It keeps rearing its ugly head doesn’t it?
Negative gearing that is.
Well it’s not really evil and shouldn’t be removed according to Deloitte Access Economics “Mythbusting Tax Reform” report.
The report looks at superannuation incentives, negative gearing and the discount on capital gains tax.
Deloitte has defended negative gearing as being no different to the other methods used by people to reduce their tax burdens, saying:
“Negative gearing is seen as a loophole, with the rich making out like bandits from it, yet the ability to deduct expenses incurred in earning revenue is an accepted principle of our tax system – and most other tax systems too.
“It is standard practice to allow taxpayers to claim a deduction for a real economic loss that they incur to earn their income.”
The report also downplays the idea that negative gearing has had an adverse effect on housing affordability, instead claiming that interest rates and other tax arrangements have resulted in prices increasing.
“Interest rates have a far larger impact on house prices than taxes do. Housing prices are through the roof mostly because mortgage rates have never been lower,” the report said.
“Among tax factors, it is the favourable treatment of capital gains that is the key culprit – not negative gearing,”
Deloitte also suggest the 50% discount on CGT is too big, because it was constructed with a different, higher level of inflation in Australia in mind.
Here’s Deloitte’s infographic highlighting the key takeaways from their report:
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