Suggestions that negative gearing should be removed in the upcoming federal Budget have been heavily criticised by the REIA.
According to the Real Estate Institute of Australia (REIA), any change to negative gearing would impact on the supply of housing and the level of rents in an already tight rental market.
A review commissioned by the Rudd government and released in 2010 suggested replacing current negative gearing arrangements with the introduction of a 40 per cent savings income discount for residential rental income and associated interest expenses.
REIA president Peter Bushby believes the government will be considering the proposal set down by the review in next week’s Budget announcement.
“To amend the current negative gearing provisions for housing would be treating real estate differently to other asset classes, which would create a distortion on the investment landscape and result in a resource misallocation.
“This would result in rent increases of more than four per cent,” he said.
With the Treasurer claiming it will be a tough Budget focused on spending cuts, Mr Bushby said the view that negative gearing is for wealthy investors is a myth.
“[Australian Taxation Office] ATO data shows fewer than 80 per cent of the total individual taxpayers that are claiming a tax deduction for property earn less than $80,000 a year,” he said.
A range of other issues were also included in the REIA’s budget submission, including giving first home buyers access to their superannuation for the purchase of a home.
The latest available Australian Bureau of Statistics (ABS) data shows the average superannuation savings for 25 to 34 year-olds was $15,000, and $32,000 for 35 to 44 year-olds.
“Allowing access to a proportion of superannuation funds would help prospective buyers to save for a deposit faster. That proportion could be either a fixed percentage of the total, or their voluntary payments over and above the super guarantee contribution," said Mr Bushby.
“Superannuation and homeownership are both components of a retiree’s 'nest egg' and not competing products. By buying earlier in life, retirees have every prospect of having a higher equity on retirement and a larger 'nest egg' on downsizing.”
The REIA also implored the Commonwealth to remove stamp duty on property transactions.