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Negative gearing: Stopping the abuse

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Australian Broker | 04 Apr 2017, 08:25 AM Agree 0
One finance specialist has called for a more rationalised approach to negative gearing that prevents investors misusing the system
  • Joe Siragusa | 04 Apr 2017, 09:19 AM Agree 0
    The proposal has merit but still fails to address how borrowers structure their loans to be on the Negative Gearing drip forever. An alternative which I have constantly argued for is to have an annual reduction of negative gearing allowance over specified period. For example each year the negative gearing allowance is reduced by say 20% so that in 5 years no further negative gearing is allowed for that particular property. The idea being is that eventually the property is positively geared and contributing to the taxable income that benefit all Australians.

    The proposal to limit negative gearing to a certain number of properties is basically telling investors how much they can invest in certain assets and in doing so has the potential to distort the market. We need more investors who can add supply to the housing market and in turn contribute to the taxation revenue over time.
  • Intended consequences | 04 Apr 2017, 12:36 PM Agree 0
    "Rather than doing nothing like the Liberals or wanting to abolish negative gearing completely like Labor..."

    Labor is not abolishing negative gearing. It wants it for new builds only. People can still negative gear to their hearts content under labor's plan, while adding more and more housing stock.

    It does seem the taxman is distorting housing pretty badly though.

    Even the Libs admit this if they say 'changes will crash the market' (Christopher Pyne, Malcolm Turnbull)
  • Peter | 05 Apr 2017, 12:49 PM Agree 0
    The Libs are philosophically opposed to changes to Negative Gearing as it is almost totally supported by their demographic. However there is no doubt that changes are needed to assist bring the budget back from deficit. There is no doubt the biggest beneficiaries of Negative Gearing over the past couple of years. Try buying a property in China if you are not a Chinese National. One Chinese client commented she could not believe the government was so generous - it doesn't happen anywhere else.

    There is no doubt it is what drives property investment in Australia. It is also an extremely strong lobby as Paul Keating found out so politicians are wary of changing it (and everything else). Somebody is going to have to bite the bullet one day though as the current Negative Gearing rules do favour the rich, seriously hurt first home buyers and do nothing for the deficit.
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