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Byron Shire
July 28, 2021

Negative gearing truth

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1) Any person who currently negatively gears a property will NOT be affected by the new ALP rules. This means that all those properties currently for rent will still be available and there is no reason rents should rise because of the new policy.

2) Investors will still be able to negatively gear a property, as long as it is a newly built one. This means that new properties will come onto the market, increasing, not decreasing, the number available for rental. This will also provide increased employment for the building industry. Again, there is no reason rents should increase because of ALP policy.

3) The distortion of facts by vested interests, especially the current coalition, should be carefully investigated. Of the approximately 2.2 million landlords in Australia, less than half of these own one property, the rest own many more, some up to 15. This type of  investor has bought properties via the gift  of negative gearing (whether taxpayer funds are given from Australian Tax Office (ATO) or Centrelink it is all a form of welfare). Why should all taxpayers pay for the increase in wealth of a few, while other taxpayers cannot afford to buy  even one property?  Negative gearing is an obscene use of taxpayer money. This year almost $6 billion has been handed over to investors, with the top ten per cent already multi millionaires. Six billion is equivalent to the amount spent on all public schools. It is economic madness and Australia is the only country that has this wasteful policy. 

4) Perhaps if the current government had encouraged wage growth and had sufficiently increased Newstart/Pensions, then rents might still be affordable.

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  1. Respectfully Disagree with Point 1. Current investors are impacted in that our existing properties wont be appealing to other investors when we sell, as they only get 25% CGT discount and no NG. Selling to first home owners, and non-investors, I fear, limits the sale potential.

  2. I suspect most people don’t actually know what negative gearing is and less actually benefit from it. Given interest rates today, most dwellings recover more in rent than they pay in interest etc so they are positively geared.

    People are eligible for tax deductions against income generation in all sorts of ways – this is just another one. The idea is to support people generating income – which drives economic activity and therefore more tax.
    Interest on investment loans (among other things) is an expense which justifiably should be offset against income before tax is assessed.
    If you pay more interest than you make in income, you are in a fairly poor position. If you are counting purely on the capital gain, the government taxes this anyway.
    So negative gearing balances the objectives of Capital Gains Tax – which is perfectly sensible.

    If you want to remove one, then remove the other as well.

    If the objective is to move investors out of private housing (which personally I support), then you have to incentivise them as well.
    So the Gov could for example, remove CGT on private dwelling for the next 5 years before applying really tough conditions for owning more than one house… giving the opportunity for current investors to move out without penalty while stagnating the housing market to encourage the balance of home owners.
    Problem with this is there is likely to be at least 10-20% of people who will simply not even own housing – does the government fund these?


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