Matthew Harris

So you have your rent, then your main expenses, interest, rates, insurance.

yep yeah 20 grand so under the old rules in australia that 20 000 could offset other types of income so salary and wage income being the main one and you would get a refund so i would pay 20 my my tax threshold would drop by 20 grand yeah because on my normal salary just day-to-day job yep that's pretty convenient yeah and that's not bad new zealand um used to have it and um we had uh

and property investors expected refunds every single year.

You guys remember this because it's not that long ago.

You get the odd one that still asks, right?

Yeah, we get the odd one that still asks, where's my refund?

We're like, this has been gone for years.

And we had this great thing that's called intoxication, which is the euphoria you feel when you get a tax refund until you realise it's your own money to begin with.

So I've always looked at Australia and gone, when New Zealand removed ring fencing, two things happened in my mind.

One, I was like, well, finally property investors are going to take this a little more seriously because it does reduce the buffer for error in a portfolio.

And it makes people look at it and go, well, under the old rules, if I made a dollar a loss, the maximum tax refund I get would be 33 cents or 39 cents.

But if I make a dollar a profit, the max tax I pay is 33 or 39 cents.

So there's a vast difference between that kind of thinking.

And at that time I thought, okay, we don't have a capital gains tax.

There is an element of fairness in this because why should I be able to claim a whole lot of losses and I get to the other end and don't have to pay tax on the sale?

So that works.

And this is where fundamentally I can't wrap my head around this Australian thing.

Them keeping ring fencing, I thought, okay, that's fair enough because at the end of it all, they're going to pay tax on the profit on the sale.

So I think it's a major change and it will definitely change investor behaviour in Australia.

Tax policies like this often result in unintended consequences.