Excessive Gearing

This page is from the 2016 election campaign. I am leaving it here as a record.

Under normal circumstances, and with the exception of financial institutions, companies would only be allowed to borrow to fund investments in productive assets. The practice of loading companies up with debt for tax minimisation purposes would cease to be legal. There may be some special cases like companies needing to borrow money in an emergency to stay afloat.

Companies which have debt, but only against productive assets, would have to retain at least 20% of profits to pay off the principal. Financial institutions for which borrowing and lending money is their business are a special case.

Companies which have debt other than against productive assets would need to retain all profits.

Whenever a company becomes bankrupt and is not able to pay it's creditors, an investigation would take place to determine if there was any reckless distribution of dividends in the lead-up. Company decision makers would be held responsible personally.

There would no tax-deductibility for debts against shares.

People would only be allowed to borrow money against one house. The same deposit rules would apply to owner-occupiers and investors.

Planned negative gearing would cease. That means investment home buyers should plan to make a profit. However, if unexpected repairs become necessary that cause a loss, the loss could still be deducted against other income. However, this would only possible once a profit has been declared on an investment house for a full financial year.

Transitioning in

The above changes would have to be transitioned in carefully.