Negative gearing does not create speculative investment: Hockey

by Julia Corderoy31 Mar 2015
Negative gearing does not drive investment in rental properties, according to Treasurer Joe Hockey.

The federal government’s tax discussion paper, released yesterday by the Treasurer, argues that the decision to invest in housing is more about Australia’s capital gains tax arrangement rather than the tax treatment of negative gearing.

“The potential tax advantage comes on the income side from the taxation of the capital gain earned from the asset,” the paper states.

“If the individual realises a capital gain when selling the property, only 50% of this income is included in their taxable return.”

The paper also highlights that negative gearing does not just apply to property investors, so any discussion on negative gearing reform must be careful not to single out property investment.

“Contrary to popular perception, negative gearing is not a specific tax concession for taxpayers with investment properties. 

“…This includes interest costs incurred when borrowing to purchase assets like shares. In 2011-12, around 285,000 individuals deducted a total of nearly $1.4 billion for expenses incurred in earning dividend income.”

However, the paper does note that investment properties constitute a “substantial proportion” of the total value of negatively geared assets. 

“…[D]eductions claimed for investment properties as a proportion of gross rental income have increased over the last 15 years and are now greater than gross rental income,” the paper notes.


  • by Awesome - Albert 31/03/2015 10:02:31 AM

    Again -look to Holland for inspiration -they have capped the negative gearing at the original construction value of the property @ a notional average interest rate. This means investors are keen to build new homes without it affecting the overall market because many home buyers are keeping the value of older houses low because they are not competing with investors.

  • by Papery 31/03/2015 11:33:36 AM

    Theres either a 'substantial proportion' of investors & accountants who have it wrong or one very out of touch Treasurer!

  • by Trev 31/03/2015 4:14:54 PM

    Is Joe on another planet? Negative Gearing does not drive investment in rental properties... As if his rhetoric on Q&A wasn't enough evidence of his complete misunderstanding on the matter. Or is he just to vested himself?