NetNews Usenet Archive 1992 #27/NN_1992_27.iso/spool/aus/politics/1842

Text File | 1992-11-18 | 2.0 KB | 40 lines

Newsgroups: aus.politics
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From: [e-mail] (Chris Maltby)
Subject: Re: Negative Gearing
Organization: Softway Pty Ltd
Date: 19 Nov 92 04:39:27 GMT
Message-ID: <[e-mail]>
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There's no doubt that negative gearing of rental property is only
a winner for the investor when inflation is higher than interest
rates/marginal tax. This is not true at present. I also agree that
there are more valuable investments that could be made than speculation
(because that's what it is) in real estate.

Among them, and particularly favoured, are equities (ie Shares). An
investment in some business (especially your own) is much more likely
to add value to the GDP through multiplier effects, and produce
employment, exports etc etc. To make this attractive, income from
companies in the form of dividends has a tax-paid component (dividend
imputation), which can be used as part of your tax payment.

Thus is you borrow (say) $100K at 10% to buy blue-chip shares returning 6.1%
dividends, your net loss is $4K pa before tax. This will be offset against
other income. Additionally there is a further $3900K of tax credits to be
used to offset tax on other income. You don't need even need a capital
gain on the shares to make this worthwhile. Of course, the risk of capital
loss on shares is much higher than on residential property.

Nevertheless, you should all rush out now and invest in the future of
Australia, and make heaps on it. Why not choose high-tech industries too.
Just avoid woodchips, tobacco and uranium (:-).
--
Chris Maltby - Softway Pty Ltd        Internet: [e-mail]

PHONE:    [phone]    "I'm waiting for X-Windows to become just that;
FAX:    [phone]     Ex-Windows" - A McGrath.