property to pretend it was their primary dwelling, and issued invoices for unpaid CGT.

Given foregone tax from the CGT discount and negative gearing represent significantly larger sums than that spent on Newstart, chasing property investors would seem to be lower hanging fruit...

[rbg246]

They most certainly do chase property investors who do claim incorrect primary residence. Remember primary place of residence is only while you live there so if you change it one month before selling it only offsets one month of profits and what if you have multiple properties you can't hide it all with that.

However the bigger problem remains that capital is taxed at half the rate of labour and this matched with tax free pensions has meant people with built up capital have gotten extraordinarily rich in the past decade and a half at the expense generally of the younger generation.

[victorhooi]

Are you sure about that part about only while you live there?

I have friends who tell me they "need" (well, want to) live in their investment property for 6 months every few years, in order to get a refresh on their tax breaks?

[rbg246]

Actually you could be right with your friends.

[rahimnathwani]

"it's not possible to get this amount of debt leverage for buying shares"

But it's easy to buy a call options on shares, which is equivalent.

[a13xb]

They are not at all equivalent. Shares are a lot more volatile, and your guess needs to be accurate within a very short term or you lose 100% of your investment.

[rahimnathwani]

> They are not at all equivalent.

Why not?

> Shares are a lot more volatile, and

This is irrelevant.

> your guess needs to be accurate within a very short term or you lose 100% of your investment.

It's also easy to lose 100% of your investment when you buy property with leverage. At least with a call option you can't lose more than your initial investment. You can with property, unless you live in a jurisdiction which cancels the outstanding loan on a property after it's repossessed by the lender.

Perhaps your point is that, with a property purchase, you can ignore short term price movements. As long as you have enough money to pay the mortgage each month, you get 100% exposure to the price increase over 25 years, even though you put only 10% down and borrowed the rest.

The volatility doesn't matter. If I buy a 1-year call option on a particular share, it doesn't matter if the price goes up and down every day during that year. What matters is the price at the time the option expires.

What _does_ matter, and this may have been what you were thinking, is that it's hard to buy a long term call option on an individual share. The longest you can buy easily is probably 2 years, which is much less than the length of a mortgage.