[ Print Article ]Articles

LOSERS OR CHEATERS?

LOSERS OR CHEATERS?
The predicament of property investors.

by Neil Jenman

Australia's tax collectors are set to focus on Australia's property investors.

It seems the folk at the Tax Office have had enough of what appears to be blatant rorting in the property industry. Anyone who can do simple maths can see that something seriously dodgy seems to be happening on a grand scale.

In the financial year to June 30, 2006, property investors collected $17.6 billion in rental income and claimed $21.7 billion in expenses.

According to their tax returns, Australia's property investors lost $4.1 billion last year.

That's an average annual loss per investor of $3,727 which works out at $310 per month or $72 per week.

So, why, with such losses, do 1.5 million Australians choose to invest in property?

Capital gain, of course. Yea right, it makes such perfect sense for investors to keep paying higher and higher prices in order to keep making bigger and bigger losses.

But maybe there's another reason. Perhaps, as the Tax Office suspects, many property investors are not losing as much as they claim to be losing. In other words, they are cheating on their taxes which means they are ripping off every other taxpayer.

Unfortunately, the nation's property investors have now painted themselves into a rather difficult corner - either they are dishonest cheaters or honest losers.

Thanks to Australia's negative gearing laws, these losses are, technically, all tax deductible. If the Tax Office accepts that most property investors are honest losers and not dishonest cheaters then more than $2 billion in tax will be saved by property investors.

But this $2 billion will have to be paid by other tax payers - non-property investors, people such as nurses, ambulance officers and school teachers, the types that some (I said 'some', not all) property investors sneer at and say, "They are not smart enough to invest in property."

Andrew Johnson, the director of the Australian Council of Social Services believes that the negative gearing laws are inequitable and need to be overhauled. But then he's probably not a property investor.

In fairness to all honest property investors (especially the newbies) you are probably starting to wonder about these losses. With no capital gain - or perhaps even a fall from the price you paid - you may be hurting - and not just financially, there's also the emotional pain of thinking that you must be the world's worst investor. Everyone seems to be making a fortune, except you.

Well, don't be too hard on yourself. Hundreds of thousands of people lose money in real estate. They don't do the simple maths on all the costs until after they buy. Now they know the truth of the saying, "Buy property and be forever coming out of the hardware store."

No, most property investors are not cheaters. But, sadly, they are losers - as the Tax Office will surely discover when it does some audits.

It hasn't changed for centuries, the people making the most money out of real estate are those who sell it not those who buy it.

Just ask the Tax Office.

***************************

Source: http://www.smh.com.au/news/national/taxman-to-blitz-property-investors/2006/10/20/1160851142117.html
Taxman to blitz property investors by John Garnaut.

This article is taken from the Jenman website.


<< Back to Articles

Articles