HIA: Don’t scrap negative gearing

Negative-gearing-is-hugely-beneficial-says-the-HIA_157_84346_0_14098675_300A new report from the Housing Industry Association (HIA) has defended the practice of negative gearing against increasing assault.

Negative gearing has been a hot topic in the news recently, with commentators and lawmakers alike calling for it to be limited or scrapped entirely. Negative gearing allows investors to lower their tax burden by fully deducting any costs associated with a rental property if they lose more money than they gain.

According to the HIA’s¬†Economic Impacts of Negative Gearing of Residential Property research report, restricting this would have dire consequences. It would slash housing affordability, dent investment in housing and drive rent up, says the report.

“Discounting residential negative gearing in isolation is a retrograde step for tax reform, in terms of both efficiency and equity,” HIA¬†Managing Director Shane Goodwin said in a September 22 release.

“With an ageing workforce and future pressure on services, policy settings such as negative gearing that promote wealth creation and self-sufficiency in retirement should be promoted.”

Mr Goodwin pointed out that the tax burden on new housing was already onerous enough. By removing the safety valve of negative gearing, investment would fall, leading to a corresponding housing supply drop. This would in turn lead to higher rents.

He further stated that, unlike the popular perception, negative gearing was not solely used by the wealthy. He cited Australian Taxation Office figures which showed that 74 per cent of taxpayers who derived some of their income from renting out a property have a taxable income under $80,000.

The report may have a significant impact on current property investors. It was released in advance of the federal government’s tax reform white paper, and could help to stem the negative opinion against negative gearing.

If so, home owners who are currently using their property as an additional revenue stream will be able to continue to rely on negative gearing for their finances.

Leave a Reply

Your email address will not be published. Required fields are marked *