To this we can add the positive social benefits of employment and having money circulate. Also business are encouraged to use all money available to them and to borrow money to engage in more business and therefore zero profit is not necessarily a bad thing.

I agree that all business must be encouraged and monitored to ensure that they do comply with Taxation Law and do not engage in business transactions purely to minimise or evade tax.

2. No matter what Mr Killaly says, all GST is paid by the end user, i.e. the general public. All businesses pass on the GST cost. There are only four groups that any business can deal with:
i. the end user,
ii. another corporation which will then pass its GST cost on to the end user (eg. PWC charging GMH GST on accounting services which then Holden pass on in its Commodore sale price and so on, no matter how many times the GST is passed on),
iii. government, where the GST is paid by our taxes,
iv. export customers, where GST has never been applicable.

3. Raising the GST beyond 10% will have other consequences:
i. social welfare recipients and low income earners will be disadvantaged because they already pay minimal, or no, tax and therefore any increase is direct. Looking back at the introduction of the GST, this group had minimal benefit from the reduction in wholesale tax of such things as cars and electrical goods because they never had the money (or the need) to buy these items.
ii. the rate of 10% allows mathematic simplicity: multiply by 1.1, divide by 11, move the decimal point one to the left etc.
iii. a higher rate will further encourage the cash economy and other ideas to ‘minimise’ GST.
iv. lead to further maldistribution of taxation revenue between the states, unless this ‘hot potato’ is changed.

4. Applying the GST to rents will increase the cost of rents:
i. as the GST would apply to all rents the tenants have nowhere else to go, and therefore I would predict it to be passed on immediately in all areas with low vacancy rates.
ii. in areas of higher vacancy rates there may be a year, or two, of relief but as the returns from rental are poor the landlords would have to pass them on or sell the property.

You write “losses” in inverted commas as if to imply that these losses are false or otherwise not real. This is fundamentally incorrect. Any person who is negatively gearing a property is losing money for all those financial years where ‘negative gearing’ applies. They will only receive a refund if they already paid tax in that year, i.e. they belong to the PAYG group. The refund is directly proportional to how much money they have lost on conducting their ‘rental business’ for that year, but the ATO will only ever contribute a maximum of 46.5% to this loss (and most likely only 39.5% as most landlords earn between $80,000 and $180,000). Therefore, most landlords contribute 60.5% of their own money to their losses to have someone live in their negatively geared property. So that if they receive, say, an $5200 refund for their property, they have themselves contributed $7964 (60.5/39.5 x 5200) to house the renter.

Put another way, the government has contributed $100 per week to house the renter and the landlord has contributed $153 per week of their own, after-tax, money to do the same. The landlord has done this in the expectation, but ultimately in hope, of an increase in the capital value of the property after a number of years upon which they will pay approximately 19.75% CGT.
Sounds almost charitable. If this mechanism did not exist, who would provide the rental accommodation?

If I add the frustrations of having tenants, paying land tax, dealing with banks and real estate agents, I know why I am not a negative gearer of property. (To my detriment as house prices continue to rise beyond expectations, although I feel we may finally have reached the end of wide spread spectacular gains, as the wage earner cannot afford any further increase in the proportion of their income that has to be devoted to buying a house without wage increases i.e. inflation)

Also, remember that if negative gearing was removed the landlord can still carry over any, and all, expense(s) to be deducted from the sale price of a property when CGT is calculated, i.e. they still get a tax deduction for their costs, albeit smaller and much later.

Regards, Arne.