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Scrapping negative gearing would ‘add to rental prices’

02 July 2015 Reporter

A new report shows negative gearing is helping to boost the supply of new homes and drive prices down.

The study, commissioned by the Real Estate Institute of Australia and the Property Council of Australia, found that every year a third of all new dwelling construction is financed by investors.

The report also noted that two-thirds of property investors who benefit from negative gearing earn a taxable income of less than $80,000 per year.

It warned that “the immediate removal of negative gearing without allowing to carry forward losses is likely to result in a portion of the average net rental loss (which was, on average, $9,500 in 2012-2013 across all taxable income groups) being added to rental prices”.


Property Council of Australia chief executive Ken Morrison said the arguments for removing negative gearing and the capital gains tax discount just don’t stack up.

“The reality is that if negative gearing was abolished there would less investment and rents would go up,” Mr Morrison said.

“It is time to start focusing on the real barriers to home ownership, like runaway stamp duty costs, which have increased by as much as 800 per cent in the past two decades.”

REIA chief executive Amanda Lynch said mum-and-dad investors are the ones who benefit most from the ability to negatively gear property investments.

“This isn’t some tax lurk for the wealthy, rather an incentive for people on low-to-average incomes,” Ms Lynch said.

“Tinkering with negative gearing would introduce distortions into the tax system and attack confidence, counter to the principles of simplicity and fairness we are seeking to achieve.”

[Related: Negative gearing dangerous]


Scrapping negative gearing would ‘add to rental prices’
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