Negative Gearing still on the chopping block agenda

The two day tax forum in Canberra has ended today showing negative gearing is still firmly on the chopping block.

In April we reported (Negative Gearing Rort added to Endangered Species List) on discussions the Gillard government had been having on abolishing what is considered Australia’s largest tax concession. Figures from the Australian Taxation Office show Australia had 1.7 million loss making property investors in 2008-09, losing collectively $6.5 billion. While this is down from losses of $8.6 billion in 2007-08, six out of ten investment properties lose money every year and so landlords can avoid paying income tax. It’s also thought negative gearing is one of the drivers that has seen our housing bubble surge to one of the biggest in the developed world.

Saul Eslake, an economist with the Grattan Institute told the forum, “There is no country in the world that allows negative gearing as generously as the Australian tax system does.”

As Bob Hawke and Paul Keating found out in July 1985, abolishing negative gearing is sure to create a stir. Eslake today re-enforced this saying “There are now 1.7 million of them [negative gearing, loss making landlords] and they vote, which is why that subject is off the agenda for both major political parties,”

But the perfect window of opportunity is fast approaching to wind it back. Negative gearing requires investors to make a loss on rental income in return for capital gains in the future. With house prices now falling for eight months and expected to continue for quite some years, the carrot of capital gains may no longer be in sight for many investors. As our economy starts to de-leverage and our housing bubble deflate, getting plans together to wind back negative gearing in a couple of years will coincide with a period where negative gearing may be ineffective for many investors.

The other housing related topic to come up in the Tax forum is from Nicholas Gruen, CEO of Lateral Economics. He has called on the First Home Saver Accounts to be canned, instead allowing young Australians in their 20s and 30s to be able to use their super towards a house.

ยป Let Generation Y buy a house with super savings, Nicholas Gruen says – News Limited, 5th October 2011.


  1. The boomers have bet their retirement savings on the house, I don’t think Generation Y really needs to do the same! I’ll rather rent from a boomer, and buy their retirement dreams (house) from them after the bubble has deflated.

  2. I agree Tom

    The Gen Y’s should pay the BB’s the $310 rent per week rent on their 1.7 – 1.9 million NG dwellings

    If 1.7 – 1.9 million BB “Specuvestors’ believe they can live off a gross $310 rent p/w minus @ $100 cash costs (pre-tax) = $150 p/w post costs and tax, WELL GOOD LUCK TO THEM as they pay down their debt into retirement.

    Nic Gruen is an idiot and is barking up the wrong tree

    The BB’s will be the only ones raiding their Super Savings to pay down ‘THEIR OWN’ NG debts, not Gen Y

    IMHO Gen Y, pay the rent and send every cent of savings off-shore and out of the AUD

    The main probems with Australian Housing… Crap Yield & Illiquid. There are far better currencies yields and assets to own in the world.

  3. I cannot believe somebody could be so IRRESPONSIBLE as to suggest that a generation invest their retirement funds just to kick the can down the road to keep this PONZI afloat! This just goes to show how desperate and despicable these people are to Steal your money! and laden the next generation into bank driven Debt Slavery!

  4. “The other housing related topic to come up in the Tax forum is from Nicholas Gruen, CEO of Lateral Economics. He has called on the First Home Saver Accounts to be canned, instead allowing young Australians in their 20s and 30s to be able to use their super towards a house. ”

    I used to be an advocate of accessing super for a house purchase but am no longer in favour. I think this would just be inflationary as its a demand side response. If they really had to do it I believe that any self-funded additional contributions (over and above the 9% minimum) could be accessible but only if held within the super account as cash.

    Rather a better way of doing this could be to emulate Canada’s TFSA (Tax Free Savings Account) and scrap the First Home Saver Accounts entirely. The Canadian TFSA isn’t just for cash, but for any investments parked in there – its a growth account.

    I’ve just recently upped my super contribution from 9% to 12% – i barely miss the money but I would rather have the ability to allocate it within my own TFSA as I see fit and withdraw it as needed (eg: for a house deposit).

    While I’m talking Canadian solutions – can we please ensure that Gillard does NOT go the way of CMHC (Canadian Mortgage Housing Corporation) as she was bleating on about a few months back?


  5. Residential property investing is unethical because it causes more harm than it does good. This is fact not opinion. It is a real shame that people have been programmed by the bankers into thinking that a house is an investment. A house is a basic human right and it is the over investment in property that has driven up the prices, this is what has created the excess demand not people’s need for shelter. Property investors are selfish people. I would be too ashamed to be a property investor – face it these people are not in the business of providing homes to people. If only people will see these people for who they are. Sadly, these people think that high property prices are a good thing for society. I challenge any of you property investors out there to prove me wrong. It suits you that people should be forced into renting and deprived of the opportunity to have their own homes. It suits you that people should suffer because of high rentals and mortgages, money that could be spent on nutrition, education, time with family. It suits you, yes.

  6. i agree with you, craig. it suits the well off to have the mass of the peasants anxious, not able to compete financially, and desperate for work – at any price. as long as they pay their rent first, before any other debts. keep feeding them lies and distractions so that no change occurs.

    the mainstream media supports this status quo. they also support the propaganda of the property lobby as these people are their biggest advertisers.

    bring on the bursting of the bubble – of both property and illusions!

  7. Hey there chicken littles, how is the sky today?

    I will be back here in 12 months and you will still be telling me the sky is falling in.

    I hope things work out well for you all.

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