Self Interest

By March 21, 2016 News

by Lachlan Polkinghorne

 

Who was the politician who made the statement,  ‘In a two horse race always back self interest because you at least know it is trying’?

Our former Prime Minister, Mr Paul Keating, was absolutely correct on this one.  He was right in the sense that if people have incentive to invest, then they will. Remove the incentive and they stop trying and have their hand out.

Cutting out negative gearing, introducing a wealth tax and limiting the tax benefits of superannuation have been suggested to fix the nations budget problem. Such actions attack the basic premise of allowing people scope to build their own wealth, to aspire to improving their own situation and to allow them some comforts at a point in their life.

The attack on negative gearing is falsely based on the assumption that it is the domain of the rich. Purchasing real estate is a relatively simple and mostly conservative way of building wealth over a life time. The tax benefits early in the life of the purchase are vital to help remove some of the risk with the investment decision. Evidence shows that many investors with modest incomes invest in real estate.

At least two prominent charities have supported the introduction of an inheritance tax. It is likely that they do not understand the challenges of retaining a viable farming business operating between generations. For a young couple taking on the challenge of managing and growing a farming business for a lifetime, they need the incentive and security that they can transfer a healthy and robust business to the next generation.

Successive Governments have difficulty in keeping their hands off Superannuation.  Some top end benefits are generous, and could be limited. But the fact remains – tamper with superannuation for the man in the street, and people lose the trust in government, and lose the incentive to invest.

Pollies please – give self interest a chance.