Superannuation or Negative Gearing, which one, or Both?

Superannuation

Great article in the Australian by Judith Sloan April 13th, where Judith comments on the words of the Superannuation industry reps about accessing super for housing deposits and paying down their loans.

“Ask a 30-year old whether they would prefer a dignified retirement or a home of their own now and we know what the typical response would be. And let us not forget that for many, the effect of compulsory super is simply to knock off their entitlement to a full Age Pension in exchange for foregoing consumption year after year……..And there is no doubt that most people would prefer a home of their own than some uncertain future income stream that may be gobbled up by higher taxation.”

This is probably in response to the Governments proposal to allow first-home buyers to divert super contributions into their home savings account, to be matched dollar for dollar by the purchaser.

Tony Abbott weighed in saying that superannuation is not the government’s money, it’s the people’s money and in the end you want your money to be as useful as it can be.

Negative Gearing

On the other hand, the opposition and labor leader Bill Shorten has criticised the whole deal by saying at his recent tour of Qld that, “the great Australian dream of owning your own home could be the great Australian nightmare of being locked out of the housing market.”  Mr Shorten was scathing of the prime minister (Malcolm Turnbull) and the teasurer (Scott Morrison) failure at reforming negative gearing, “if they want housing affordability they need to reform negative gearing” Bill Shorten said.

Mr Shorten has stated that under a labor government they would get rid of negative gearing because it creates an unfair advantage over homeowners wanting to enter the market. Labor plans to introduce and make negative gearing available only on new built property and adjusting the Capital Gains Tax from 50% to 25%.

What is Capital Gains Tax?

Capital gains tax (CGT) is a tax which is levied on the profits you make when you dispose of a property. It is calculated by subtracting the purchase cost and holding cost of the property from the selling price of the property. The profit that is made from the sale is subject to tax and is included in your assessable income in the year it was sold.

What is Negative Gearing?

Negative gearing on property is when rental income is less than your interest payments and expenses on the property. The main benefit of negative gearing is due to the fact that the losses associated are offset against your personal income (salary), thus reducing your taxable income.

a blog written by, James Hannah Tax Depreciation Specialist.