This Years Barbecue Stopper, Negative Gearing

The Labour opposition has put the issue on the agenda, pledging to end negative gearing on existing housing purchased after July 1 2017.

The Liberal party are warning of “unintended consequences” which they say would “inevitably flow” from paring back the practice like property prices crashing as much as 50%, massive rent increases and a decline in construction.

Liberal Immigration Minister Peter Dutton warned that Labour’s proposed property investment tax changes would bring the economy to ‘a shuddering halt’ and ‘crash’ the stock market.

One quote that I believe to be true is from Murphy’s Law and that is “Where you stand on an issue depends on where you sit”.

So Who Uses Negative Gearing?

Almost two million Australians own an investment property and almost 1.2 million negative gear. Property builds our economy employing more than 1.1 million Australians, more the mining and manufacturing combined and generating 11.5 % of our national income every year.

  • 840,000 Australians with taxable incomes below $80,000 a year negatively gear investments properties.
  • The average net loss claimed is $9500 per year.
  • 8% of investor’s own only one investment property while an additional 18% own two properties.
  • Approximate 27% of newly constructed housing is purchased by investors.
  • Negative gearing has been a part of tax law for over 100 years.

Why Investors Use Negative Gearing?

The investor may enter into such an arrangement and expect the tax benefits and the capital gain on the investment, when the investment is ultimately disposed of, to exceed the accumulated losses of holding the investment.

By Mark Ribarsky 

What Is Negative Gearing?

Negative gearing has been part of tax law for over 100 years. The practice is whereby an investor borrows money to acquire an investment and expects the income generated by the investment, to be less than the cost of owning and managing the investment, including depreciation and interest charged on the loan.