If negative gearing is abolished on all but newly-built dwellings, investors
- Will no longer be able to buy strategic investments, looking to acquire high value properties in prime locations that will realise the best gains over time.
- Will no longer be able to write rental losses off against other tax, creating a disincentive to invest in property at all.
- Will find it harder to sell their investments if and when they want to dispose of them, as there will be no incentive for other investors to buy.
- Will find their investments worth less, as the lack of incentive for other investors to buy them will translate directly to reduced capital growth.
Halving the capital gains tax discount from 50% to 25% is a false economy: quite simply, there will be less capital gains to be taxed.
Almost every Australian belongs to a superannuation fund that invests in property; axing negative gearing means returns will be lower, impacting ordinary people when they retire.
Most people who self-manage super buy property, and these people will be hit even harder.
The average deduction for a loss on negatively geared property, according to recent Australian Taxation Office figures, is $10,000; in the overwhelming majority of cases, this means people with one or at most two investment properties.
Abolishing the deduction may cost these investors up to $3,500 per year. In many cases, this could be the difference between an Australian family on a modest income being able to afford to invest in property – and help provide for themselves in later life – or not at all.
While statistics vary, roughly 90% of investors who negative gear property own just one or two properties each, and 78% of them earn less than $100,000 per year. Is it really worth kicking these hard workers trying to get ahead just to get at the 10% with more than two properties?
And if negative gearing is so bad, why retain it for new properties at all?
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.