A report jointly commissioned by the Real Estate Institute of Australia (REIA) and the Property Council of Australia (PCA) reveals the positive impact negative gearing and capital gains discounts have on the property market.
The REIA says the report – Australian housing investment: analysis of negative gearing and CGT discount for residential property – shows negative gearing and the capital gains discount boosts the supply of new homes, puts downward pressure on prices and allows Australians to get their foot on the property ladder.
According to the report, around a third of all new dwelling construction is financed by investors every year – “debunking the myth that negative gearing does nothing to support housing supply”; while two thirds of property investors who benefit from negative gearing earn a taxable income of less than $80,000 a year.
“Mum and dad investors are overwhelmingly the ones who benefit most for the ability to negatively gear their property investments,” says REIA CEO Amanda Lynch.
“This is middle Australia. 66.5% of taxpayers who earn an annual income of up to $80,000 own 80% of negatively geared properties.”
The REIA says the report shows removing negative gearing of the CGT discount altogether for property will dampen investment, diminish rental supply and increase the likelihood that in the short to medium term, rents and property prices will increase.
“The immediate removal of negative gearing without allowing to carry forward losses is likely to result in a portion of the average net rental loss (which was, on average, $9500 in 2012-13 across all taxable income groups) being added to rental prices,” the report states.
According to PCA chief executive Ken Morrison, arguments for removing negative gearing and the CGT discount don’t stack up.
“They tick all the boxes by increasing supply, giving people an opportunity to get into the housing market and helping ordinary Australians build wealth for their future,” he says.
“The reality is that if negative gearing was abolished there would less investment and rents would go up.”
Lynch adds: “Tinkering with negative gearing would introduce distortions into the tax system and attack confidence, counter to the principles of simplicity and fairness we are seeking to achieve.”
Morrison says the focus should be on real barriers to home ownership such as the increase in stamp duty costs which have increased by up to 800% in the last two decades.
Published on: Monday, June 29, 2015 Source Switze Broker
