Negative Gearing – Not So Negative

As we all know, negative gearing is a hot topic at the moment. For a while the potential changes to negative gearing was all people were talking about. The conversation went into overdrive when the ALP announced their plan to abolish negative gearing. As we know they were only going to allow it for brand new property starting from 1 July 2017 if they were to win the next election.

The government also added fuel to the fire as they originally said that everything would be on the table regarding tax reform. A couple of weeks later, the government decided to leave things on hold. We will only know if there are to be any changes to negative gearing at the next federal budget in May.

Here are 8 reasons why I don’t see any changes to negative gearing;

  1. Every year (during a property boom) for as long as I can remember there is always a discussion about making changes to negative gearing. This year has been no different.
  2. With an aging population coming out of the horrors of the GFC, of course we saw an increase in the number of property investors. It was always going to happen.
  3. The latest Australian Taxation Office (ATO) statistics show that 2013-14 the impact that negative gearing had to the federal budget has actually more than halved from $7.9 billion to just $3.7 billion.
  4. Let’s not forget that during this period, the cash rate was at 2.75%. It is now at 2%.
  5. As more numbers come out of the ATO for 2014-15 and 2015-16, we will see further declines to net rental losses. This will mean negative gearing will have less of an impact on the federal budget.
  6. The recent statistics from the ATO also demonstrates that 60% of taxpayers claiming net rental losses have a taxable income of less than $80,000.
  7. Only 8% of property investors are paying tax at the highest marginal rate.
  8. The total capital gains reported by taxpayers increased by 37% to $34.4 billion

These figures are not my opinion. These figures are the latest figures released by the ATO. If you would like to review some ATO findings, please visit https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-statistics/Taxation-statistics-2013-14/?anchor=Individuals#Figure8