Negative Gearing Affects Everyone

NEGATIVE GEARING IS NOT A PERK OF “THE RICH.” IT AFFECTS EVERYONE. IF THE PLAN TO GET RID OF IT SUCCEEDS, IT WILL BE A DISASTER FOR OUR FRAGILE ECONOMY. WHY WOULD WE RISK THAT?

In recent months, a policy to get rid of negative gearing on existing residential property and increase capital gains tax has been all over the media.

This policy – if ever adopted – directly affects the millions of Australians who own any property, whether it’s an investment or their own home. It also affects the 18 million Australians who have a stake in property through their superannuation funds.

But as well as falling house prices, the knock-on effects will see jobs destroyed and government revenues fall, and may even send the Australian economy into recession.

This site is part of a campaign by real estate groups across the country who have united with the Real Estate Institute of Australia to make Australians aware of these disastrous consequences. Our industry participants pride themselves on being apolitical, but this time, the issue is far too important not to speak out.

Yes, this policy will affect the property industry, which is now the biggest industry in Australia. Such a policy would rip billions of dollars out of our sector at a stroke. But it’s obvious that taking billions of dollars out of the economy all at once is a recipe for disaster for all of us.

Please take the time to read the material here, which will be updated regularly, and to contact us if you have questions about your own specific circumstances.

You can follow us on Twitter: @ngaffectsyou

We encourage all Australians to make an informed choice. Negative gearing is not some taxpayer-funded perk for “the rich.” It matters to, and affects, everybody.

Negative gearing affects everyone. Why risk so much right now?

Authorised by Jock Kreitals, 16 Thesiger Court, Deakin ACT 2600

Copyright © Real Estate Institute of Australia 2016. All Rights Reserved.

272 thoughts

  1. Not sure why there is debate about negative gearing. Investment properties are not money making business. People pay maintenance, loose out with tenants when they malaciously destroy the property, pay high stamp dut, land tax and take all these hard measures so they can save for their retirement.
    If government taxes them at both end there would be no point of investing.
    If this goes ahead most investors will try pulling out of the market, leaves disastrous effect to housing , rental and economy.
    People supporting this should think of more wider impact and not this as money making cow for rich people.

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    1. But a money making cow for the rich is exactly what it is! If there is so much wrong with owning investment properties then the answer is simple; sell them. It is immoral that people wish to own someone else’s home, immoral and bordering on evil. Is it not a good thing that the back side finally fall out of the property market so those that who cannot not afford to buy their own home may finally be able to do so????

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      1. Hi Muck Moose – thanks for your comments. We’re wondering where you are suggesting people would live, if there were no rental properties available? In terms of affordability, please have a look at our “for first home buyers” tab – we understand affordability is an issue for lots of people and needs to be addressed, but this proposal is unfortunately not going to achieve that.

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      2. Hi Muck Moose. Evil? Immoral? Wow! Since when is the disire to ensure you are a FULLY self funded retiree and NOT a burden on society or on taxpayers evil or immoral? None of us are getting a pension and investment through property is the ONLY sure fire way of PAYING YOUR WAY when you are old. Super is a ruse and will never be enough. It has ALWAYS been expensive to buy a house. ALWAYS will be. But, as my dad always says (who worked as a toilet cleaner until he had his overseas Mechanical Engineering qualifications recognized in Oz and went on to work for Lang Hancock)….”in hindsight it ALWAYS seems cheap to those that DIDN’T buy because they didnt take the risk, so it seems like a walk in the park to them” Don’t let the green eyed or red commie monster get the better of you mate. The governments just want revenue they don’t give a shit about affordability. There is no economic or other evidence affordability will be better if negative gearing is abolished. Quitw the opposite. Investors will still buy because they are funding retirement and don’t care one way or the other. All it will do is give those already in the market more opportunity and prevent you from getting into the market even further. The Aussie finace systems are among the most fail safe in the world. I cannot see us ever having a GFC or housi g collapse. For one thing the USA collapse was helped along by poor lending paractices and the fact that you can give back the keys to the bank and walk away perfectly free!!! You can’t in Oz. There is ALOT IF SKIN IN THE GAME HERE and people hold onto there property because they have a lot more to lose than in USA!
        If the governments were serious about helping first home owners they would:
        1) outlaw stupid shows like The Block etc which give first home buyers completely unrealistic expectations of what a first home should look like and how to renovate for profit.
        2) allow full stamp duty exemption for first home buyers 3) reduce capital gains tax even further if a person sells to a first home buyer
        4) allow negative gearing for first hone buyers that arw owner occupiers. Just like they do in The USA!

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      3. I started with absolutely nothing and now own 3 properties thanks to the aid of negative gearing. Still working my ass off at 52 but at least I have something to show for and can help my 2 kids. If you understand how negative gearing works, it can work for you. It you don’t want to work and rent all your life, that’s your choice. Let those who want to work hard see some benefits. I still pay heaps of tax to help the rest of society.

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      4. Interesting point Muck. The fact is if investors pull out of the market, there will be an economic land slide. If housing market crash, the financing for real estate will retreat as well as it will be looked at as a risky market. It can go back as far as the buyers having to to put up 50% of capital to get a loan. So let’s say if $600K property crash to a level of 50% because of negative gearing, $600K property would worth $300 and because the bank would not lend on the market now, you still can’t afford it any way. So you theory and argument is redundant.

        You would actually need to really consider and understand economy and how housing sector supports Australian economy as a whole. The challenge of owning your own home, I believe is not in the crash of housing market and economy, it is in lifting the income and your standard of lifestyle. What you still haven’t consider is the ripple affect of housing market crash. when that happens, there will be a rise of unemployment, it is already at 6% average. You can’t be sure you will still have a job when housing market comes down. If you haven’t got a job, you still can’t afford it.

        That’s why this is never going to work. And Muck Moose, please try and understand economy as whole.

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      5. You are sadly mistaken. There are thousands of people who will never own a property. Not because they can’t afford one, but because they couldn’t be bothered being a home owner. They would rather go to the movies and on holidays than to maintain their own house. They are lazy and spendthrifts. Anyone who wishes to own their own home can do so. They just have to curb their spending. I have sat down with single mothers and showed them how they, too can have their own house in less than 5 years time. It would however require them to charge their precious offspring who are still sitting on their indulged butts at 25 studying for a useless arts degree some food and board costs. But they won’t do it. They couldn’t be asked to save money either. No they’d rather drive a newer car and when the hot water system goes they call the land lord to fix it. Many of them would rather sit on their butts watching day time TV than get up and actually work for a living. They will, however, have to live somewhere. And that is where the investors come in.
        Also there are some investors, I am among them, who provide low cost housing to those we can see have a desire to get into their own house one day. And we keep the rent low so they can save the deposit.
        Your ideas border on “let’s redistribute all wealth so we can all have enough” and are misguided.
        Even if this was to ever happen, the wealthy would be wealthy again in no time at all and the poop would be poor again in a very short time. It;s their attitude that keeps them poor and their unwillingness to do the right thing.
        Very easy to go and produce 5 kids and then cry that you can’t afford to buy a house.
        Those who get a house often forego early breeding and get a house first, then kids.
        We live in a time where family planning is easy and affordable. But some people take no heed or deliberately have kids so their do not have to work. Others study perpetually useless subjects so they don’t have to actually get a job.
        Those people will never own a house, no matter how the government policies will change.

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      6. Muck Moose, you are against NG, but can you explain “IN DETAIL” why it should be abolished yet kept for new properties only? When it’s only the wealthier who can more afford the new properties. Remember investors DO supply housing for MANY people.

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    2. Hi. If people want to buy investment properties it should not be payed by the taxpayer. Also, my salary is not going up as fast as house prices are because negative gearing has swallowed up most of the available housing and has created a shortage. I want to live the Aussie dream of owning my own house and I will not stand by and watch prices go up ridiculously and worse my taxes pay for it.

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      1. Hi Theo it would be great if you could read the article in our blog about what negative gearing actually is and also the page for first home buyers. Tax payers don’t pay for people who are negative gearing – in fact, most people who negative gear do pay an above average amount of tax. And sadly, this policy won’t make it any more affordable for you to buy a house if you’re struggling to now – this is another myth being perpetuated by the policy maker.

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        1. You state that Theo’s taxes don’t pay for negative gearing but they kind of do don’t they? I mean if as a country we need $x amount of tax to pay for services (hospitals, education, ect) and $y is not paid due to interest costs being deducted from people’s income (reducing the amount of tax paid) then doesn’t everyone else have to pay more tax to make up the shortfall? The below analysis indicates that the average benefit per negative gearing is $8722 per year which means that the rest of us have to pay $310 each a year extra. I would value the associations opinion on this.

          http://m.smh.com.au/federal-politics/political-news/election-2016-what-negative-gearing-costs-other-taxpayers-310-per-year-20160513-goubz7.html

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          1. Hi again Pez, thanks for raising that point.

            It’s convenient for the policy makers to make people who don’t own property feel like they’re footing the bill for those who do, but that’s not really how it works.

            Negative gearing doesn’t mean you deduct the interest costs on your loan, it means you deduct any losses on the investment along the way – the rental income less whatever you have to spend to maintain the investment (interest, rates, repairs, etc). So every investor is spending a dollar to get at most a 47% refund if you like – while pumping money into the economy and providing housing. Money and housing that just won’t exist when a large segment of investors withdraw from the market.

            Every business or investor of any type gets to claim these sorts of losses – it just means you only pay tax on the money you actually make. Ironically, it’s recently been confirmed that under this policy, while property investors wont be able to negatively gear these losses (ie charge them against wage income every year) on existing properties purchased after July 1, they will still be able to carry the losses forward and offset them against the profit on the eventual sale – the capital gain. So it’s a timing difference mainly. We say ironically because while the policy makers keep talking about “stopping” those wealthy investors who have multiple properties, they’ll no doubt have the cash flow to merrily continue on with their property investing (without much competition)- the only people this change will lock out from property investment are the normal Australians who don’t earn enough to carry the losses forward – the nurses and the tradies and other average wage earners who make up 3/4 of all people who are using negative gearing currently.

            As a last point, it’s estimated by BIS Shrapnel that this policy is likely to send 70,000 Australians into housing stress, potentially putting significant pressure on Government funding to support them.

            There are other ways to address the real issues – this policy makes absolutely no sense and the reasons given for it don’t stand up to any level of scrutiny.

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            1. Denying investors from claiming property expenses now but still allowing these expenses to be deducted from the sale price when the property is sold will leave future governments with a liability to tax income that can hit at any time making budgeting impossible. If, as everyone thinks, this policy reduces the value of existing properties whilst allowing the accrual of expenses to be deducted from the sale price then the final capital gain on the property may well be negative. As the population ages it must be expected that more and more investment properties will hit the market each year so future governments will not be able to accurately estimate tax revenue.
              It could be argued that this will be offset by increased revenue in the short term but this will quickly be overrun as more properties get sold, especially if interest rates increase,
              The future will be further impacted as, with cash flow decreased by paying more tax, investors will have less capital with which to invest further. It is easy to see that Bill Shorten has never been involved in any sort of business.
              It looks to me like Mr Shorten is sacrificing Australia’s future in order to become Prime Minister and therefore increase his pension. Feathering the Shorten nest so to speak.

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        2. Tax payers do pay for negative gearing, where do you think the tax refunds come from, outer space?! And all this with the ‘negative gearers pay more tax’ doubt that at all, the reason most use negative gearing is to dodge paying tax, it’s a rort – plain and simple!

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          1. Hi Tonto, thanks for your post. Does that mean you also think that businesses that make a loss should pay tax anyway? We ask because that’s essentially what negative gearing is – it’s claiming a loss made on an investment. You might be interested to know that the policy makers are still going to allow the claiming of the cumulative loss against the capital gain made at the end. Effectively, this further distorts the market as it means the only people who’ll be able to invest are those who already have sufficient cash flow to fund the loss along the way.

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      2. Hi Theo
        Your taxes are not paying for my properties.
        I believe I pay more tax then you do.
        Stamp Duty on Purchase, Duty on Loan, Land Tax, ES Levy, and GST.
        Furthermore anytime I need work done on my property I pay a premium to the trades person because it is a rental.
        I put up with Tenants not paying rent, destroying my house and then when its time to sell I pay Capital Gains tax which completely blows out any minor tax benefit I received over the years.

        You may not be aware but for every $1 loss I make on the property I get back at my marginal tax rate generally about 30c. NO big benefit.
        I choose to buy into properties not for the Tax benefits but the long term growth which property provides.
        I wont be receiving the pension when I retire, Will You?

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      3. Hi all, I’ve been reading up on everyone’s comments and I’ve realised that it seems like no one here actually knows what negative gearing is therefore don’t really know what they’re talking about. Negative gearing is basically deducting expenses/loss that an investor has incurred from their total income and then paying tax on their remaining income that they have earned as an individual. Therefore no taxpayer is paying for the investment property someone is buying. Honestly it is just stupid to even think that. Investors and their investment properties are basically dealt like businesses without having a business structure. Just like how a business pays tax on their net profit (the amount that doesn’t include their losses), its the same situation for investors and their “business”.

        Whoever says that investors don’t pay tax and are making taxpayers pay for their property, clearly don’t understand some details of the property industry. When a house is sold, the seller must pay a tax on their capital gains or losses. The amount of capital gains or losses is added to the individuals personal income and the seller is taxed based on that whole amount for the year (example: personal income of $60000+$300000 of capital gains from the sale of his/her home will amount to a taxable income of $360000. For that year, which means the investor will have to pay tax on that full amount.) Therefore their tax is paid along with all the tax they have paid along the years of owning the property.

        As far as that aussie dream bs goes, please re-evaluate your lifestyle, before accusing people with common sense and an understanding of life for making your dream unattainable. If I can buy my first home at the age of 19 without a proper full-time job and without help from the parents, then everyone else can. Maybe think about buying a cheaper running car and maybe aim for a slightly cheaper home for a start. Focus on the life you want to live, instead of the life you want to show everyone you’re living. Maybe then, eventually you’ll get to own a big house with a pool to have BBQs on Sundays with family and friends and live the “Aussie dream”. Get off your high horse and actually work for what you want instead of expecting everything to be handed to you.

        And to those who said that they don’t want to pay for other people’s investment property (which is a completely wrong statement). I don’t want my hard earned cash going to support others that don’t want to work either aka dole bludgers. That’s something people should worry about, that’s were taxpayers money is being wasted.

        WAKE UP GUYS.

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    3. we can all experience negative comments….i bought a house for $100,000.00 20 years ago paid $200,000.00 over the life of the mortage plus fees/tax.etc.

      paying down the principal part of my investment loan is TAXED as only the interest is tax Deductable…
      buying a house cost over $100 per week more than renting….thats $208,000in Beers over 40 years..
      Lets remind the Politicians…they have been shoving THE GREAT AUSTRALIAN DREAM…down our gullible, throats…only to stab us in the back…..

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    4. I quite agree that so-called “investment properties” deserve tax considerations due to the “wear and tear” notion in tenancy contracts. No owner wears and tears quite as much as some tenants do.

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  2. The average renter who does not own property really does not understand that property owners (rental property investors) subsidise the actual true cost of housing to the rental market. The rental market pay only a fraction of the true cost of placing a roof over its head. Rental property Investors (who are well meaning mum and dads, not archetypal property Tycoons twirling their moustaches) pay the full cost less the rent.

    These investors, are the reason that housing is affordable for the rental market. Because the investor choose to sacrifice now and run an investment at a loss for pay off in the future, they receive tax back but again only a fraction of what was the loss, so they are still out of pocket. But what is achieved is housing to the rental market at a fraction of the actual cost of housing, provided by a working taxpayer who is sacrificing disposable income now to be self-accountable in funding their own retirement rather than burdening the system in the future.

    And anyone who thinks that removing a tax refund for an investment dollar loss, will not lead to higher rents does not understand how things work.
    Holding onto investment property without a tax break for rental losses will become unaffordable for most mum and dad investors, leading investors to flood the market with properties that they cannot afford without the tax return. This will all be unwanted stock leading to property values to go down. However, those who hold on to property including properties on the flooded market that can’t be sold, still have to afford the service commitments and with no tax break for a loss, where does the investor look for the cash flow to make good on the commitments…….by upping the rent of course!

    So anyone who thinks that they pay high rent because of negative gearing investors, well that is plainly wrong. The truth is renters do not pay the true (high) cost of housing because investors subsidise the cost of housing for renters, and the Tax man subsidise a fraction of the investor’s loss.

    Take that away, and rents rise, house prices fall, but renters won’t be able to magically buy the houses then, because if they could not save the deposit before, they want save it anymore when rents rise.

    If people put down the “class wars”, “Tall poppy syndromes” and just plain “envy” and look to understand the symbiotic, co-dependence of everyone’s contribution and place in the economy….. well imagine that.

    Nicolhas Climent

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    1. What a load of rubbish!! Investors do not subsidise the cost of rental, the Australian Taxation System does. If you are not making money out of NG then why do you own rental properties? It would be wonderful for Australia if the butt fell out of property prices and those so far excluding could get in on home loans. I can assure you real estate agents will clap their hands should NG be modified as proposed by the ALP. Most of them just ain’t smart enough to work out that any agent will prosper from the mass exodus of some classes of investor.

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      1. Muck Moose, there is no money making in negative gearing – pay $1 and only get your tax paid back. You will never get more than 50% if you are lucky of the $1 paid. You can’t make money on this strategy unless your depreciation benefits exceed your cash income less outgoings. Depreciation doesn’t last long unless you have a new build. I think you are niave. Investors who hold NG property would be looking at the Capital Gain benefits in the long term not the tax benefits of NG.

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        1. Well said Tracy. It’s all about ‘hoping’ for the ‘one-day’ Capital Gain !! In this regard owners and investors are aligned in their aims. Also building depreciation, while it helps cash flow, is merely tax deferral…. all that building (capital) depreciation gets added (back) to profits when the property is sold.

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      2. Muck Moose, even if negative gearing is abolished, it won’t be done so retrospectively. That means all the people who currently have negatively geared properties will keep their properties, not sell them in some “mass exodus”, because they will still get to keep the right to the tax deductions. You don’t make money out of negative gearing, you’re essentially banking on the value of the house to increase over the long term or to “level out” after a decade or so where you will then start making some actual profitable return on your return. What will happen is less people, the middle-wage investors, will stop looking to buy investment property and put their money elsewhere, such as shares. This in turn creates more supply than demand for housing. Because there’s less demand to buy housing; house prices fall; banks re-value houses and require mums and dads with mortgages to pay the difference due to the mortgage LVR terms or risk having their house sold under power of sale; and anyone buying a property as an investment will only do so if the ROI is higher (ie they will be charging high rent) to justify the investment.
        Negative gearing is in reality a fair tax system, akin the Australia’s tax system. Investors get to deduct expenses (maintenance, mortgage interest, etc) on the house from the revenue. Just like anyone can deduct work expenses from their revenue earning activities.

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        1. Hi Mitch, thanks for your thoughts. It’s hard to predict exactly what will happen, but we also can see a much stronger probability of a negative outcome than a positive. We’re very concerned.

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      3. I think what is being overlooked is the alternative available to the taxation department other than NG, that is Public Housing. The report enclosed on this site shows the medium rebate from the tax office is just $1800 pa per investor. It would be impossible for the Department of Housing to supply a house for $1800 net cost pa. For every negative geared investor, there is a tenant housed not in Public Housing. It is far cheaper for the tax office ( ie taxpayers) to support the private sector investment through gearing deductions than to roll out Public Housing. That’s why the policy exists, and was reinstated by Keating in 87. Public Housing can only be delivered economically on mass, whereas private rentals are integrated throughout the community. I don’t think as a nation, we wish to go back to large areas of Public Housing Commission estates. A third of the nation rent, will never buy, and we cannot ignore the tenants outcomes in this debate.

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      4. Hey Muck Moose, you have to understand investors as you rightly put them, subsidise their cost by tax system. You are absolutely right. But what you don’t seem to understand is that they have paid or paying a large sum of tax in the first place to support the economy, caring for the weak.

        You don’t seem to understand that 80% of working class Australian own at 1 investment property regardless of whether they own their own home or not. A lot of the investors buys property not to get tax break but to enter the booming and shifting market, tax break is just a added benefit. Property goes up in value because of supply and demand.

        If you understand the economy, you will understand that radical change like this will affect the economy as whole. A change like this is only show lack of intellect and knowledge by the people who are proposing them and the people who supports them.

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    2. Spot on Nicholas, most of us who have a negative geared property or 2 dont have o/seas holidays or live the high life, we are all just planning and investing for our own retiement in ??years, because there wont be enough in the tin for any amount of “pension” . we are aiming to be self sufficeient in our retiement , not a cost or a drain to the system like so many others appear to be happy to do so. Not too many years ago there were 18 tax payers to 1 pension recipient, now it is 6 to 1, within 20 years it will 1 to 1. we will be in big trouble then.

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      1. So true Geoff, we have a couple of rentals but we work long hard hours, no high life in our house. Planning for the future, hoping I can retire before I am dead
        Mags

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    3. Hi Nic.

      Just a correction.

      Investors are not subsidising the renatal market. Tax payers are.

      A negative geared property is a tax break that is subsidised by a tax refund and a lower tax bracket on your normal salary.

      There are no tax benefits for the renter.

      Cheers,
      Fox

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      1. How can you have ‘truth’ in a ‘likely’ impact? Truth is when you can be certain of an outcome. Your contribution to this debate is based on possible outcomes, not what will actually happen. This website and the information you present is clearly severely bias and it is questionable what you bring to a debate of this nature noting your conflict. Notwithstanding also that your argument is based on negative impacts with no consideration as to possible positives that would come from a change to negative gearing, which may give some impartiality to what you are trying to tell people.

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        1. Hi Matty, thanks for posting. We knew when we decided to join together on this issue that our motives would be questioned – we actually covered this in our FAQs. The thing is, we are very conferned about our industry, which is now the largest industry in Australia – even bigger than mining. But of course this also spells disaster for our customers, almost every Australian in one way or another, because the two go hand in hand. We will suffer because our customers will suffer, and the secondary effect of that will be felt by every Australian. This is not scaremongering – we are expressing genuine concern, with good reason.

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  3. Why should Australian Tax Payers be subsiding YOUR losses on poor investments? Like every other country in the world (barring NZ), losses you make on an investment class should ONLY be applicable to that investment class’s income, not general income. That way you promote the investment into Assets that return Positive Value, not Negative Value. NG in Australia further takes money that would be better applied in business investments, in innovative solutions and economic growth. Then, there might be a chance that Australia has a ROBUST economy, not the “Fragile Economy” we have today, as you so poignantly put it.

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    1. Hi William, thanks for your thoughts. We’re not debating on this site whether or not negative gearing is a good thing. The point is, it’s part of the framework currently, and our point is only that making sudden shocks to a fragile economy is not appropriate or good for Australia. There are better ways!

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      1. There awas once a time when negative gearing and the capital gains tax discount on properties were not ever though of.

        The same for GST, Superannuation, land tax, deposit taxes, sales tax, the list goes on. Over time, our needs as a country change and our means to support those changes (tax based revenue) must also change.

        There was once a time when global warming was never heard of nor its impacts. There was once a time when we never had Aids or bird flu or a diabetes problem.

        The point is, things (taxes) that are a “part of the framework” are not ever in concrete for obvious reasons. Our tax sysem requires change and negative gearing amongst other tax issues must chage in order for us to be sustainable to meet the challenges that face us now.

        Surely you want a better and more sustainable future for your kids…dont you?

        Cheers

        Fox

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        1. Hi Again Fox, you’re right, of course we all want that – we doubt our ideologies are really that far apart. And we’re not against change at all, but as mentioned previously, it’s the radical nature of this policy that represents an unacceptable risk to our economy. Thanks for posting.

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        2. Hi Fox, I don’t think this this forum is about whether we support the change or not. This forum more concern about the impact of the change, and how great this impact would be. So your above argument is slightly flawed.

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        3. Fox, you forget to mention there was once a time when there was no CGT either. I’m not old enough to remember such a time but I imagine the ability to claim the costs of buying a property was established when the proceeds of selling that property became taxable.

          I agree with you that none of these things should be set in stone and that changes should be implemented as required to maintain the government’s tax base. However, before making changes to existing systems it is important to understand why they were originally implemented and what they were expected to achieve.

          The language used by our politicians with regards to NG is designed to make this a class war between “rich” and “poor” in order to gain votes. Beware of “Robin Hood” politics. The Russians once shot all their rich people then spent the next 70 years in bread lines. Before thinking all investors are money grubbing bastards, try to understand they do supply a service to society and the tax breaks were implemented for a reason.

          I am also wary of repeating changes that have been made before and failed. What is different this time? I am concerned that our politicians are looking at how much tax can be saved without looking at the full impacts to the economy and, mostly, to the people they claim to represent.

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    2. Why. Good question. What is being overlooked is the alternative available to the taxation department other than NG, that is Public Housing. The report enclosed on this site shows the medium rebate from the tax office is just $1800 pa per investor. It would be impossible for the Department of Housing to supply a house for $1800 net cost pa. For every negative geared investor, there is a tenant housed not in Public Housing. It is far cheaper for the tax office ( ie taxpayers) to support the private sector investment through gearing deductions than to roll out Public Housing. That’s why the policy exists, and was reinstated by Keating in 87. Public Housing can only be delivered economically on mass, whereas private rentals are integrated throughout the community. I don’t think as a nation, we wish to go back to large areas of Public Housing Commission estates. A third of the nation rent, will never buy, and we cannot ignore the tenants outcomes in this debate.

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  4. Hi Michael, thanks for your comments. We expected some people will see the site as “self serving” but we assure you we’re not only concerned about ourselves – we’ve tackled this point already in our FAQ’s. Also, you might want to look more carefully at the RBA position – the document that’s doing the rounds is not an official statement, it’s a note from 2014. The latest comments from the RBA are; “The bank believes there is a case for reviewing negative gearing, but not in isolation. Its interaction with other aspects of the tax system should be taken into account.” By the way, we’re not debating the validity of negative gearing, what we’re pointing out is that our economy is currently in a fragile take and the economic effect of suddenly removing negative gearing on existing property right now could be disastrous. If you currently have a negatively geared property, you would no doubt be concerned if the value of that property were to drop.

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    1. My understanding is the proposal is to remove some part of negative gearing on existing property. There does seem to be quite a bit of LNP scare tactics repeated here.

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      1. Hi Greg, thanks for posting. We can assure you we are very concerned, for both our industry and our customers (who in one way or another and across all out brands covers almost all of Australia) and our joint commitment is to ensure that we share information so that people can really understand the risks. We’ve tried to simply the fundamentals of the issues, although we will be providing more information and modelling in the coming weeks. I can also confirm that we would be doing this no matter which party was making the proposal – it’s the proposal we are concerns about, not the party.

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    2. Hi rob richardson, thAnks for your comments. Unfortunately there’s nothing slow and steady about the only proposal that’s currently on the table. It’s more like a radical and explosive manner and this is is essentially the reason it has to be blocked – radical change to the county’s biggest industry in a fragile economic environment spells disaster.

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  5. Well you got the headline right. Negative gearing does affect everyone. It drives up home values by allowing investors to borrow more, buy sooner and pay increasingly higher prices, outbidding home buyers who are just trying to get a piece of the great Australian dream…

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    1. Hi again Bullion Baron, thanks for your thoughts. As we’ve said before, we’re not debating here whether negative gearing is a good or bad thing – that’s a separate debate. The reality is, it’s a part of our economic system and what we’re pointing out is that in the current fragile economic environment, the proposal to suddenly stop it on a particular date will present a massive shock and cause untold damage for every Australian. There are better and more effective ways to improve affordability, without creating what may well amount to a property recession.

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  6. Negative Gearing is exactly what is making our economy fragile and at risk of a meltdown. It pushes people to over-leverage in property (as a tax minimization scheme, we all know that is what NG is used for) and it is used by millions. Now we will never be able to raise rate or the whole house of card will come down. The sooner is removed the better. The change proposed will only impact new entrants in the market, not existing ones.

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    1. Hi ngaffectsallofus, thanks for your comments, although we suspect you have not taken the time to read through our site. As we’ve said before, we not debating the benefits or otherwise of negative gearing – fact is, it’s here right now and if there are to be changes, they need to be made in a way that doesn’t present a massive shock to the economy as a whole. If the current proposal becomes reality, we’re all in for a rough ride – every single Australian, property owner or not
      .

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  7. When did the “Great Australian Dream” change from owning your own home to owning someone else’s home?

    I am a millennial earning a good wage. In any other generation I would have a modest home with a modest mortgage in reasonable proximity to where I work. Housing speculation, aided and abetted by negative gearing and the CGT discount, has made that unattainable.

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    1. Hi Ryan, we understand your pain! But realistically, it’s not repayments that are a barrier to entry for first home buyers today, it’s the massive upfront deposit and state stamp duties that are the issue. Finder.com.au recently put out some data that showed that in the 1980’s in NSW (when interest rates were 18%) the average repayment was 45% of the average wage. Today, the average repayment is just 31% of the average wage. Even a 10% drop in house prices won’t help with the upfront barrier to affordability you face – meanwhile, abolishing negative gearing on existing properties may well cause a property recession (and higher rents for you), and the flow on effects will cause a host of other economic problems for everyone.

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  8. There appears much ignorance out there on this subject. When the not very bright Hawke Labor Party government removed negative gearing, most investors refused to buy investment properties and the values of all real estate began to drop dramatically. Consequently very few rental properties were available to renters and rents skyrocketed. The dopey Hawke Labor Party government were so embarrassed that some three months later, they reinstated negative gearing for investors. On this forum, no one has told the full story of the real reason why negative gearing is allowable by our government. When the rental investment property is eventually sold, our government coffers benefit as the property owner must pay capital gains tax on the increase in value of the property. This tax can be up to hundreds of thousands of dollars. The property investor is therefore a great contributer to our economy, plus he makes available these properties when previously it was a government responsibility.

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  9. The effects of this government initiate effects will reach far and wide having many negative effects. Do your due diligence people before you put your votes into a government that will destroy the Australian dream

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    1. The dream is already destroyed for first home buyers as rhe banks extract ever increasing mortgages. It will end badly with or without negative gearing.

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      1. HI Karlnixon, thanks for posting.

        We know affordability is a real problem for some Australians and needs to be addressed. If this current proposal is enacted, we do believe it will end badly – the shock will be immense and far reaching. There are better ways to deal with issues, that’s is for sure.

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        1. It would serve you well to show the basis of your argument.

          The RBA, the Henry Tax Review, the Treasury and most if not all internationally accaimed economsts actually disagree with you. Each have presented a well established and accurate factual case to show that negative gearing is a bad idea and its impacts on the economy.

          Its best if you can provide modelling to support your case, then you be more sucessful in you campaign.

          Cheers

          Fox

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          1. Thanks for your comments Fox. Unfortunately, none of the comments it modelling you’re referring to deal directly with the current proposal – the key problem with it is the suddenly nature of the proposed changes. You’d be hard pressed to find any economist who would suggest such a radical move – every educated supporter of the removal of negative gearing advocates a slow and steady plan, not this crazed idea of withdrawing it all at one on a certain day on every existing property in the country. That’s what this campaign is attempting to create understanding of – this policy just doesn’t make sense.

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      2. Hi, I don’t think you realise that a lot of people who do not buy or afford to buy their home end up buying investment property and found a way to enter the market. So when they say there is a drop in first home owners!! survey itself is flawed as they did not count people who bout investment property first. “Statement made by Westpac Chief Economists”

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  10. It is high time NG was severely modified. It is no longer doing anyone any good. Embrace the change and Australians will, in the main, prosper.

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    1. Hi again Muck Moose! We’re not actually debating that issue right now – the reality is, negative gearing is a part of our system right now and if there are going to be changes made, they need to be done in a measured way. Making any sudden change as proposed in such a fragile economic environment to the country’s biggest industry is an ill advised move and will negatively impact every single Australian.

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        1. Hi Ralph, there are lots of different opinions around these issues and we’re not debating them here. This group has formed purely as a direct result of the current proposal and you’re absolutely right, the suggestion of such a sudden removal presents unacceptable risk to our industry and the broader economy. Thanks for commenting.

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  11. I agree with Geoffrey’s analogy, adding too that with the prospect of rising rent and a decline in investment causing a rental shortage. Will the government be happy to not only lose income through lost taxes but also possibly having commit to taking up the short fall with funding public housing .. this seems get overlooked in this argument.

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  12. Okay….we’re not debating whether NG is good or bad, class-based or retirement based…we’re discussing the radical or severe change to the current process at a colossal pace…immediately for examples sake. While I have a definite view on NG I’d like to hear what your suggestion is as to the rate that NG can be changed that will not negatively affect the Investors, Mum & Dad, Retirement Planners and yourself as a Shareholder in the Property Industry. My question is…if owning more than one home is for the philanthropic morality of the Investor and not to prosper ones family….then why do it? Please do not spin that it is good for the economy….this is the ‘Invisible Hand’ we are discussing – the pursuit of ones individual betterment that results in the betterment for others.

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    1. HI Tina, thanks for your comments. In response to your first question, we don’t claim to be economists so wouldn’t be able to provide you with a exact plan, but any winding back of a significant concession has to be done in a measured way to minimise the possibility of destabilising the market. It would be up to any party proposing the removal of a concession to come up with a plan that doesn’t cause havoc – and that hasn’t happened yet, hence our initiative. In regards to your other question, we don’t really understand it. We’re not debating whether owning investment property is good or bad, we’re just stating the fact that a key factor in the current market place is the existence of negative gearing. Once again, removing it suddenly is like ripping a rug out from under
      – it just doesn’t make sense, especially now.

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      1. Answe the question: if grandfathering (aka preserving existing rorts) is not enough of a measured approach – what is?

        You claim it is ripping the rug out – but it could be a ten year plan and you’d still be claiming it was too fast.

        Facts are this situation is a rort which favours the richest most. You lobbyists are purely about self interest at the expense of the wider population.

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        1. Hi Nathan thanks for your comments. To be honest, anyone accusing the property industry of acting in self interest in this campaign against the proposal is actually validating our argument that there is unacceptable risk to it. We’ve been very upfront that we don’t want our industry to be devastated. It’s an unavoidable fact that if our industry is negatively affected, so will the entire economy, given our industry is now Australia’s largest (and biggest taxpayer)

          In regards your mistaken comments that Ng favours the rich, we’d recommend you have a closer look through the site and you’ll find that 3/4 of all people who use Ng earn less than $80k per year. The vast majority own only one property. That’s not a policy that favours the rich.

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      2. Can you please get the facts straight. Under the ALP policy It is not being removed it is simply being limited to new builds only. This is a good thing for the economy, it means more demand to buy new builds helping the construction industry.

        The fact that the policy proposes no changes to existing negative gearing arrangements is also very sensible as it means there won’t be a mass exodus of negative gearers trying to offload property (that would be very bad for house prices!)

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        1. Hi Dave, thanks for your comments. We understand there’s a lot of misleading things being said around this topic, but please be assured, we know this industry very well, with many of our participants having decades of experience and the REIA being led by an economist. As we’ve said previously, the “stimulus to new building” angle is simply not true – if it were, developers would be thrilled about this proposal and they’re not – have a look at this article.
          http://www.theaustralian.com.au/business/property/negative-gearing-changes-could-lead-to-recession-mark-steinhart/news-story/fc6876b2ee0b50993eb96e443f456517

          The grandfathering you’ve mentioned won’t stop a mass exodus – a recent survey by the REIQ showed 72% of investors would exit the market immediately if this policy were enacted. And you’re right, this will be very bad for house prices – although this part doesn’t affect agents, as their businesses are based on transaction numbers, it does affect their customers badly. And once the exodus occurs, we expect the market could well stall, which is when unemployment would hit the property industry, Australia’s largest industry, and ripple more broadly into the general economy.

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          1. A shame that article you link to over and over again is behind a paywall so very few of us can actually read it.

            The REIQ survey you mention is an interesting one though I can’t seem to find a lot of detail about it. If you have any references to it I’d be interested to read. I did see this quote bandied about a lot (not sure where you get the 72% figure from)

            “We now know for a fact that 79 per cent of respondents will get out of property and find an alternative investment strategy that works more effectively and yields a better return,”

            In reality this is absolutely ridiculous, if there are no changes to their negative gearing arrangements why would existing investors exit the market? Especially if as you are arguing that rents will go up, that will make their investments more attractive.

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            1. Hi Dave not sure why you’re having trouble seeing that article. You can google the information you’re seeking re the REIQ study – it’s easily accessible. In reality, the majority of property investors are seeking capital gain, they’re not in it for the tax concession of negative gearing – after all, that part involves spending $1 to get a usually less than 50c tax deduction. We can only assume these investors are suggesting they would sell because they see prices falling, not rising. Thanks for your reply.

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            2. Hi again Dave – here’s the text of the article so you can read it – from The Australian May 7 2016

              Scaling back negative gearing could destabilise the economy, the president of a powerful property sector group has warned.

              As negative gearing and housing affordability shape up as key issues in the election, Property Council of Australia president, Stockland chief executive Mark Steinert, said the only way to lift affordability “in a way that doesn’t destabilise the economy in our view is through supply”.

              Labor has said it would limit negative gearing to new homes and remove negative gearing concessions from existing houses in purchases made after July 1 next year, saying this would put home ownership “within reach for the middle and working class” and make budget savings.

              But Mr Steinert said that directing investors towards new homes “creates distortion in the market, puts pressure on the new stock, and it potentially puts downward pressure on the existing stock. It potentially undermines the established housing market, which has the potential to put the economy or the country into recession,” he said.

              “Because it’s such a large part of the economy, if you push the prices down significantly in the established market, it destabilises the banks, it reduces the growth in lending, and as a result it’s likely to reduce economic activity, which reduces job creation, which would then ultimately potentially create a recession.”

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  13. I worked in real estate the last time they took negative gearing away from investors, if you are a renter you do not want to go there again. I’ve seen people unable to afford rent and living in cars with their children. If you can’t afford to purchase a home for yourself, then be at least appreciative of the thousands of mums and dads going with out to give you a home for you and your family to live in. It will be worse this time because of the amount of investments in superannuation homes. The market was begging to bring it back because the rent went soooo high. There became a massive shortage of rental on the market. Be warned don’t go there otherwise, tenants are going to be the worst hit.hard to save for a home when you pay such high rents. Don’t be envious- and get saving

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    1. Thanks for sharing that Catherine. A lot of people in this debate are too young to have experienced the devastating effects that occurred last time. We appreciate hearing your story.

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    2. It is a shame that a large portion of the community do not realise or appreciate the role the private sector is making in providing housing. The negative gearing incentives encourage private investors to buy property and put it up for rent. If these benefits were to be removed and these investors would potentially go and invest elsewhere, clearly the pool of properties available is going to shrink. The simple laws of supply and demand will mean the rents will increase, as Catherine has suggested. The level of pressure that this will place on the government will then be far greater than any incentives, they currently provide to the few who avail themselves of Negative gearing.

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  14. I have yet to see any wholistic treatment of negative gearing, ie one that also takes into account the end benefit to the ATO achieved through capital gains tax on the eventual sale of a negatively geared property. I would appreciate if anyone who has access to appropriate data would provide information on the average level of negative gearing of a typical investment property, along with the average amount claimed on negative gearing over the typical period an investment property is held, the average capital gain achieved over that period, the average amount of capital gain tax paid on selling the property and the effects of inflation over the holding period. I do not see how anyone can mount an argument for or against negative gearing without addressing the full ramifications of the capital gain tax and inflationary effects over the holding time of property.. We have access to how much the ATO pays out, but as far as I am aware there is no readily available information on payback through capital gains tax.

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  15. Remove negative gearing, property prices will go down, rents will go up and the only people buying will be the rich snapping up bargains in the knowledge that negative gearing will return just like last time. Result – the rich get richer and the rest loose.

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  16. I am seriously perplexed by many of the comments here. I thought we lived in a democracy where the harder you worked and saved you could be rewarded by not only owning your own home but by even possibly stretching the budget to buy an investment property. Judging by some of these comments it would appear that owning your own property and, heaven forbid, an investment property would appear elitist. How is the average Australian going to support themselves in retirement? Shares, cash in the bank or maybe hide your money underneath your mattress, the current interest rate environment and fickle share market provide most with very little confidence. So investing in property appears a great alternative and if you look hard enough you will find that most Sydney investors would be lucky to get a net return of 2.5% net. The reason negative gearing was introduced was to promote property as an investment to create more stock for renters, as previously stated. Take this away and the reverse will apply and rents will sky rocket as supply will dwindle as developers walk away. When I was looking for my first home in Sydney my options were either have a huge mortgage or move outside of Sydney to somewhere more affordable and commute. Personally I believe all levels of government should be doing more to promote incentives for businesses to relocate to regional areas to create decentralisation which would in turn provide incentives for people to move, i.e jobs and much more affordable housing both to buy and rent.

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    1. HI Ray, thanks for your comments. It is a shame to see the tall poppy syndrome in full swing, especially because many of the people who use negative gearing aren’t really tall poppies at all – they’re just ordinary, hard working Australians. But the real concern is that if this policy is enacted, we’re all in danger, tall poppy or not. There are so many other options to improve affordability, as you quite rightly say. It just doesn’t make sense!

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  17. Most comments on the evils of NG are from those that probably don’t own their own primary residence. My wife and I have amassed 7 properties in the past 15 years. We have managed to pay off our primary residence and intend to stay put as it suits our needs. 2 of our properties are now rented from us at below market rental values by family members. My in-laws failed to ensure their security in their retirement and were facing being homeless when their last rental was put up for sale. We stepped in so that they can now rest easy knowing they won’t be sold out from under them. This BS about investors driving up the market prices is just that; BS!!! The in-laws home was an open house. We went and then on the day made an offer for the asking price. We were told a few days later that the woman behind us made an offer 2 days later and was peeved we had made an offer on the house she wanted. Not our problem; you snooze, you lose. We offered what was asked, we didn’t ‘outbid’ anyone so we say to those that complain about rising prices: Put your money where your mouth is. I am now retired and just managing to get by on my military pension. NG affords us a write off on the costs because the rental income does not meet the expenditure. If NG is abolished then our rents will be put up to cover the true costs of the properties and then let’s hear who complains then, the tenants who don’t want to take the big step.

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  18. Negative Gearing is an economic debate not a political debate, however the two are intertwined. There are many facets to the housing affordability question in Australia. Negative Gearing is a low priority issue. There are other much more critical problems, mostly with the financial system. Back in the 1950s – 60s prior to financial deregulation in the 1980’s people could afford an average home on an average wage in Melbourne. The country did not have capital gains tax, stamp duty in Victoria was 3%, there was no negative gearing, and there was no GST on new land and houses. If lending was restricted to 70% of valuation for investors, in a low interest environment there would be minimal negative gearing. NG could also be capped at say $1m per person. (That is only one average property now in Sydney) Thereby softening any impact on the existing system. The real estate sales and rental markets would not collapse if it was wound back a little. The only real reason to remove NG is for the Govt to increase revenue. If people want to discuss housing affordability, look at the GST firstly. PS: I have been an agent in Melbourne for over 40 years, and understand the market well.

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    1. Hi Graham thanks for your thoughts and we agree there are so many other possibilities for dealing with the issue of affordability, without creating radical shocks to the economy. We can only hope this policy does not become reality.

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  19. To be fair, I think negative gearing should apply to new build only. This would help my business as I rely on new home construction for a livelihood. Given that over 92% of investment dollars goes into bidding up the price of existing homes which creates no employment, I see restrictions on negative gearing as a very good thing. Thank you.

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    1. Hi marvin, thanks for your comments. It does sound that way at first however the biggest players in the new build and development space are as against this proposal as we are – you might want to check out Mark Steinhart’s comments (CEO of stock lands) in a recent article in The Australian newspaper where he said the policy could actually destabilise the economy and potentially send our entire economy into recession. Your industry will also
      suffer if this policy becomes reality, sad to say.

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    2. Hi Marvin, it seems to me that a person whose livelihood is dependent the construction of new homes would have a vested interest in maintaining the value of existing homes. As a current home owner, the only way I could afford to build a new home would be to sell my existing home to generate the deposit and then rent during construction. Ideally selling to an investor and then renting my house back. If this option is made unattractive to investors then any current home owners are basically priced out of the new home market.
      This will lead to your customer base being those people who currently can’t afford to buy a home meaning you will have a period without income while these people save a deposit and then drop your prices to improve affordability, thus impacting the profitability of your company and all companies involved in manufacturing products for new houses. This leads to the job losses that this website is alluding to.
      It is important to note that buildings do not appreciate in value as such. It is the land they sit on that grows in value as population increases. Anything that decreases the construction of new homes decreases the requirement for new land. As population increases over time this will lead to a shortage of available housing which will drive prices up.
      Anyone who thinks this gap will be filled by investors building new homes to receive the NG incentives is, I believe, sadly mistaken. Given that it takes about 18 months to build a house during which the mortgage on the property grows while there is no return on the initial investment. This will prevent most Mum & Dad investors from entering the investment market thus leaving only the super rich who are able to build a new home for investment purposes creating the very situation everyone fears the most.

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  20. Negative gearing & CGT concession is the cancer of Australia economy as it sucks so much money out of the general economy & claimed so many jobs, home dream is killed by NG & CGT concession. EU & North America do not have such an arrangement, their economy is much healthier & people have much better life. PS: I am not a renter, I just have my own home

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    1. Hi Charles, thanks for your comments. Just to clarify, we’re not debating whether negative gearing or other concessions are a good or a bad thing – that’s a completely separate issue. What we’re saying is that negative gearing and other concessions are a significant part of the economy currently and removing them all at once on a particular day in a fragile economic environment spells disaster for all of us. As a home owner, the direct effect on you will be a direct hit to the value of your home, along with an almost certain hit on your superannuation. More broadly, some industry participants believe we could be facing a recession if this policy is enacted;
      http://www.theaustralian.com.au/business/property/negative-gearing-changes-could-lead-to-recession-mark-steinhart/news-story/fc6876b2ee0b50993eb96e443f456517

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  21. This is a highly misleading website. The current policy from the ALP is to stop FUTURE negative gearing tax breaks for investments in existing residential properties. Investments that already receive these tax breaks will continue to receive them.
    What do you think the policy rationale for negative gearing in the first place was? It was to increase the stock of housing to make housing more affordable. The ALP policy will do precisely that, by still allowing negative gearing for investments into NEW housing.
    Also, any tax breaks that are not given to investors will be able to be put towards health, education, infrastructure etc or to pay off debt. This money stays in the economy and is not ‘ripped out’ as this website incorrectly claims.

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    1. HI Marty, thanks for your comments. As we’ve already said, if it were true that this policy was going to increase the stock of new housing, one of the country’s major developers wouldn’t be saying the policy may actually cause a recession. http://www.theaustralian.com.au/business/property/negative-gearing-changes-could-lead-to-recession-mark-steinhart/news-story/fc6876b2ee0b50993eb96e443f456517

      It’s also interesting that there’s a common perception that those who are negative gearing will pay more tax if negative gearing is abolished, but a recent survey by the REIQ showed 72% of investors surveyed said they would sell their properties if this policy is enacted, meaning there won’t be extra tax funds. And the direct consequence of this will be fewer rental properties and higher rents.

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  22. The purpose of housing is to provide shelter for people, not to enrich the greedy and not to become a financial asset. Negative gearing should be removed completely – its purpose is to turn Australians into a race of greedy people.

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    1. Hi Ashley, thanks for your comments. People who can’t afford to buy their own homes need housing too, hence why landlords exist and always have. Otherwise, the government would have to fund more public housing, which would present an untenable drain on the budget. Please, do take the time to read through our site, we’ve presented information as simply as possible to illustrate the issue we all currently face.

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      1. Negative gearing was originally intended to solve the problem of housing shortage by increasing housing stocks. In this regard negative gearing has been a miserable failure, and all at the expense of taxpayers. About 96% of property investors currently purchase existing housing which decreases housing stocks and increases housing prices such that many people can no longer afford to buy houses.

        The whole business of investment housing is currently one of wretched excess.

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        1. Hi Ashley, thanks for your comments. Negative gearing has been around for more than 100 years and today is a key part of the property economy. We recognise and acknowledge that affordability is an issue, out only point in this debate (which on July 2 only comes down to two options unfortunately – to leave it alone for now, or abolish it entirely on existing property on one day) is that the latter proposal presents an unacceptable level of risk in a fragile economic environment.

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    2. Ashley,
      Why the heck would anyone put their hard earned money into a rental property if it is not to make money? They’d be better off putting it into a bank account and putting their feet up instead of dealing with tenants.
      If I put my money down I am not doing it so you can have cheap housing while I work hard to pay the house off and you go on holidays to Bali.
      I buy rental property because I do not have super and I do not buy into the share market. I believe investing money in the share market is a fools game.
      So I buy rentals and make money out of that. I thereby ensure that my future is financially safe, I won’t get any pension from anyone. I pay my own way. For doing that I get punished by having to pay land tax on every property I own. The first three months of rent go back to the government and in return I get a piddly amount of Negative gearing benefit.
      My suggestion, if Labour wants to remove negative gearing, also remove the land tax.
      Just remember to move into a rental property someone has first got to have earned enough money to buy it. And that work effort has to be awarded in some way.
      Most people these days want everything. Kids want to move out from home into a ready made $2milion property that comes with gardener and cleaner and nanny.
      If kids were to start saving early and not be so self indulgent they’d have no issues buying property.
      But no it’s got to be the best as a first home.
      My husband and I own 7 rental properties between us. I am a cleaner!!!!!!!!!!!!!!!!
      Yes, I literally scrape stuff off other people’s toilets. And I can buy investment properties. But I don’t go out for dinner twice a week and I don’t smoke and I don’t spend 2 weeks in the snow every winter and another 3 weeks in Bali each summer.
      It can be done. I have run the figures for many friends who also want property but when it comes to curbing their spending habits to get a house there is nothing but unwillingness. Funny the only one out of 40 people I have shown how to buy a place who was willing to make the sacrifice was an immigrant from China. He has worked all hours God gave him and he just bought his first one. I am an immigrant from Europe and I never got one cent from this government. I have paid for everything myself.
      And I supply low cost housing for those who are willing to save and get their own place. I rejoice every time one of my tenants buys their own place.
      To lump all investors into that “invisible enemy group” called “Investors”
      is that same “tall poppy syndrome” that is keeping Australians from achieving anything.

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  23. The problem is (mostly) not ‘mum and dad’ investors claiming negative gearing on their 1 investment property. The problem is the very rich buying dozens of properties (mostly new, inner city apartments) and not even bothering to rent them out so that they can claim ‘negative gearing’ on their ‘investments’. After all, they’re losing even more money when they ‘fail’ to rent out their properties, right? This artificially drives up the demand for properties and leaves less properties for tenants to rent out. Meanwhile the very rich are paying very little tax, in part due to their negative gearing claims.

    Negative gearing should not be abolished all at once, but it seriously needs to be reviewed. Why should you be able to claim negative gearing on a property/idea you’re not even trying to rent out??

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    1. HI DSmith, thanks for your comments, you raise some interesting points and we definitely agree the key issue here is that negative gearing should not be abolished all at once – at the end of the day – this would be a radical move with untold consequences, not only for real estate agents, but for every single Australian.

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    2. I think you will find the empty properties come from GST taxation triggers, developers must pay the GST as soon as it is rented. So they don’t rent. Those that have bought must show they are actively leasing to make a claim, they cannot just get a claim for leaving it there. For those that don’t lease, its due to wear and tear issues, again highlighting the issue of investors reluctant to buy new, as the opposition claim will happen. I manage hundred of properties, majority single investor only and only 2 clients have more than 5 rentals, its a myth that their are loads of people with 7 houses.

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  24. I’ve watched the video, seen some comments and couldn’t avoid to leave a comment because in my opinion the video is bias towards everybody profiting (short or long term) from the real estate market in Australia, at the expense of those who want to buy a house to live in it.

    I come from Spain, a country whose economy was 10 years ago mostly based on the construction and real estate industries, with housing prices as high in proportion to those in Australia now, prices that the middle class couldn’t even afford and led to unthinkable mortgages. Australia has more measures in place to avoid such collapse of the economy, but still there are many similarities. I’m not an economist but I’ve lived in a few countries and in the past bought a property in The Netherlands, where I lived first, rented out when I left the country and ended up selling,

    With the comment saying investing in property, even with negative gearing, is not profitable at first, I don’t agree. A colleague of mine has an investment property that is rented out and told me recently not only negative gearing covers the difference between the mortgage and what he gets for renting the property out, but also he makes a good profit. Guess what, he drives an AMG.

    I’ve read another comment fearing the lack of negative gearing would cause a big drop in property investments. To me one of the reasons for negative gearing is the extremely high housing prices that renting them out can’t cover, so one of the reasons it’s there is to fill the gap. Without negative gearing, housing prices would drop, therefore mortgages would be lower and repayments could more or less match rental prices, so the situation could become even. Negative gearing, in my opinion, encourages and favours speculation in the housing market. I think those (and specially first home buyers) who want to buy a house to live in it in order to fully own a property when retirement comes should be the ones having tax deductions instead.

    This situation again doesn’t look good/healthy for the Australian society in the medium/long term, as for example in my suburb (in the East of Melbourne) I’m increasingly seeing houses on sale that are immediately put for lease once the sale is done. It doesn’t makes sense to me that only investors can buy properties but people who genuinely want to live in them. I understand though everybody with a job related to real estate is concerned, hence the video.
    J

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    1. Hi Jthegrey, thanks for posting.

      You’ve highlighted an interesting point, which relates to the comments some overseas economists have made about Australia’s supposed “housing bubble” and compares our property market to other markets around the world. Put simply, our property market does operate in fundamental ways that are different to the rest of the world and so any comparison doesn’t really work – it’s apples and oranges. While we can’t cover off all of the differences here, suffice it to say that Australian economists are almost unanimously in agreement that Australia is not in a property bubble.

      Once again, this site doesn’t debate whether or not negative gearing is a good thing. The fact is, it’s a part of our economy currently and the proposal to suddenly stop it represents a threat not only to our industry but to our economy as a whole. Of course we are worried about our people and unemployment – this is will be a direct effect of the policy if it’s enacted. But we’re not an island -all of Australia is connected and the property industry employs one in four people here. This spells disaster for all Australians – and we don’t understand why anyone would take such a risk.

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      1. “Trust me, we’re not in a property bubble.” — Real Estate Industry

        Yeah, sounds legit.

        You keep mentioning the fact that we are so heavily invested in the property industry and that any changes could be disastrous. Putting all of our eggs in the one basket springs to mind here.

        It shouldn’t have been allowed to get the point it is now and the sooner we rip the band-aid off the better.

        Anyone with existing arrangements are going to be covered, but it will prevent a further addition to the already outrageous predicament we are in at the moment.

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        1. Hi mynameisjohn, thanks for your post. Most Australian economists say we’re not in a property bubble, even highly respected ones! In some areas of Australia, especially mining towns, there’s already been a lot of hurt with significant property price drops.

          It’s a common misperception that the grandfathering arrangement will protect current investors, but while they will still be allowed to negatively gear their cash-flow losses, they’ll still take a hit on the value of their property when they go to sell. Smaller pool of buyers = lower prices. That’s why so many current investors are saying they’ll sell if this policy is enacted.

          We have to deal with what we have, and find a way to do it that doesn’t destabilise our economy. This policy is just not the solution.

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  25. The Federal Government subsidises private health providers to provide health care for Australians, through private hospitals. The Federal Government subsidises private education providers to provide education for Australians through private schools. It is only right that the Federal Government provides private investors to provide housing for Australians, through tax concessions. If the Federal Government didn’t do all this subsidising, it would have to provide all these services itself, and the tax payer would have to pay for all this. Take your choice.

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  26. thank you for taking an initiative to protect all of us who have invested in property… one way or another. what incentive do we have to create some financial security?

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    1. Hi Terri, thank you. Most of our groups have never before been involved in anything like this, but the issue is so serious, it would be remiss of us not to speak up when so much is at stake – for us, our customers and all Australians.

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  27. Most people do not realize that -although there are some tax benefits to be obtained by having an investment property- there are also lots of costs involved. One of our investment property is costing around $6,000 per year in maintenance. Add to this the land rates, landlord insurance, management fees, land tax, building insurance etc… As a consequence we are employing (although not directly) a property manager, a maintenance person (handyman), a gardener, an insurance broker and several other individuals working in a number of private companies and government departments. In addition to this, we are also providing a place to live for individuals and families. Most investors (in Real Estate) do not purchase properties for the immediate gain or tax concessions. Instead they invest in properties to benefit from capital growth when they sell. And when they do sell, they pay capital gains tax. So let me summarize: Buying an investment property is costly, keeping an investment property is costly (but provides indirect employment for many), and selling an investment property is costly (capital gains tax, marketing and advertising, agent fees, settlement fees etc…). Investors are willing to take all the risk on the premise that prices may, eventually go up one day. Sometimes it works and sometimes it does not, that’s the risk I take. I do not complaint until a political party is trying to take away the little bit of reward I get for putting a lot of my hard earned dollar on the line.

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  28. Property prices where I live in Sydney have not been pushed up by negative geared Australian investors, but overseas investors from China and India who have been buying property outright with no finance at all.
    Negative gearing really can’t be blamed as the exclusive reason for high property prices !

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  29. All we need is someone knowledgable to stand up and talk in media. Turnbull hasn’t been great explaining the truth and fact about negative gearing. All the medias are only publishing the negative effect on negative gearing, and this is why Labor is the favourite now.

    We need someone to Step up and explain the benefit of negative gearing in front of TV. I’m tired of media, political, fhb bashing around negative gearing without even know what negative gearing is.

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    1. Hi Erwin, thanks for your post. If only it were that easy! We have plenty of very experienced and knowledgeable people taking part in this information campaign, but unfortunately we don’t have control

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  30. Charles, if you believe EU and America have a better economy and much happier life, you must be reading MAD magazine. NG is about give and take, we help the government in supplying housing, saving taxpayer dollars on building them, and they allow tax concessions. You might not be aware the Housing Dept. is also
    using some private homes for their tenants, it’s CHEAPER for them, the landlord pays wear and tear maintenance and land rates as well as property insurance. Not being able to claim on costs but then expecting us to declare the rent is unfair. Give and take.

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  31. It’s concerning to see that this website is now censoring unfavourable criticism. Not really balanced and fair conversation then. None of my comments have been published.

    Liked by 1 person

    1. Hi Ben, to the contrary, we’re not censoring unfavourable criticism, we are censoring posts that are abusive, rude, contain external links or are overly repetitive. We have to have some limits! If you’d like to add some new perspectives, please fee free to comment further.

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  32. Negative gearing along with low interest rates seems to be distorting asset prices and reducing property yield. I would much rather high rates and no negative gearing…..

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    1. HI jf, thanks for your post. Unfortunately we have to play the cards we’re dealt and currently we have both low interest rates and negative gearing. If we were to suddenly raise rates back to “normal levels” (upwards of 2% more) we’d see a similar bedlam to what will happen if negative gearing is suddenly withdrawn. That’s why this policy is far too risky – we’re in a fragile economic environment (hence why we have low rates in the first place) and can’t afford any sudden movements.

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  33. Interesting, polarising inner city debate.
    Gratten modelling states an average 2 -3 % price falls nationally, but in areas of high negative gearing, such as regional coastal areas, it is admitted that those impacts may be higher. And that markets tend to overshoot, so initial impacts will be greater again. So how much devaluation, know one can answer. Bill Moss ex head of Macquarie Group Property division ( obviously no fool) is on record saying 30 %. Sounds rich. Or is it. Post GFC we saw the Central Coast beachfront sales fall 45%. Markets are volitile. They do react.
    Whilst the inner CBD may have a solid buyer base to take up the exit of investors, the regionals do not have an employment or high salary base to uphold market values. Considering some coastal tourist towns beachside apartments are predominately investor to investor sales, these markets will collapse, but again do not have the permanent employment to allow home buyers to finance their purchases. This puts a drag on surrounding property values, so even if your not an investor values are affected. And whilst affordability for first home buyers is an issue, almost a third of the country rent, and will continue to do so. Many by choice, or circumstance will never qualify for a loan, even if the current values were HALVED.
    Whilst it’s great spin to talk up pushing the investors into new housing, the reality is those new properties are generally more expensive. This will knock out a lot of current investors, with increased borrowings criteria’s, at higher levels, that they will not simply not qualify for under our responsible lending guideline. So again the limited number of new rentals, that do get bought, will be at a higher rent. That’s just logic, so rents must rise.
    Investors are not stupid, they soon realise that the new unit or house they have purchased, now has a limited resale value, with the only market being owner occupier, to pay hopefully a premium value to their original purchase price. That’s what an investment is. So we will not see the promised new building boom. All the construction bodies HI, MBA , Property Council have all come out against the changes. If construction was going to be boosted, they would support Shortens claims. But they are not. It is a lie being told to the Australian youth for grubby political gain. Its what people want to hear.
    What’s not being told honestly,is the impacts on tenants rents, and the impacts to regional areas. Both in home prices values, rents ,and construction employment, these are being completely ignored, in this inner city dominated debate.
    The HIA and MBA are not supporting it, they know property construction rates need added investment to produce valuations, above current construction costs. Take the investment away and it’s the countries tradies that suffer. It’s not the rich vs the poor in this debate. It’s the lefties vs the tradies.

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  34. Correct me if I’m wrong…
    If NG is removed why would the rents increase? The rent market is in control of the renters in this case. Because I figured if investors bump the price of the rents through the roof then renters will just become buyers. They are not buyers now because they have been priced out of the market. Low interest rates and a drop in the house prices would make buying a very good option as an alternative to paying higher rent.

    Renters are probably more resilient as they can share / consolidate with other renters, move home etc. in dire circumstances. Investors with loans to pay won’t have it as easy and probably would be forced to sell in a declining market.

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    1. Hi James, thanks for your question. Rents will rise because supply of rental properties will fall – more competition for those properties will drive rents higher. There’s a large section of Australians who rent, will always rent and don’t have the option to buy – these people would be hurt greatly by this proposal. As for tenants becoming buyers, please take a look at the “for first home buyers” tab on our site – this myth that the proposal will magically make homes more affordable for young people is misleading and incorrect.

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    2. In terms of renters consolidating with others. Although the law means I cannot reasonably refuse people to share accommodation, I steadfastly refuse to rent to anyone who makes it clear to me that theirs is a share situation. Or that they will need co-renters to cover the full rent. Too much trouble with people moving in and out and no one ever wants to pay for damages or water bills because “the other guy did that” or “I only just moved in so the water was used before I came”. Or I want to do an inspection and know not one person who actually lives there. Most sharers move out without having themselves be taken off the lease. Most tenants don’t know where their lease agreement is after the first 3 months.
      No thanks. And if there are fewer rentals landlords will become even more discerning.
      Even now I insist that the rent my tenants pay is no more than 40% of their total income. If they don’t have enough income they do not meet the income requirement for the property and have to rent elsewhere. Removing NG would mean I have to increase the rent to cover costs and this would mean the bottom end of the rental market, those who can even now barely afford housing would fall through the cracks and have no where to live at all.

      I think we need to be clear here. Because we have NG property investors take the stress off public housing for those who really can’t afford to rent otherwise.
      It will not make home owners out of single mothers who are struggling to pay the rent and have no spare money. no matter how much house prices will come down.
      My rentals are in a low socioeconomic area. Most people do not have $1 spare at the end of the week and if they do they will spend it on consumables. Pizza, movies, cigarettes, beer, not save it for a deposit for a house. None of these people will buy a house ever, with or without NG. But with NG they have a greater chance of renting somewhere.

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  35. Why is there so much focus on NG and so little on CGT concessions. It seems to me that reducing concessions to CGT over time would be a safer option as it would have a delayed impact on the economy as a whole. Removing NG will impact the affordability of properties already owned by investors leading to a potential flooding of the market with established homes. If these properties are no longer suitable for investors, what happens to the renters? Not all of them will be in a position to buy their own home.

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    1. HI Karl, you’re correct in suggesting there are plenty of other options that could be considered other than the current one, which makes absolutely no sense.Why would we risk it?

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  36. A rushed policy decision by Labour to appease the hoi polloi. But this policy direction needs careful review before it is implemented. This is what will happen if it’s implemented as is: 1) Big panic among real estate investors (dad and mum types, not the rich) as they can no longer afford to service their investment properties 2) They will move quickly to offload it in the market but because there’s oversupply caused by fear and change in policy there will be no effective demand (buyers) 3) the mortgagee (lenders) will move in to repossess, putting families and their PPOR at risk. 4) The ATO will not be able to realise tax revenue from sale of investment properties; also GST revenue from property management companies will fall. 5) Oversupply will force property values in Australia to decline sharply, AFFECTING both rented premises and PPOR. 6) homelessness will increase as renters will be thrown out in the streets 5) The millions of Australians directly and indirectly employed by the industry will be laid off and as companies move to close shop (valuation, property management etc) 7) Overseas property investors will lose trust in Australia as a stable investment destination. 8) With increased unemployment, depression will set in. 9) the impact will be HUGE, affecting ALL Australian families irrespective of whether they are property investors or not. This is DISASTER and should be stopped!

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    1. I only hear a defence of the current negative gearing policy from people who have vested interest in it. Most economists know it is a bad policy, and I think that second to the ridiculously generous superannuation rules that previously existed, it is in its current form the biggest loophole in Australia’s taxation system allowing for rorts and scams of public money and for little public benefit in return.

      Let us think about what this policy means. Limitless deduction of losses on housing against unrelated income, and accompanied by significantly reduced capital gains tax, and with no direction on what type of housing to invest in, i.e no discrimination towards new housing that really would increase supply, i.e a policy with no purpose and no limits on cost.

      A stupid policy by all measures, and what this site is saying is that a stupid policy like this cannot be improved upon, and it should not be tinkered with lest the world comes fall, and appeals to the selfishness of those who are older and have money to make it more difficult for young people to have easier access to housing. The world will not fall down. All that will happen is that some people who scammed and milked this policy will have to look for new tax scams and we will save some public money to spend it on something worthwhile like housing or education.

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      1. Hi Joseph, it’s disappointing to read so many false assumptions in your comments about the purpose of our campaign and the detail around it. It would be great if you would take the time to read through the site more closely. Once you have, we’d be happy to answer any questions you might. Thanks you.

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  37. Negative Gearing provides the incentive for house speculation.
    This insidious practice is a well tried “Get Rich Quick ” scheme.
    BUT it produces nothing to the economy ; it burdens the young with now impossible mortgages.
    As far as providing rental premises, that may be true, but there is little security for the unfortunate tenant, as
    at the whim of the owner investor they will be evicted .
    Any negatively geared property should be mandatorily required to enter into say a 7 year lease with their Tenant.
    This will reduce the incentive for all except the long term investor

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    1. Hi Dutch treat would be worth you reading the article in our blog about what negative gearing actually is – despite the perception that it’s some “get Rick quick scheme” all it actually is is a mechanism to claim losses against income, as with any business. There’s no extra subsidy or benefit – it’s just claiming losses. As for long term leases, in our experience it’s rare that a tenant will agree to sign a lease any longer than one or at the most two years – most tenants want flexibility, often more so than landlords.

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    2. What a stupid thing to say. I bought a house and could well see why the current owner was selling. He had ended up with some anti-social tenants who hardly ever paid the rent and lived like pigs – never cleaning the house and not looking after the lawns. When I said I’d buy the property I said I wanted vacant possession because I could see that the current tenants would never pay the rent. Are you saying I should have been legally forced to put my money into an investment that would have driven me bankrupt?
      I have owned that rental for over 3 years now and am still receiving letters for those people from the sheriff and from multiple debt collection agencies. Both the mother and the son owe $3500 in phone bills each and have not bothered telling anyone where they have moved to. They were taking advantage of the previous kindhearted landlord. The property was a dual occupancy and the two young blokes living int he back threw all their possessions in the back lane (where council does not pick up!) , stole an air conditioning unit from the house and smashed a garden glass table in the back lane and set fire to their old car, also left in the back lane.
      Are you really saying I should have been forced to sign a 7 year lease with these people? You must be out of your mind.
      And by the way, most tenants move in less than 2-3 years anyway. Why? Because they so trash your place that they don’t like living there any more and then argue that all the holes in the wall were already there when they moved in and that the stove was dirty when they moved in. Never mind the old stove had been professionally cleaned and died during the tenancy and they were supplied with a brand new one. They still say it was dirty and leave you with a stove with a dead mouse in the bottom drawer.
      You want protection for those people?
      Instead of telling me about a dripping tap one tenant turned the tap off with a wrench and destroyed the whole tap assembly, handle, spindle and all, costing me $50 in materials alone. I am 10 minutes drive away and could have come over and changed the tap washer in less than half an hour. But you want those kinds of people protected?
      I tell you what, good tenants are not made to leave, and any decent landlord keeps the rent within reason to keep a good tenant. I left a tenant’s rent within $20 of the original sign up rent for 9 years because she was the best tenant I ever had. She looked after the place like it was her own. Unfortunately some tenants have very different ideas of clean. To them leaving dirty washing on the floor for a month is clean enough. I just had someone move who had a dog the size of a great dane and never picked droppings in the yard. They had a 5 year old and an 18 months old child playing in a yard with 50 – 100 dog turds in various states of decomposition and didn’t care. They thought is was clean enough.
      I had to actually tell him that if I were to find dog turd in the yard when he is moving out I would have to charge him for picking them up. I cannot rent a house to another tenant with such an unhygienic yard. He did it, but only because I told him I would charge him. Then tried to dispute the pet clause carpet cleaning which he had agreed to when signing the lease.
      Again. You want people like that protected?
      I think landlords need more protection from their tenants.
      Even now I have to jump through all sorts of hoops to get decent tenants. I am a TICA member (another cost!) I look up the facebook pages of the prospective tenants, I ask for 2 months of bank statements to check they are actually paying rent to someone and that they didn’t forge their payslips. And can still end up with a bad one. Then it takes 21 days to get a hearing to have them evicted if they are 14 days overdue with the rent and if they are evicted they get another 1-2 to actually vacate the premises. If they move out then, some don’t by then they owe 5-7 weeks in rent, when I am only allowed to hold 4 weeks in bond and the water bill and any damage has not been covered. And despite signing to the effect that they are not allowed to use the bond in lew of rent, most tenants stop paying rent 2 weeks before they move out so you only have 2 weeks to cover damage and from those 2 weeks you have to take the latest water bill. Which depending on how long it’s been since the last bill might be higher than the 2 weeks rent, leaving you with nothing but to list them on TICA and hope the’ll pay up. And even then after 3 years the TICA record has to be removed even if they didn’t pay. Leaving them in the clear and the landlord with an unpaid debt.
      I think most people who do not own property have quite a distorted and unrealistic idea of what is actually involved in owning rental property. You are among them.

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    3. How could NG be a “Get rich quick” scheme when it takes many years before you see a return on your investment? Another thing, a good 95% of property owners ARE long term investors already.Unlike shares, property is a long term investment. If a tenant stays 7 years or longer and they are looking after the property, and paying their rent with no hassles, we love that. When the time comes to retire we won’t require the pension. The Government gives us tax concessions now, then they don’t need to use taxpayer dollars to pay us a pension in the future, and we will still pay tax because of the income from the property. Superannuation will just not be enough for the majority of people.

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    4. Hi Dutch Treat,

      I find your suggestion of forcing properties to be leased for a minimum of 7 years interesting for 2 reasons. Firstly, longer lease contracts reduce vacancy time and is therefore better for landlords and tenants as it can reduce rent for the tenant and increase income for the landlord. Increased income equals increased tax so everyone wins.
      Secondly, this is interesting because these types of leases are available but generally only for government housing. The Defence Housing Association sells houses to public investors and then leases those houses for periods up to 18 years. This decreases the government’s capital requirements and allows them to pay rent compatible to private rentals in the area.
      Other posts I have read here suggest that the average NG benefit is something like $8,700 and the average tax bracket is about 40%. This means that the cost of owning a house costs about $20,000 more than renting per year.
      DHA also charges a management fee while renting the property making this option even cheaper.
      Removing the ability to claim costs from taxable income for these properties in future will mean the government will be forced to buy future properties outright costing them an enormous amount of money.
      Further to this, will the government reimburse current landlords for any potential capital losses caused by changing current tax laws? These landlords have entered into long term agreements with the government in good faith that their capital investment will not be negatively impacted by regulatory changes. Changes to NG may actually cost the government far more than they realise.

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  38. Let’s drop interest rates further and continue with negative gearing so house prices can go to the moon!
    Putting youth and first home buyers further out of reach and make the lucky property investment owners even wealthier!
    Who wants to own a house these days when you can rent!

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    1. Hi Mocca – your suggestions seem a little odd, no one involved in this campaign is wanting to see affordability issues exacerbated. We should also add that interest rates only get cut because of a softening economy, even more reason for us to be cautious about making reckless changes to existing policy without considering the ramifications. Plenty more information coming, we hope you take the time to read it and become involved. Thank you.

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  39. Hi. I am interested, as negative gearing provides a tax benefit when interest expense exceeds rental income what is the view of this association in regards to how it has effected levels of residential property debt?

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    1. Hi Pez thanks for posting. That’s a hard question to answer – there are so many factors influencing debt, probably historically low interest rates more so than anything else. The data does show the amount being claimed in negative gearing has fallen dramatically in the past couple of years, so negative gearing can’t really be held accountable for property price growth in that time. It’s also important to understand the tax benefit is similar to that of any business – income is taxable and losses are tax deductible. Even if this policy is enacted, investors will still be able to claim losses, just later when they go to sell against the capital gain. Negative gearing only provides an additional cash flow benefit – it enables people who might not have the cash flow to support a loss along the way to invest in propriety. Those people would no longer be able to do so.

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      1. Thank you for your reply. You state “enables people who might not have the cash flow to support a loss along the way to invest in propriety”. As interest expense is the largest expense an investor usually has doesn’t it follow that as negative gearing allows them to endure larger losses for longer it allows them to borrow more?

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        1. Hi Pez, borrowings are limited by lending criteria which has tightened significantly over recent months due to the new APRA requirements. Negative gearing does allow landlords to claim losses, meaning the yield they can tolerate is lower than would otherwise be possible. Without negative gearing, one of two things (or both) would have to happen – property prices fall and/or rents rise. Interesting to note the yields in Australia are much lower than in many countries that do not have negative gearing, meaning Australian tenants pay less rent as a percentage of property values
          .

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  40. I find the acusation made on this website and the flyer i received in the mail that purports that “..rents will rise…” if negative gearing is abolished, contadictory.

    If the abolishment of negative grearing results in greater return on investment, why is the real estate industry against such a generous move?

    Surely agents and investors are seeking exactly this outcome of…Higher Rents….

    So why are you against higher returns for investors, and why does your web site state this as a fact?

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    1. Hi again Fox, we’re concerned for our tenants, who’ll face rising rents as a result of shorter supply. We are concerned for investors too – Many of our investors simply will be pushed out of the market. Most investors on normal incomes don’t have the cash flow to carry forward the losses until the point of sale, which it now appears this policy is suggesting will be allowably. The only people who are in a position to carry these losses are the ones who this policy is supposedly meant to target – who would in fact be very happy at the lack of competition they’re about to face!

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      1. Again, (putting your noble concern for tenants aside)

        You have a contradiction here. You are putting a dollar $ both ways.

        if rents rise, surely your agents have gotta be happy..surely??

        So why are you against the idea for rents rising? This seems an oxymoron for you guys.

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        1. Hi again Fox, rents will rise due to a shortage of rental properties. We have no desire to see tenants suffer, nor do we want to see property managers lose their jobs due to shrinking rent rolls. No contradiction here.

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  41. “But it’s obvious that taking billions of dollars out of the economy all at once is a recipe for disaster for all of us.”

    – Where exactly do you think the money is going? It’s just going to disappear from the economy?

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    1. Hi Anna tricky question – when the value of Australian’s most valuable assets ate decimated, it’s not actual money that disappears. They’re two different things. There are so many ramifications to this proposal, we hope you get a chance to look properly through the website. Thanks for posting.

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  42. Everyone seems fixated about “lost tax revenue” subsidizing greedy investors. Well you may ask what is the taxpayer receiving by allowing investors to negatively gear, what is this “lost tax revenue” buying?

    Well in effect it is “buying” subsidized rental accommodation for those who either choose to rent or cannot afford to buy. Make no mistake if you remove investment incentives for residential property, investors will turn away and the supply of rental properties will not keep up with demand (particularly in middle ring suburbs). Rents will rise substantially (maybe not immediately but within 2 years), rental stress will skyrocket as will the waiting list for public housing. The additional investment required for public housing to fill the gap in rental demand will require far more investment by government than the “lost tax revenue” gained by abolishing negative gearing.

    Abolishing negative gearing does not make economic sense. The equations do not add up. It is an ill-conceived policy adopted by a desperate opposition grasping what they think is a populist policy (popular only with the vocal and ill-informed).

    If Labor win the election I predict the following outcome (more or less chronologically over say 5 to 8 years):

    – Investors no longer purchase established residential property.
    – Investors do not turn to new property in the oversupplied CBD or growth corridors as this is not investment grade property.
    – This leads to a construction slump and recession as construction is the only industry propping up the economy.
    – Interest rates fall to near zero and rents rise dramatically due to lack of rental supply. Over time rental properties will become neutrally geared and investors will return to the market and commence purchasing established investment grade housing stock (in effect negative gearing will no longer be necessary for investors).
    – The construction slump compounds the lack of supply and we experiencing another property boom.
    – This time high rents and high house prices lock out first home buyers.

    Basically a lot of economic pain for no gain.

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    1. 1. When people say “Tax payers pay for the gap created by Negative Gearing”
      Answer: There is no gap. Investor’s pay less tax due to a loss on their investments. It’s like saying all businesses should pay same tax every year regardless of if they make or loose money.

      2. When people say “Abolish NG to make housing more affordable”
      Answer: The correct statement should be “Release more land, build more houses, work on the supply side to make housing more affordable”

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  43. Let’s get one thing clear,negative gearing DOES NOT increase the cost of housing. This tax concession has been around for many years. It’s a combination of the market ( supply and demand ) and interest rates that creates increases as well as price falls. But no-one seems to want to acknowledge the one thing we’ve never had before – the Chinese buyer – that’s the reason the market has been crazy in the past 2 years or so.
    Understand one thing, you cannot claim more than what you have paid in tax from your wages eg. $10,000 tax paid from wages, no more than $10,000 claimed via negative gearing.

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  44. I was told the best way to get on in life was to save up and buy a home. I arrived in this country 26 years ago and it was no easier then to buy a property but i saved and moved out of Sydney to somewhere affordable and started again in my own property. I now have an investment home which will go someway to providing for me in my old age. Why is nobody talking about giving tax relief on the mortgage payments first home buyers make, this i believe would build equity faster for them and make for a more secure future should property have a re-adjustment.Fewer people would lose their homes as they did under Labors disastrous 17% interest rate we needed to have. There are always other options to current ideas and everything should be considered because the extra burden of paying more out in pensions instead of encouraging people to provide for themselves may just be the straw that breaks the back of this camel we call home. David

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  45. Hi. Residentisl property investment is very important. Does the association have a preferred level of residential property investment? What is the ideal mix of investor owned and owner occupier? Is it currently right? Is it going in the right direction?

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    1. HI Pez, another hard question to answer! Loose estimates suggest that around one third of people will always be renters through choice or necessity, and obviously private property investment is the main mechanism to provide housing for the vast majority of these people. Vacancy rates vary quite dramatically by area – for example, there are a lot of vacant properties in some regional areas currently, particularly mining towns, yet there are severe shortages of rental properties in some key metropolitan areas. We are concerned that if this policy becomes reality, supply of rental properties will become a real issue in many more areas as property investment will become significantly less attractive to private investors. With a shortage in supply, rents will rise.

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  46. I am an investor with just 2 rentals. Old houses that I have spent a considerable amount of money on over the 6 and 8 years that I have had them. Nearly sold at least one twice and both at one time due to losses and stressors of bad renters and I mean very bad renters. I went into this as thought better than superannuation when I was late joining the workforce but if could do it all again would opt for the Super due to the stress and Time factor spent in fixing the homes when vacated and need repair or upgrades or maintenance. both managed by real estate agents now but managed one by myself for a few years. I think people forget WHY negative gearing was introduced to encourage ordinary people to invest and save the government a lot of time and money. ie a lot of problems with housing trust homes being wrecked a shortage of supply of rental properties so government was sharing the problem with incentive to try to make it appear worth while. In an ideal world it would be but we don’t have ideal people renting! Some are good many are not. I am lucky to have two good tenants now. After all this time it is just starting to make a small income. do tax payers pay for the refunds as many believe? Well we all pay taxes so we all pay for the numerous benefits out in society and the ridiculously high salaries of MP’s and we all pay when tenants of housing trust homes wreck them or they have to be repaired and replaced so it cannot be costing more to subsidise the ordinary investor than it does to compensate the government expense in that department! I think expenses should be recovered from the individuals pockets from the benefits of many but then many can spend big on holidays furniture, clothes and alcohol and drugs and then claim no money for food and get emergency funds to cover unpaid rent! Again all taxpayers pay for this. I have had my share of those tenants. I think people are barking up the wrong tree thinking landlords are becoming rich at their expense as I am far from rich and have very few and very brief breaks from work. There is the perk of claiming on travel when investments are interstate and I think that is something that could be tightened up. Make people invest locally. No travel perks interstate. If we need the government to save money lets start with the Government and the MP perks. I believe they should have a wage only a government car which should be 100% Australian and reimbursement of travel for government business only for one person only and at economy rates and should not be able to claim for overnight costs when they are staying in anyone of their own homes and if in hotels then nominated hotels at economy price unless they foot the difference.
    Cheryl Milloss

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    1. Hi Cheryl,
      Wonderful to hear from somebody else who has lived the REAL world of property investing. TENANTS !!! Sitting here in my ‘paint splattered tracky dacks’ I feel just as RICH as you ! Hahhahhaaaa !! Stick with it. This is a marathon …NOT a sprint. Especially in QLD which has suffered of late. But DO hang in there. It may take another few years but it is worth it. My best wishes !! LL

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