Negative gearing ‘not a huge tax saver’, says Cunningham

The Real Estate Institute of New South Wales has rejected calls to abolish negative gearing.

REINSW president John Cunningham says there is no advantage in removing negative gearing from existing properties, and doing so will not solve the supply problem.

“The abolition of negative gearing will push investment dollars out of property and into other areas of the economy that do not give the consequential social benefits that property provides,” Mr Cunningham said.

“The removal of negative gearing would deny an allowable tax deduction that all other entities that are in the pursuit of taxable income receive.

“It is time for government to stop treating property unequally.”

Mr Cunningham said people who invest in residential property do so “as it is considered a safe haven but at the same time there is risk”.

“Negative gearing lessens that risk slightly,” he said.

“People are generally terrified of shares and don’t trust government with super, whereas property provides them with a sense of security as they can see and touch it.”

Mr Cunningham said negative gearing “is not a huge tax saver”.

“The owner contributes far more than government and most properties become positively geared after five to 10 years with principal and interest payments,” he added.

“When the property is sold, the government gets the capital gains tax and the investor may miss out on the pension due to their assets.

“The potential of capital gain is less on new dwellings due to inflated new prices and the unregulated spruikers will have a field day enticing naive investors into good returns and high depreciation in the first few years followed by years of disappointment after that.

“This leaves the door open to the savvy investor who is positively geared to have a field day and thereby robbing the average person of his or her opportunity to get ahead.”

[Related: Market impacts of negative gearing]

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