Negative gearing benefits ordinary Australians

Tuesday, 7th Jul 2015
Categories: Market News, Newsletter

negative gearingScrapping negative gearing would have a profound effect on the Australian housing market and hit middle-income earners the hardest, according to a report on property investment in Australia.

The report, conducted by ACIL Allen Consulting, found that the removal of negative gearing would limit opportunities for ordinary taxpayers to invest in property.

It found that about two-thirds of the nation’s property investors who benefit from negative gearing had a taxable income of less than $80,000 a year.

Those earning $80,000 a year also claimed the majority of losses through negative gearing accounting for 58% of total losses in the 2013 financial year.

The report also found that negative gearing was particularly advantageous for investors with “less resources”.

“By reducing the amount of accumulated losses in the initial years of the investment, access to negative gearing lowers the cost of investment for investors,” the report found.

“Negative gearing provides ordinary individual taxpayers, compared to high-income earners, with more opportunity to invest in property than otherwise would be the case.”

The report, which was commissioned by Property Council of Australia and Real Estate Institute of Australia, also found that negative gearing adds to the nation’s housing supply with about one-third of all new dwelling constructions being financed by investors.

Real Estate Institute of Western Australia president David Airey welcomed the report saying negative gearing was helping to improve housing affordability.

He said that it increased supply, provided many with the opportunity to get into the housing market and helped Australians build wealth for their future.

“Mum and dad investors are overwhelmingly the ones who benefit most for the ability to negatively gear their property investments. It’s not a tax lurk for the wealthy, but an incentive for people on average incomes,” Mr Airey said.

Mr Airey instead took aim at government taxes for causing housing affordability issues in Australia.

“The real barrier to home ownership is the run-away stamp duty costs which have increased significantly over the last 20 years,” he said.

“There has been no adjustment for bracket creep as house prices have risen and the state government has become too reliant on this volatile revenue stream.”