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517 | “Negative Gearing Needs to Go”: Have Bryce & Ben Changed Their Mind?

“Negative gearing is symptomatic of a dysfunctional & inequitable property market!” 🏚️💸  

Folks, this is a quote from Ash, one of today’s fantastic question ask-ers.  

And if you’re like us and have been fighting tooth and nail AGAINST abolishing Negative Gearing… 🥊✊ 

You can understand why Ben has described this question as one of the top 3 questions he’s ever been asked on the show!  

Tune in to hear Ben and Ash get into the great negative gearing debate and answer – should it be removed? If yes, what are the alternatives??  


Plus, we cover:  

🏆 We’re going against THE Noel Whittaker! Thoughts on knocking residential property and generational attitudes towards wealth-building. 

🏘️  Restrictions on lending: What are the 2 BIG questions to ask yourself regarding borrowing capacity?  

💰 We don’t vouch for most property owners having five properties. Here’s why.  

It’s an episode that covers the hottest topics at the moment; listen in now!  


Free Stuff  

  • One Spot Left in our 2024/25 Summer Series!
    Help us inspire others by coming onto the couch and sharing your journey towards financial peace! We’ve got one spot left, folks. Share your story here >>  
  • Graphs from Ben’s “What’s Making Property News”: Victoria rentals fast declining! Victoria Rental's Falling
  • Guests & Episodes Mentioned: 
  • Want Episode 515 slides + our 3-part Negative Gearing video series? Just fill out the form below, and we’ll send them straight to your inbox!

 

Questions We Answer

Q1) Thoughts on Noel Whittaker’s Path from Jye

Thoughts on Noel knocking property as an investment when that’s your whole philosophy? (and our whole retirement plan 😬)

Q2) Regulatory limitations for borrowing capacity assessment from Ash

Hi guys, love the show. Thanks for all of the great information and value you provide to the community.

My question is on dealing with regulatory limitations around income when being assessed by lenders for borrowing capacity. I currently own 4 investment properties, and I’m in the process of looking to purchase a 5th.

All of the existing properties have done well with appreciation since they were purchased, so I have about $200,000 of available equity. And the properties in the area that I’m looking at are around the $500,000 to $600,000 mark. So I’m theoretically well covered from a deposit perspective.

My employment income is around $220,000 a year gross. And the investment properties that I have, are returning between 7.0-8.0% yield, against their current value.

Other than the investment properties, I don’t have any additional lending or personal loans, and our primary place of residence is provided by my employer. So our family living expenses, for myself, my wife, and our 3 daughters, are relatively low and we have a reasonably well managed budget that we track.

However, when being assessed for my borrowing capacity by my lender for this next property, I was informed that the restrictions imposed following the royal commission, meant that the lender was only allowed to assess the investment properties as having a maximum of 6% yield each, which results in hundreds of dollars a week, not being able to be included within my available income.

That’s on top of the 3% buffer which is also applied to current interest rates for affordability assessment.

All this to say, that my borrowing capacity based on my “income” is well short of the available equity that I have, despite the fact that all of my existing properties are currently cashflow positive.

While I’m confident I’ll be able to arrange my finances to purchase this 5th property, I don’t see an obvious pathway for being able to purchase any more. Short of waiting for further significant increases in the property values and their assessed yields. If you’re able to offer any guidance as to the best way to navigate an imposed affordability constraint, that would be much appreciated

I’d also be really interested in your take on how some people seem to be able to purchase 30, 50, or 100 properties (if you believe the claims on their social media pages and book covers) without running into this constraint.

It would seem that even with cash flow-producing properties, they would surely be running into the same regulatory limitations on income assessment with the 6% yield limit.

Or is there a strategy that I’m completely missing?

Kind regards,
Ash

Q3) Why Australia loves and hates negative gearing from Jim 

Hi Ben and Bryce! 

I’m a big fan of your work and the podcast. Your focus on empowering the community with knowledge about the property industry and sound financial management skills is fantastic. 

Ben, a shout-out also to the very important work PIPA is doing—couldn’t agree more that the property investment industry needs regulation as soon as possible. So, on to my question (or rather, a topic I’d love to hear more about on an episode): negative gearing. 

As a property investor in Australia, I’m going to say something controversial – negative gearing needs to go. I believe it’s a counterproductive policy, but please hear me out, because there’s an important context to this that merits some discussion from experts like yourselves. 

As a starting point, no one should be investing in an asset that consistently costs them money, relying on PI tax offsets and the hope of a future capital gain that may never materialise. 

I’ve heard the justification that negative gearing is just like any other business where investors should be able to offset financing costs, but in my view this logic is flawed.

In a typical business, debt is used to acquire assets that generate positive cash flow and can be paid off. No business willingly takes on significant debt with the expectation of enduring ongoing cash flow losses in the hopes of one day realising a capital gain. 

If someone approached a stock portfolio this way, we’d call it speculative and reckless – so why should property investment be any different? 

Negative gearing is also a global outlier. In most (but admittedly not all) other countries, property investors do not expect or accept being cash flow negative. Yet in Australia, this has become normalised. 

Why? Because the cost of holding property – largely driven by taxes, rates, and other overheads – is extraordinarily high here. And this, in my view, is where the industry needs to be focusing more attention and policy thinking. 

That said, I agree with you that abolishing negative gearing in isolation would cause significant disruption in the already fragile rental market. 

If investors were to exit the market en masse, as many predict they would without negative gearing, the result would be catastrophic. Rental stock would shrink, and rents would surge even further. 

Therein lies the real dilemma: negative gearing has become an essential feature of Australian property investment precisely because of these inflated holding costs. 

You can’t get rid of one without addressing the other. The current structure of property taxation and regulation in Australia has made positive cash flow investment nearly impossible. 

Take the inability of landlords to pass on council rates to tenants, despite tenants being the direct beneficiaries of council services. This issue barely gets a mention – almost as if the industry is suffering from Stockholm Syndrome. 

Another significant factor is the imposition of extremely high state-level land taxes (especially for those investing through a trust). Again, hardly discussed, despite this tax being a major contributor to the unsustainable costs of holding property. 

Meanwhile, negative gearing in isolation is always front and centre in the debate. These issues together are ripe for reform. Unfortunately, state governments are drunk on land tax as a source of revenue and have little incentive to remove it. 

So if negative gearing is to be abolished (and I suspect it will eventually happen), the federal government must step in and reassert control over property taxation and regulation at a national level. 

Reducing holding costs would ease the financial strain on investors and make property investment more viable and cash-flow positive. 

In that scenario, negative gearing would become irrelevant, just as it is in most other countries. Some, including the Green Party, advocate for rent controls to mitigate the potential impact of constrained rental supply if negative gearing were scrapped. 

In other words, why bother addressing holding costs when you can abolish negative gearing and simply prevent landlords from raising rents? 

This might sound attractive to anyone currently locked-out of the property market by high housing costs, but this approach is really akin to trying to catch smoke with your hands and would be a disaster for renters. 

There’s clear evidence from cities like Berlin and Glasgow that rent controls only lead to higher rents at reset points and a tighter rental market overall. 

It would also be deeply unjust to impose such controls after decades of government policies encouraging and incentivising private property investment as the primary solution for rental housing, with governments effectively outsourcing and stepping away from that responsibility themselves.   

Negative gearing is symptomatic of a dysfunctional and inequitable property market. But advocating for its removal or retention without addressing the issue of holding costs is a bit like rearranging the deck chairs on the Titanic – it misses the bigger structural issues threatening the whole shebang. 

What’s needed is a comprehensive overhaul of the property tax system and a rebalancing of investor incentives to align the market with sound economic principles, which will help to protect rental availability and affordability. 

Isn’t this where the industry should be focusing the debate? I’d love to hear your thoughts on this, particularly if you think I’m off base.

 

Timestamps  

  • 0:00 – “Negative Gearing Needs to Go”: Have Bryce & Ben Changed Their Mind?   
  • 1:25 – Download our Negative Gearing video series slides & one spot left in the 2024/25 Summer Series!  
  • 5:22 – Mindset Minute: “This is how most people live their lives”  
  • 7:23 – Q1) Thoughts on Noel Whittaker’s Path from Jye   
  • 8:40 – Why Ben chooses residential property for building wealth 
  • 11:29 – Loss Aversion and how it links to the Pies losing the Grand Final 😉  
  • 12:42 – “There’s no single path to the holy grail.”  
  • 15:26 – Noel happens to live in a beautiful property in…  
  • 17:05 – Ben’s business analogy & Rupert Murdoch’s $150M property  
  • 19:59 – Q2) Regulatory limitations for borrowing capacity assessment from Ash 
  • 22:57 – Throttling investment properties? The answer in short is 100% yes 
  • 26:40 – The 2 big questions for Ash…  
  • 31:53 – Envy Sells: Be wary of these  
  • 33:38 – Folks, only 1% actually make it!  
  • 36:11 – Alternative strategies when regulation limits your borrowing capacity   
  • 38:19 – Q3) Why Australia loves and hates negative gearing from Jim   
  • 44:14 – The political system WON’T reboot the taxation system  
  • 46:09 – The Macro Story: Why are we seeing this?  
  • 49:01 – How it helps the lower-income earners   
  • 50:05 – Why it’s about finding a balance: From wage to workers 
  • 53:53 – “Most people are after power, not legacy.”  
  • 55:35 – What is the alternative to negative gearing? 

And… 

  • 57:14 – Lifehack: Ask for late check-outs from…caravan parks!? 🕰️ 
  • 1:02:04– WMPN: How many properties are available to rent in Victoria?  

 

516 | The Alternatives to Abolishing Negative Gearing (LIVE)

Continuing our LIVE streak, we’re back this week to answer your burning questions on negative gearing and dive into our think tank to drum up EIGHT alternatives to abolishing it! 🔥

Whether you’re curious about how many Aussies are impacted by negative gearing or if it’s possible to get politicians to lift their eyes beyond an election cycle…  

We’re revealing our own list of realistic and actionable solutions to solve our housing crisis, increase density, reduce building costs and much more!  


Here’s what you can expect:  

  • How much tax is generated for the government by positively geared properties? 
  • Eight creative solutions to try BEFORE eliminating negative gearing 
  • How to reduce building costs with cutting-edge technology 
  • Realistic solutions to increase rental supply and affordability  
  • Future concepts to expand and maximise existing infrastructure from pay-to-play to selling airspace  
  • Why properties don’t just disappear! (Tune in to hear Ben forecast rental demand to use the next time you get into that kind of argument around the dinner table 😉) 

For a one-of-a-kind look into how to get more folks onto the property ladder and solve our growing housing crisis, tune in now!


Want last week’s slides + our 3-part Negative Gearing video series? Just fill out the form below, and we’ll send them straight to your inbox!

Free Stuff  

 

Questions We Answer

Q1) Is it a simple as that? From Andrew M

So if 71% (approx. from memory) only buy 1 property and then it quickly declines when you look at 2 and 3 etc. Why do we keep coming back to this argument…is it because it only affects a small amount of people but the rhetoric is good for votes…is it as simple as that?

Q2) How many Australians are affected by negative gearing? From Ashisain

At the end of the day, this is for politics…do we know how many people in Aus are affected by negative gearing? It can’t be substantial enough to affect election outcome.. (individual voters numbers)

Q3) The million-dollar question from Brett A

So the million dollar question is: How do you get politicians to lift their eyes beyond an election cycle?

Q4) How much tax is generated for the government by positively geared properties? From Tyrone P

We know how much negative gearing costs the govt in taxes but do we understand how much tax is generated for govt by positively geared properties? How would abolishing it affect that govt income?

Related graph:

Timestamps  

  • 0:00 – The Alternatives to Abolishing Negative Gearing (Part 2)  
  • 0:43 – Download the slides from Ep 515 | The Truth About Negative Gearing & Capital Gains Tax!  
  • 3:37 – Ep 515 Recap: Everyday Aussies will miss out  
  • 5:28 – Q1) Is it as simple as that?  
  • 8:16 – Who are the people investing in 1 or 2 properties?  
  • 9:53 – Negative gearing is a tax outcome  
  • 11:04 – Q2) How many Australians are affected by negative gearing? From Ashisain & Q3) The million-dollar question  
  • 11:42 – “Elections are all about looking in the margins”  
  • 12:12 – ATO: How many people have seats and are affected by negative gearing? 
  • 13:42 – How have we found ourselves here  
  • 15:05 – Q4) How much tax is generated for the government by positively geared properties?  
  • 16:28 – The net amount of property investors profiting and loss  
  • 20:39 – Think Tank: The alternatives to abolishing negative gearing  
  • 22:50 – The 1% Rezoning Rule  
  • 25:19 – Land Release Scheduling  
  • 27:18 – Higher Density Zoning  
  • 26:16 – Reduce State Gov Taxes & Charges 
  • 32:33 – Land Lease Communities  
  • 36:20 – Household Size Formation 
  • 38:12 – Accessing Super for a Deposit  
  • 40:29 – Reduced Build Costs  
  • 45:57 – Future Concepts: A pay-to-play fee  
  • 48:22 – Selling airspace to increase density  
  • 50:25 – Properties Don’t Disappear: Forecasting rental property demand 
  • 54:17 – Rental Supply & Affordability Ideas
  • 56:25 – Going for granny flats & tiny homes 
  • 57:109 – Ageing and Students: It’s not a room shortage, it’s a housing shortage!  
  • 1:00:27 – Encouraging Build-to-Rent 
  • 1:00:50 – Protecting the public and providing social housing  
  • 1:03:01 – Recap: Knowledge is empowering but ONLY if you act on it. 

 

Download the Slide Deck & Access Our Negative Gearing Video Series

Negative gearing reform has been in the spotlight since 2016, when Labor first proposed changes ahead of the 2016 and 2019 federal elections.

At the time, the proposal was to limit negative gearing to new homes only, while exempting all existing negatively geared properties.

As you can tell, this is a topic we’re incredibly passionate about.

That’s why we’ve produced a short 3-part video series to help you better understand Labor’s Proposed Negative Gearing Policy and its potential impacts. And, following our recent LIVE episode on The Truth About Negative Gearing & CGT, we’re also making the slides from the episode available for download.

In this 3-part series on Negative Gearing, Bryce & Ben cover:

  • What negative gearing really is
  • Why negative gearing is not a strategy
  • Who negative gearing impacts the most
  • Common myths and misconceptions
  • How proposed changes could affect you as an investor, homeowner, or renter

To download the slide deck and gain access to the video series, simply fill out the form below!

 


Plus, don’t miss Episode 231 where we dive into listener questions about the impact of changes to negative gearing.

To be clear:

❌ We’re not anti-Labor.
❌ We’re not saying negative gearing should stay as is.

✅ We believe the numbers need a fresh review with updated data.
✅ We’re advocating for collaboration between experts like the Master Builders Association of Victoria, HIA, REIA, Property Council, Property Investment Professionals of Australia, Property Investors Council of Australia – PICA, and more to craft a well-informed policy.

 

490 | Why Is the Sandwich Generation Trapped in Wealth Limbo?

 

The Sandwich Generation is stuck in a wealth limbo where “it seems impossible to get past 1 to 2 properties”, says TPC listener MC. But who are this group of investors, and why are they finding themselves in this property purgatory? 💸 

In today’s episode, we explore how to get creative to escape wealth limbo, the #1 thing you shouldn’t do for those going through a breakup and pose the question… 

Would you stop paying 10c at the risk of not earning $1?  

This question paints the tip of the iceberg for today’s discussion into a battle that looks increasingly akin to David and Goliath as the government continues to stop $3B worth of incentives for property investors… 

The truth is in the pudding (or, more specifically, the Australian Taxation Office’s data): for the first time in recorded history, rental stock is declining 

It’s an alarming and insightful episode that will open your eyes to the many hurdles property investors must overcome.  

Give it a listen now, folks 😊  

 

P.S. Were you in wealth limbo or are you part of the Sandwich Generation? Send us a message on our SpeakPipe; we want to know you overcome these issues!  

 

Free Stuff Mentioned

  • 2024 TPC Survey Now Open!
    Let us know what we should start, stop and keep doing and as our thanks to you, we’ll give you a Case Study Series Unpacked for FREE (usually $297). Plus, the top #5 most insightful answers will win a $100 gift card. Share your thoughts now >>   
  • Free Book: Make Money Simple Again  
  • Free Money Management Platform: Moorr 
  • Are you part of the Sandwich Generation? We want you to be part of our 2025 Summer Series! Reach out to Bryce on Instagram or through our SpeakPipe  (And get a free Start & Build course if you make an appearance!)  
  • The first time in recorded Australian History: Rental stock is going backwards and the latest ATO data. Watch this Episode on YouTube to see these insightful graphs >>  
  • Bryce’s Lifehack: iPhone stickers can help you plan your outfit! >>  
  • Ben’s “What’s Making Property News”: Read Domain’s March 2024 Rental Report >>  
  • Guests & Episodes Mentioned:  
    • 376 | It’s never too late to start: How he’s on track for a $2k/week passive income! – Chat with Steve  
    • 382 | “Property Investors are Tired of Being the ATMs for the State!” – Chat with Antonia Mercorella  
    • 401 | How Old is Too Old?! Refinancing, Retiring Debt & Starting Later in Life 
    • 454 | How to Create a $5.54M Portfolio in Your 50s – Chat with Tom Dekker 
    • 473 | Juggling Teenagers, Divorce, and 4 Properties: How This Single Mum Conquered Her Financial Pain – Chat with Leisa 

 

Comments & Questions

Listener Comment from Tom: 

Hi Ben and Bryce,

Loving the content after listening for more than 3 years.

There is currently a lot of noise in the media and social platforms about how us greedy investors are pushing up house prices and rents as well as rolling in wealth as a result of the negative gearing and capital gains tax rules which I believe need to be clarified for everyday Aussies and certainly for the politicians who are using this agenda for their own political benefit.

As a property investor, I have and will continue to work as diligently as possible to pay tax on my rental properties every year. Yes this is my goal!

For the past 3 years, I have had the privilege of paying tax on income received from my rental properties although this may change in the coming year as a result of interest rates and increased costs to hold the properties.

Negative Gearing is a safety net for the investor which supports reducing the “loss” it does not create a windfall at all and simply means that if for example I made a loss of $10,000 on rental properties in a year and I am on the top marginal tax rate, my loss is reduced by up to $4,700.

I am still making a loss whilst providing accommodation so I am a little confused by the politicians assumption that we buy property just so that we can claim back some tax and lose money. Makes little sense and it is my view that removal of this safety net will simply increase the cost of rents.

Capital gains tax discount which was brought in to replace indexing and based on my research, the impact (difference between before and after capital gains tax discount) is actually in favour of going back to the indexing model where investors made slightly more.

I am proud to be a property investor providing good, safe and as affordable as possible accommodation for my tenants and whilst I accept that I cannot always make money on the rents collected, I am ultimately doing this to support myself and my family in retirement where I will most likely continue to pay tax on rental income happily until my final breath.

Seems to me that the politicians want me to reconsider and live off the government in my retirement rather than contribute!

The record needs to be set straight on the greens agenda. The Greens were for the environment when it was top of the social media charts but now suddenly they are the anti-investors party because this has a higher profile.

We as a group of investors need to create a voice that helps inform all people of the facts rather than the political BS!  I would pay to watch or listen to you guys interviewing one of these politicians!

Perhaps by putting everyone straight, we can get the focus back on to the priority which is increasing supply and improving vacancy rates rather than pointing fingers.

Keep up the great work gents!

Tom

 

Question on Sandwich Generation of Women from MC:

I’m keen to hear from single women (and men) who didn’t start investing till their 40s. There are so many of us! It’s a real feature of my generation.

A lot of the single women you’ve had on your program started their investment journey before 2017, so were able to buy multiple properties with equity and before the serviceability constraints came in.

If you’re a single female on a middle income today, don’t have parental assistance or any kind of inherited wealth, and you start investing a bit later, it seems impossible to get past 1 to 2 properties.

I’m keen to hear others who might have done that in today’s environment, especially how they’ve met and creatively dealt with serviceability challenges.

For what it’s worth, I think there’s a large, sandwich generation of women who never married, but whose parents never bothered to educate them about property because they just assumed it was a ladder they’d start climbing once they got married and had children.

But that hasn’t happened, so they’re in a kind of wealth limbo. I know so many people in this situation! I’m also just keen to hear more from people who started their investment journey late – age 40+ – in general and to hear what they’ve been able to achieve.

Cheers and thanks for your terrific program!

 

Timestamps

  • 0:00 – Why Is the Sandwich Generation Trapped in Wealth Limbo? 
  • 1:35 – Tell us what you want to hear! >>  
  • 4:27 – Mindset Minute: How to Stop the Toxic Cycle of Overthinking  
  • 9:27 – Previous Summer Series Guest: Negative Gearing is Still Loss Making  
  • 13:57 – Property just isn’t stacking up anymore for the investor… 
  • 18:27 – A Letter to the QLD Parliament from A Property Investor 
  • 22:01 – The first time in recorded Australian history: Rental stock is going backwards?!  
  • 26:09 – It’s David vs. Goliath: Giving the investor a voice  
  • 32:13 – Would you stop paying 10c at the risk of not earning $1?  
  • 38:31 – If you stop the $3B incentives, you have to accept the unintended consequences…  
  • 43:40 – Q1) Sandwich Generation of Women from MC   
  • 46:14 – You need 2 essential things to invest in property  
  • 48:55 – “Don’t think about investments, think about stabilisation”  
  • 51:00 – Why Bryce likes listening to success stories  
  • 53:57 – Get creative to get out of the wealth limbo 
  • 57:09 – Going through a breakup? Don’t do THIS  
  • 1:02:19 – Encore Comment: “You’ll be given a generous referral fee of $10,000 plus GST for each successful referral.” 🙄 
  • 1:06:48 – Behind-the-scenes of how the referral game works   

And… 

  • 1:11:18 – Lifehack: iPhone stickers can help you plan your outfit   
  • 1:13:55 – WMPN: Quarterly Rents: We predict VIC will be top soon…

 

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