So Then – Just Who IS Using Negative Gearing?

There has been a lot of misinformation in the press in recent months about exactly who is using negative gearing, how widespread it is, and whether this locks ordinary taxpayers and families out of the property market to favour “the rich.”

We’ve taken data from the Australian Tax Office’s official tax statistics for the 2013-14 financial year (hardly a biased or partisan source) to create a visual snapshot of just who uses negative gearing.

To listen to the scaremongering that has been going on in the media of late, you could be forgiven for believing negative gearing is the plaything of the upper classes, or the sole preserve of “the rich” (whoever they are) but as you can see, the reality is very different to the hype.

neg-gearing-1-high res image

Key points:

  • 1.2 million people use negative gearing, which equates to 10% of all taxpayers.
  • Just over two-thirds of these people have annual taxable incomes of less than $80,000: in today’s busy world (and especially in big metropolitan centres), this can hardly be construed as “rich.”
  • 106,000 people under 30 use negative gearing — in many cases, getting onto the property ladder with investments at an early age — and the opportunity to do so is open to every other Australian who can’t save $80k, $100k or more to cover a 20% deposit as an owner-occupier in the area of their choice, plus the fees, taxes and charges that go on top of that.
  • Finally, and contrary to some of the hysteria on this issue, the spread of people using negative gearing crosses all walks of life and covers normal people doing normal jobs: that includes thousands of teachers, nurses and tradespeople — just the people some voices in the debate claim are locked out of the property market altogether.

Of course, if negative gearing is restricted to new dwellings only, as has been proposed, rents will increase, property values will fall, thousands of jobs will be lost, the decline in government revenue will add to public sector borrowing and debt — not saving the budget bottom line, as claimed — and the loss of money from these jobs to the economy will put businesses and families under real financial strain, risking a recession in the process.

How do we know all this? Because it happened before, in the 1980s, the last time someone thought abolishing negative gearing was a good idea: and back then, there was a rush to reinstate it as the damage became obvious.

It will do nothing to help first home buyers, who will continue to find the need to save 20% of the purchase price as a deposit, plus taxes and fees and charges, prohibitive.

And so-called “grandfathering” is meaningless to existing investors when there will be no incentive for another investor to buy their asset when they are ready to sell.

The facts speak for themselves. Negative gearing affects all of us. Abolishing it to hit “the rich” is a shortsighted idea that could reap grave consequences for the whole economy.