Negative gearing: Bid for housing tax break only for new homes

NEGATIVE gearing should be limited to new-build homes and be capped on expensive properties to stop the super-rich exploiting the tax allowance, according to a group lobbying for housing affordability.

Shelter WA executive officer Chantal Robertson said the organisation was preparing a submission to the Federal Government’s tax green paper, recommending that negative gearing should only allowed on non-established, affordable properties.

“Negative gearing is increasing the number of investors in the market and is hurting affordability,” Ms Robertson said.

“By limiting negative gearing to affordable properties, it would ensure the number of rentals on the market would not decrease and make it easier for ordinary people to access housing.” Curtin University’s Steven Rowley backed the calls, claiming it was a “realistic” solution.

“By limiting negative gearing to new-builds it would ensure the supply of new stock wasn’t limited, while also relieving investor competition in the established market,” Dr Rowley said.

Previous submissions from housing affordability advocates have suggested scrapping negative gearing, but Dr Rowley said limiting it to new-build properties would be a healthy compromise.

But Property Council WA chief executive Joe Lenzo said the idea was “misguided”.

“Research shows the majority of those using negative gearing are mum-and-dad investors with incomes of $80,000 or under, not the super-rich,” Mr Lenzo said.

“While there may be a few big-scale investors using it, they are in the minority.

“Negative gearing is a very efficient tax, which helps make renting more affordable.

“If there was any tweaking to it we would run the risk of investors completely exiting the market and rental properties becoming scarce.”

Dr Rowley said studies showing “average” investors were using negative gearing should be treated with cynicism.

“Their taxable income may be $80,000 (only) because they have used negative gearing to limit what is taken into consideration,” he said.

Negative gearing allows investors to claim losses on their investment properties against their taxable income.

Earlier this year, Opposition leader Bill Shorten said Labor was preparing a think-tank to consider ways of limiting negative gearing.

news.com.au/ September 19, 2015

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