NEGATIVE gearing is mistakenly viewed as a tax concession that helps property barons. However, the truth is a very different story.Far from being multi-millionaire property magnates, the majority who negatively geared their properties in 2011-2012 earned less than $80,000 a year, that is 883,000 of the 1.26 million Australians who declared net rental losses to the ATO over the 2011-2012 financial year.
Residential Development Council data shows that these investors included 62,000 clerical workers, 54,000 teachers, 47,000 salespeople, 36,000 nurses and tens of thousands of hospitality workers.
Seventy-three per cent of Australians with a rental property own one property, while a further 18 per cent own two.
Negative gearing enables investors to deduct costs associated with a rental property against their income, which reduces their tax liability. This makes market rents for negatively geared properties lower than they would be otherwise, something that assists those on low incomes.
Removing negative gearing would limit the capacity of low-income property investors to maintain their properties, with renters the losers.
Negative gearing also underpins the financial future of more than 780,000 “mum and dad” investors, helping them save for retirement and reduce the potential burden on the public purse.
While some groups say limiting negative gearing could increase housing supply, the reality is that affordability has been greatly hampered by land restrictions and government charges.
In a market already facing significant supply constraints, negative gearing helps deliver affordable rental accommodation in our major cities and towns.
Any measures that reduce the incentive to invest in residential property could place further pressure on the availability of affordable rental accommodation within the private rental market.
The perverse outcome will not be more affordable housing, but less.
Catherine Carter is ACT executive director of the Property Council of Australia.