Some questions that should be asked regarding removing negative gearing

Everyone seems to be having their say about negative gearing lately.

But that always seems to happen around this time of the year – before the budget and many of the same old arguments are being hauled out.

Today I’d like to do things differently

Let’s look at some of the questions and the facts:

  • Currently around 30% of Australia’s population (around 7.2 million people) are either currently tenants or looking for accommodation.
  • The government provides only around 4% of public housing for tenants. gearing negative
  •  The private sector provides around 96% of the properties for tenants through investment properties.
  • The ATO figures shows $13 billion in tax deductions claimed by property investors in FY2013. That represents $4.3 billion lost in revenue to government at an average tax rate of 30 per cent.
  • If private investors pulled out of property market and the burden of public housing fell more heavily on government, would it cost the government more than the $4 billion it currently gives up in tax. Where would the government get the funds to build these properties to replace the private investors when they are already in such debt
  • The State governments collect millions of dollars in Stamp Duty and Land Tax due to the active trading and investing in all types of properties. Will the removal of negative gearing have a domino effect on the States economy.
  • Currently the real estate industry has replaced the slowing down in the mining industry. Do we risk killing off another industry and currently is helping the economy in light of the current government debt levels?
  • What happens to industries such as the blue collar industry carpenters, plumbers, electricians etc plus real estate agents and banks etc. if the private investors pulled out of the property market.
  • Negative gearing applies to all other investments such as shares, businesses, companies and other investments. Is it legislatively possible to remove negative gearing from only one industry, the property investors and not from other investment like shares and business?
  • Negative gearing is simply a fancy term attributed to making losses. If one makes a loss it can be offset against other income.
  • This is the same argument put forward by Labor when they introduced the Mining tax on a booming mining industry. Some accused the Labor Government of having a “Tax it till it disappears” mentality. But what happens to economic growth if we tax our most productive industry.
  •  Is Labor repeating the same mistake with the property industry –  Tax it till it disappears?
  • Most property investors are not rich. Over 70% earn income at around $80,000pa or less.
  • Australia’s population is aging and should we be encouraging people to become self funded by taking risks in investing in real estate and therefore not rely on an old age pension. The governments debt levels are unsustainable.
  • The great Hawke/Keating Labor government replaced negative gearing after 18 months when rents went through the roof and the waiting list for public housing doubled as private investors left the property market and created a huge shortage of rental properties.
  • Negative gearing means someone is paying out more than they are earning. In other words losing money. Why would anyone do that? It’s in the hope that they can make up the losses and more, due to capital gain of the investment. This occurs not just in property but applies to those who invest in shares as well as in businesses and many forms of investments where there is prospect of capital growth.
    So why would someone take such risks because there are no guarantees that the property market will increase greater than the losses suffered. Many property investors have lost hundreds of thousands dollarsIt’s an extremely risky strategy and the risk applies across the board to other investments also.
  • It’s made more risky if they cannot claim the losses like every other industry can. How can this be fair when one has to pay tax on capital gains but not the losses from negative gearing? negative gearing money dollar
  • It feels like Labor wants it both ways.
  • Labor’s wants to reduce capital gains tax concession from 50% to 25%. But what if someone has made a capital loss? One cannot claim capital losses against other income. This has increased the risk to investing in real estate. Will the returns from real estate now be so low that it no longer becomes an attractive investment to put one’s money into and what does the reduction is demand do to prices?
  • Is there sufficient incentive to attract investors back into property to help meet the demand for property and in order to keep both rents and prices down.
  • Our economy is not healthy. We have head winds coming out of Europe and USA. The global market is unstable. Is this a risk to our only industry that is keeping our economy going. Is this the right time to do this?
  • Are Property investors discriminated against when one considers they pay stamp duty on purchase and pay land tax for owning it?
  • Share investors do not pay a “share tax” simply for holding the shares or stamp duty on purchase of shares. Share investors still are permitted to negative gear their portfolio.

These are just some of the questions that should be asked by both sides – those for and those against getting rid of negative gearing.

Want more of this type of information?

Ed Chan


Ed is a founding partner of Chan and Naylor accountants and a leading property tax specialist. He has co-authored 3 best selling books. As a seasoned property investor he shares his unique understanding of the relationship between property investment and tax. Visit

'Some questions that should be asked regarding removing negative gearing' have 3 comments

  1. March 6, 2016 @ 7:18 am Dean

    All good points.
    The loss in land taxes and stamp duty would be large and the overall hit to the economy if tgese changes were to be brought in would also be massive. They’ll be less construction and therefore all it will do is put an increased pressure on supply in the future which will only exacerbate the current we have in the market… Not enough supply to meet demand.


    • March 7, 2016 @ 9:08 am Caro Jean

      Hi Ed, I haven’t seen these questions on issues raised much in the media, and I think they are very interesting points. Have you tried submitting an opinion piece to the ABC drum webpage perhaps?


  2. March 7, 2016 @ 9:25 am Fred

    Where is the evidence that negative gearing directly pushes up house prices? Yes, NG does sit on the demand side of the equation, but it is one of many demand driving factors that impact house prices. I note NG is still available in places like Perth, yet property prices there have dropped.
    Im surprised the Libs haven’t smacked Dill Shorten in the face and ask him “what happened last time your illustrious Keating tinkered with NG. PLease tell us why he reinstated it 18months later”


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