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Negative gearing here to stay

Monday, 4th May 2015
Categories: Market News, Newsletter

Negative gearing is here to stay after Prime Minister Tony Abbott unequivocally ruled out any changes to the popular tax concession.

In recent times, there have been calls for negative gearing to be pared back or scrapped altogether because it’s claimed to be a tax break for the rich.

However, when asked by journalists last month if he would rule out changes to negative gearing, Mr Abbott steadfastly replied, “yes”.

“The thing that worries me about so many of the contributions to our national conversation is that in the end they’re all about increasing taxes,” Mr Abbott said.

“The government I lead wants taxes to be lower, simpler, fairer.”

Treasurer Joe Hockey and social services minister Scott Morrison also ruled out changes to the current negative gearing structure.

The Property Council of Australia quickly welcomed the comments saying the announcement provided certainty for all property investors.

“The data is conclusive – negative gearing in Australia is primarily used by average workers who in the majority, own only one investment property,” PCA executive director, residential Nick Proud said.

“It is great to see the Federal Government providing certainty for the hundreds of thousands of average workers whose modest investments are contributing to housing supply and rental affordability.”

Of the 1.9 million property investors in Australia about 1.25 million use negative gearing, according to statistics from the Australian Taxation Office.

The Housing Industry Association argues that nearly 75% of property investors who use negative gearing earn a taxable income of $80,000 or less, which debunks the theory that the tax break is largely benefiting high-net-worth individuals.

The federal Labor party has also clarified its position on negative gearing if it were to win the next election.

Labor treasurer Chris Bowen told the ABC’s 7.30 Report that if any changes were to be made, they would not apply retrospectively.

“Our principle would be that people who’ve invested in good faith with existing rules shouldn’t be disadvantaged and anything we do should not take away from new housing stock, which is very important for housing affordability,” he said.

Mr Bowen added that he couldn’t see Labor abolishing negative gearing in its entirety and that if the party wanted changes to the current system it would make an announcement before the next election.