Why be so negative about negative gearing?

Negative gearingOne topic guaranteed to cause a strong reaction in the media is negative gearing.

And it’s been hitting the headlines again as it seems to every year around this time in the lead up to the budget.

The problem is that many people with only a hazy idea of what it actually is, blame negative gearing for virtually everything from locking first home buyers out of the market, to causing high property price rises, to ugly greedy investors roarting the tax system and driving the National Budget into deficit.

Indeed, the reaction to negative gearing has been so, well, negative, that there are once again calls for it to be scrapped.

But is negative gearing really that bad?

Firstly a quick primer:

A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and depreciation – exceed the income it produces. 


Since the costs of producing an income are generally deductible against the taxpayer’s other income, property investors can effectively offset some of the interest expense against their wages.

This has made some argue that other, less fortunate taxpayers help these property investors meet their costs.

Now negative gearing is nothing new, it was first introduced with the Income Tax Assessment Act in 1936.

But let’s make things clear – negative gearing is not (or maybe I should put it differently – should not be used as) a property investment strategy. It’s just a result of how a property has been financed.

So it’s never been a reason to invest in real estate, even though some misguided (or self interested) advisors have recommended it as such.

Why would anyone go into AC?

Generally it’s because property investors hope that their income losses will be more than offset by their capital gains (the growth in the value of their property) that they can access when they refinance or eventually sell their property. property mortgage finance money

Alternatively, a negatively geared property may become neutrally or positively geared as the rental increases, but in the main, negative gearing really only makes sense from an investor’s viewpoint if property increases in value.

And in Australia this capital gain is not taxed unless you sell your property, and then it is concessionally taxed; again evoking the argument that it favours wealthy landlords.

Of course negative gearing is more favourable for taxpayers who earn high incomes.

Imagine an investor had excess interest expenses of $10,000.

If they were on a marginal tax rate of 15 cents in the dollar they could use their loss and reduce their tax by $1,500.

But to a taxpayer in a higher tax bracket, one who pays 30 cents in the dollar tax, they could reduce their tax by $3,000. bank-savings-house-couple-save-property-meeting-budget-300x199

So the benefits of negative gearing are greater the more you earn and the higher your tax rate.

What gets some people hopping up and down is that Australia’s negative gearing regulations are different to most parts of the world in that they allow investors, in both property & shares, to write-off the cost of borrowing used to acquire the asset in addition to other holding costs against all sources of income (including the investors personal wages ) and not just the income generated by the asset.

And in contrast to most other countries, in Australia there are no limitations on tax payers’ income (in other words negative gearing works for billionaires as well as average income earners), on the size of losses, or the period over which losses can be deducted, which makes some suggest they’re a great tax shelter.

But negative gearing is not just for the rich

However the assertion that all negatively geared property investors are ‘ugly wealthy Australians’ is simply unfounded and incorrect.

According to ATO info released last year, there are close to two million property investors in Australia, of whom two thirds (1.3 million) negatively gear.

Interestingly, these investors do not predominately come from the wealthy end of town.

Indeed, 70 per cent of negatively geared investors earned less than $80,000.

Less than 6 per cent were in the top tax bracket.

Fact is using the benefit of negative gearing investment has allowed many ordinary working class Australians to invest in property and to take control of their financial destiny.

Negative Gearing table

Source: Herald Sun; A.T.O.

Property investors provide an essential service

I would argue that property investors provide an essential service to millions of Australians who chose to, or have to, rent their accommodation and as such these investors should be treated like all other business people.

In our modern society we pay taxes and expect the government to provide us with certain essential services.

These include hospitals, roads, schools, jails, public transport, aged care and public housing. location map house suburb area find

In Australia the government often shares the burden of providing these services with private enterprises that can often deliver them more efficiently and cheaper.

When the government can’t supply enough public hospital beds, private run hospitals step up to the mark and not only receive tax deductions for their business loans, but also allowances to subsidize them.

So do aged care providers, schools and public transport providers who provide services in tandem with the government.

Our government also provides public housing, but not enough for all those who can’t afford to buy their own property.

While government social and public housing programs are helpful, it is only the private rental market that can deliver rental accommodation at the rate and scale that is required at present.

Property investors save a deposit, buy a property, commit to a loan for 25 or 30 years and provide accommodation for others in our community.

In return we expect to get a reasonable return on our investment risk, just like other business people do.

We know that the rent won’t cover our expenses, but accept that certain tax benefits plus the long term capital growth will make up for this.

Sometimes it does, and sometimes it doesn’t.

What if the government removes negative gearing?

Leverage and negative gearing compounds returns in the good times, but multiplies losses when property prices are flat or falling.negative gearing

I know as many people who have lost money in property investment as those who have made money.

Much like most other small business people.

If the government takes away my tax concessions, I would have to consider my investment options.

To ensure I get a decent return I’d put up my rents if I could, or maybe I’d invest elsewhere to get the best bang for my bucks.

The result would be that rents would rise and tenants would have to fight over the few rental properties left, or the government would have to invest its own money and buy or build properties and enjoy the pleasures of being a landlord.

Of course the government already provides some public housing, but not enough, leaving the task of providing rental accommodation not only in our capital cities, but also in regional Australia and in the remote mining towns to private investors.

People like you and me have chosen to run our own little property investment businesses.

If I set up a dog wash business or a restaurant, I’d be able to claim a tax deduction for legitimate business expenses including loans to set up our business or purchasing business equipment.

Why should it be different for property investors who take on a business risk?

Doesn’t negative gearing push up property values?

To say negative gearing has pushed up property prices is a smoke screen. gearing negative

Just look what happened to property prices overseas in countries like the USA and parts of Europe where negative gearing isn’t allowed.

They experienced a boom and a subsequent bust of much greater magnitude that we have gone through.

What these lobbyists may not recognise is that borrowing in order to undertake productive investment actually helps economic growth because value is being added.

After all, there will always be some investments that have lower returns than the interest expenses on the loans taken on to acquire them.

This economic reality has nothing whatsoever to do with tax.

For example a typical property investment may start off with a large loan and lowish rent.

As time goes by the loan is paid down and the rent increases.

Overall the investor makes a profit and the tax office gets its share of this.

Actually, there is not as much loss of revenue to the authorities as some critics believe because for every dollar of interest claimed as a tax deduction by a borrower there is a corresponding dollar of interest assessable to a lender.

But that’s not all… Property-Investment-Checklist-300x199

If the governments stops the availability of negative gearing benefits the danger arises that there may be unintended consequences.

It is possible that even following a positive cash flow strategy you end up negatively geared and suffer.

What if:

  • Interest rates rise after you buy your investment?
  • Rents fall or your property becomes vacant for a period of time? Or
  • You have to undertake a major repair of your investment property.

To deny the person making commercial a loss like this a tax deduction would be to inflict a double whammy on them and increase their hardship unduly.

In conclusion:

Any reduction in negative gearing benefits would significantly reduce rental investment in both new and existing properties and would worsen rental affordability through a reduced supply of investment housing.

A reduced rental supply means lower rental vacancies and increased rents.

Property investment is a real and effective method for bolstering the savings of middle Australia at the same time providing accommodation for those who the government can’t or won’t help and should remain as is.

Here’s what you can do about this…

Don’t make your long term investment decisions based on short term concerns or rumours about potential policy changes.  


If you want to take advantage of the opportunities our growing property markets will offer you now is a good time to consider your options.

If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level. Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

'Why be so negative about negative gearing?' have 43 comments

  1. Avatar for Property Update

    February 25, 2016 @ 2:18 pm ailsa

    Hi Michael, Can you please explain to me the impact this will have on positively geared properties. I don’t see why if I can’t claim my losses against my taxable income why should my income from my positively geared property be ADDED to my taxable income and pay a higher tax on those earnings.
    Also how would it work if negative gearing was only on new housing. An investor buying a five year old house isn’t privy to negative gearing, but someone building a house can get negative gearing indefinitely. People opposed to negative gearing argue that they want housing treated as equal, but this is far from equal to me.


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      February 25, 2016 @ 2:55 pm Michael Yardney

      Ailsa – thanks for your comments – you’re right this is far from equal and will create distortions in the market


    • Avatar for Property Update

      February 25, 2016 @ 3:36 pm Scott


      Yes very unfair you can’t claim a deduction on a investment property that is positively geared!

      Please spare a though for the younger people not so lucky and now cant even afford a primary place of residence to live and raise a family. You poor thing, i feel for you, I really do.

      Restricting NG to new builds only encourages investment in new housing actually adding to the housing supply, knock down rebuilds don’t qualify to the best of my knowledge.



  2. Avatar for Property Update

    February 21, 2016 @ 10:18 am Adrian

    Interesting article. The economics of scrapping concessions relating to negative gearing would lead to only one thing. A corresponding drop in the property market. As Michael himself said, if there is a reduction in his rate of return, he would look at other investment strategies to get the best bang for his bucks. The removal of negative gearing or elements of it, will make property investment less attractive. Less demand means lower property prices. Instead of rents increasing as has been suggested, this will make property more affordable for first home buyers and others who are currently renting, hence some of those people will enter the property market as owners and no longer need to rent. Hence, a potential oversupply of investment properties, few people looking to rent, falling property prices and rents. That scenario will certainly impact on the attractiveness of owning investment property.


  3. Avatar for Property Update

    February 20, 2016 @ 12:48 am David Lee

    Hi Scott
    You are entitled to your opinion but to label the boomers as you call them grubs only reflects the politics of envy. My own children have understood the benefits of hard work, saving and investment strategy to buy their own homes without any financial support from us. They are in exactly the same position as we were at the same age. Try doing the same.


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      February 20, 2016 @ 10:28 pm scott

      Hi David Lee.

      Yes I am. Are you implying that I do not work hard or save? right…. your opinion, all good.

      “They are in exactly the same position as we were at the same age. Try doing the same” Typical boomer talk (grub). This could not be further from the truth in relation to property prices vs income. How much was your first house and what multiple of your income was it?

      Times are changing and the best policy gets my vote. Something needs to change.

      Housing should have never been “geared” to encourage speculative investment in EXISTING property.



  4. Avatar for Property Update

    February 20, 2016 @ 12:27 am David Lee

    Hey George , you appear very opinionated about negative gearing. Have you ever had actually purchased a couple of negatively geared properties or are you an armchair critic of something you disagree with as a matter of principle.


  5. Avatar for Property Update

    February 19, 2016 @ 8:19 pm George

    Interesting debate here. And Labor has hit the nail on the head with their proposal to allow negative gearing only on new dwellings. This is the very reason why negative gear was introduced in the first place. To increase the amount of stock available for renting.
    However Labor is also proposing to DOUBLE the CAPITAL GAINS tax and that is what will cause investors to avoid property.


  6. Avatar for Property Update

    February 19, 2016 @ 2:06 pm Simon

    Good article Michael. You can see who is wealth conscious and who listens to talk back radio.


  7. Avatar for Property Update

    February 19, 2016 @ 1:05 pm Tim

    Negative gearing is a tax perk. It along with the overally generous capital gains concessions have greatly fuelled price gains and dangerous speculative behaviour. Winding back them back is sensible economic policy that will shift investment to productive areas of the economy – away from the non-productive over investment in established homes.

    What we’re seeing now is desperate attempts by special interest property lobby groups arguing to maintain the perks.

    Negative gearing does not benefit ordinary Australians. In fact it makes them worse off as they’re subsidising the tax perk. As Saul Eslake points out in today’s AFR:

    ‘Proponents of negative gearing routinely assert that it is primarily used by taxpayers of ‘comparatively modest’ means to ‘get ahead’, that it makes a ‘vital contribution’ to ensuring an adequate supply of rental housing, and that without it rents would ‘go through the roof’, as they allegedly did between 1985 and 1987 when the Hawke Government temporarily abolished it.

    ‘None of these assertions withstands a moment’s confrontation with the facts.

    ‘The latest available ABS data, which are for 2013-14, show that 72 per cent of the total value of investment properties is owned by, and 50.7 per cent of the total value is owed by, the richest 20 per cent of households – many of whom use negative gearing, and other strategies, to reduce their taxable incomes.

    ‘That’s one reason why the assertion that nearly 80 per cent of taxpayers who use negative gearing have taxable incomes of less than $80,000 is misleading.’


    • Avatar for Property Update

      February 20, 2016 @ 9:38 am David

      Yes, the statement they all trot out, including MY, is that they have a TAXABLE income less than $80,000. No-one is willing to show the statistics on what the GROSS income is for investors claiming negative gearing. That would be more realistic.


      • Avatar for Property Update

        February 20, 2016 @ 1:35 pm Michael Yardney

        David, I’m not really sure what you’re getting at – as I understand it the ATO stats are for people’s taxable income before they deduct negative gearing


  8. Avatar for Property Update

    February 16, 2016 @ 8:09 pm Scott

    “Fact is using the benefit of negative gearing investment has allowed many ordinary working class Australians to invest in property and to take control of their financial destiny”

    Correct, if you were born at the right time. At what cost to the younger generation and how are they supposed to have the same opportunities in this CRAZY market???……. A lot of boomers will have to sell their IP very shortly because they have no cash in super! don’t expect us to be slaves to the banks to fund your retirement you grubs!

    Remove NG for and CGT reductions for existing property.

    It’s coming boomers…. move on

    Aussie property never goes down….


  9. Avatar for Property Update

    February 16, 2016 @ 3:37 pm Alex

    Statistic is a worst type of lie. Yes, perhaps rents will not increase everywhere on day 1, influenced more by supply/demand of the month but If investors keep loosing more than get they will no longer invest in medium to long term.

    The fundamental error of judgement is to extrapolate short 1985-87 period on decades to come. Gradually removing CGT will either dry out investment or cause rents to rise hurting the most vulnerable.

    Also property investment is heavily taxed business in Australia by local governments. If they tax even more, why on earth will it cause prices to fall??? This is as foolish as saying higher GST will make goods cheaper!! To make profit margin investors inevitable must raise rent or quit business.

    Fundamentally the properties cannot become cheaper as infrastructure and labour are expensive. Who will pay for this labour plus heaps of local taxes if investment dries out??


  10. Avatar for Property Update

    February 16, 2016 @ 2:47 pm Fred

    I think in the latest odds, Bill shorten is $6.50 to win the federal election. Malcolm Turnball around $1.15.
    Shorten-ideas can spruik whatever grandiose statements he likes because he knows he wont be called upon to ever implement them in government


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      February 16, 2016 @ 2:52 pm Michael Yardney

      You’re right Fred. let’s see what the Liberals come up with


  11. Avatar for Property Update

    April 27, 2015 @ 10:44 pm STU

    George … you have lots of issues. I do like your idea of “everyone treated equally … just like other investment”. Building, if I may, on Michael Yardney’s suggestion comment, if we:
    * impose property-related taxes (income tax, land tax, CG or sales tax, sometime purchase tax and any other tax that crops up), equally, and
    * offer negative gearing and other tax deductions/concessions (just as logically available on any other investment) equally, and
    * offer any grants/incentives equally to all residential property owners (first and subsequent home occupiers, non-home owning investors, home owning investors etc.) equally,
    … do you think things will be better?
    Perhaps we could hit the nail on the head and not single out property unequally at the same time!


  12. Avatar for Property Update

    April 25, 2015 @ 7:11 pm George

    “CONCLUSION: Any reduction in negative gearing benefits would significantly reduce rental investment in both new and existing properties and would worsen rental affordability through a reduced supply of investment housing. A reduced rental supply means lower rental vacancies and increased rents.”

    I dont think so. In fact I know it doesn’t. This conclusion is entirely incorrect and just propaganda from the REIA.
    Now here is the historical truth:


    Click on the link and check the graph on P3 which has a history of rental price growth since 1986.
    Note the period between 1986 and 1987 when negative gearing was temporarily removed.
    Surprise! Rental price growth actually dropped.
    But then when negative gearing was reinstated after 1987, rental price growth skyrocked for the next 2 years!!!!
    Now that is exactly the opposite of what you are claiming M.Y….Sorry to discredit your conclusion.
    Why? you may ask..because as I said, lower property prices and better affordability encourage renters to become home owners and so taking the pressure off rents, even as (new) property investors might desert the market. Remember, existing property investors are unaffected and so stay in the market. So the rental market actually experiences a decrease in rental demand. Not what you have speculated.
    So the argument that rents would increase if negative gearing is removed are totally invalidated!
    As I say, this old argument has been proven to be just REIA propaganda over and over again so pls dont quote what they say. It’s all entirely biased.
    The truth is out there if you look for it.


  13. Avatar for Property Update

    April 25, 2015 @ 6:27 pm George

    “Actually, there is not as much loss of revenue to the authorities as some critics believe because for every dollar of interest claimed as a tax deduction by a borrower there is a corresponding dollar of interest assessable to a lender.”
    This is a very good point overlooked by most people! However, unfortunately it is far too simplistic…..
    The difference in company and personal tax rates would still result in a significant net saving to the govt.
    Also companies have many more ways of reducing thier tax so its not a straight 1 for 1 transfer by a long shot.
    Hence the govt is still miles ahead by removing negative gearing.


  14. Avatar for Property Update

    April 25, 2015 @ 4:18 pm George

    M.Y says “We know that the rent won’t cover our expenses, but accept that certain tax benefits plus the long term capital growth will make up for this.” This is absolute rubbish. If rent does not cover your expeses then the property is overpriced. It’s that simple. There are plenty of places outside Sydney where your expenses are well and truely covered by rents. And before this current property boom began, property prices were much more reasonable and rents did in fact cover costs. Without negative gearing property prices would adjust back to the point where they provided a reasonable rate of return and investors would be attracted back into the property market. As rents increase over time, so would property returns and hence prices would increase along with rents and visa versa.
    This entire article is very heavily biased towards a real estate agency that is totaly focused on property investors. Hmmm. How obvious. The REA adopts the same view simply to preserve the high commssions earned by their members achived not from hard work but from inflated property prices and nothing more.
    Ask home buyers about negative gearing and they have an entirely different point of view and rightfully so. There is nothing in this article that says negative gearing benefits home owners because it doesnt. In fact it helps to keep them out of the market and stay as renters.


  15. Avatar for Property Update

    April 25, 2015 @ 4:06 pm George

    M.Y. says “In return we expect to get a reasonable return on our investment risk, just like other business people do.” That is entirely correct. So if you pay too much for an investment your return is too low. If you pay less you get a better return. This is simple maths IT HAS NOTHING TO DO WITH NEGATIVE GEARING!!! All negative gearing does is make a property purchase more affordable and hence drive up property prices. Again simple maths.


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      February 25, 2016 @ 10:21 am RichardU

      And it has no impact on the supply of properties to rent?


  16. Avatar for Property Update

    April 25, 2015 @ 1:11 pm George

    Sorry but I agree with each and every allegation against negative gearing. Guilty as charged! There is not a single good thing that can be said about negative gearing unless it is limited to new properties and so encourage construction of new dwellings. After all that was its original intention. Removing it will force investors to treat established property purchases like a business investment and demand reasonable investment returns and cashflow from their purchase. Removing negative gearing will also put investors and home buyers on a more equal footing even though tax deductions for expenses will still be allowed (but limited to the amount of income derived in any one tax year with the remained carried forward). However removing negative gearing will drive tax subsidised excesses out of the property market. Property will be more affordable and more realistically priced for everyone


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      April 25, 2015 @ 2:29 pm Michael Yardney

      If you would like home buyers and investors to be on an even footing do you suggest that capital gains tax is removed when an investor sells a property or that investors get a first investor’s grant?

      That would create an interesting scenario wouldn’t it?


      • Avatar for Property Update

        April 25, 2015 @ 6:12 pm George

        Thanks for your reply. I’m suggesting that removing negative gearing (tax deductions still remain in full) would put property investors and home owners on a more even footing as it would remove the “excessive” cash flow advantage that investors have with negative gearing. Investors would indeed need to reconsider their investment decision and as history shows, property prices would fall initially. Now that would benefit both property investors and home buyers alike…yes! In fact some renters could afford to become home owners instead and so rental demand could even drop slightly. So dont expect rents to increase automatically especially with so many investment properties currently in the property market. The temporary losers are agents (less commissions) and state governments (less land tax and stamp duties) and banks (smaller loans). The federal govt gains with significantly less property tax deductions claimed in the first few years after the change and when property prices adjust downwards – less loan interest tax deductions. Though a temporary loss on capital gain revenue would also result when property prices initially go down. Investors really don’t loose anything except the ability to claim all their tax deductions all up front. So it just affects their cash flow. Nothing else. People don’t understand this. They think property investors are losing their property tax deductions which is entirely incorrect. That’s why there is so much negativity. If there are still some accumulated losses when the property is sold they are offset in full against the capital gains of the property. OK that amounts to less of a tax saving than a straight expense tax deduction but remember that property prices would adjust to compensate for this.Now dont forget the change would only affect property purchases from the date of the announcment. It wont affect existing property investors at all – unless they decide to sell immediately after the change. I think its a huge winner for the federal government but also for both property investors and home buyers as well because property prices would become much more realistic and more affordable and investors would pay less taxes overall ! Property investors would also lose less in down times as they would not be as highly leveraged as you rightfully pointed out and so there would not be the mass investor exudus you currently get with property downturns.


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        April 25, 2015 @ 6:37 pm George

        Excuse me M.Y. First home owners grant went out long long ago. First it was significantly reduced (after being significantly increased) and now strictly limited to new owner occupied properties. And its only a one off. And doesnt apply if a first home buyer purchases an investment property. Investors on the other hand get an investors grant of much greater propertions each and every year by way of tax deductions on property expenses. But this does prove the point that govt hand outs whether as grants or tax deductions do have a huge impact on property prices. Recall back in 2009 (I think) when the grant was increased to $21,000 how property prices virtually jumped up $60,000 in the space of about 6 months since this made properties more affordable for first home buyers. Hmmm. Hard to argue with that one.


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        February 25, 2016 @ 10:19 am RichardU

        Not to mention removing the creeping (some might say, stampeding) impact of land tax on investment properties. Most tenants don’t even know they are paying it indirectly.


  17. Avatar for Property Update

    April 24, 2015 @ 7:58 pm Stu

    Nice article Michael!

    What about all the taxes property investors do pay, including thumping annual state taxes (land tax etc.) and federal taxes on sale? There was even a tax on property purchases a while back.

    If after a lifetime of risk, one’s property investment ‘business’ is successful I will be a fully or partly self-funded retiree and conserving government retirement funds for others ‘less fortunate’. I wouldn’t mind betting that will total more than all the property tax concessions I might have received along the way.

    Can some of the negative gearing bashers come out of the woodwork now and explain WHY they single out property investment (that provides the essential service of shelter) as a ‘rort’ … whilst happy for the same sort of tax break to continue under any other name for businesses and investments, including share investments, that provide other essential and non-essential services?


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      April 24, 2015 @ 9:28 pm Michael Yardney

      Well said Stu


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      April 25, 2015 @ 1:18 pm George

      Stu and M.Y. See my comment for your answers in full. Stu’sreply is blindly very one sided. For every tax a property investor pays there is a tax deduction as well. Unfortunately home buyers dont have the same enormous tax adavantage. That cant be said for any other investment where EVERYONE is treated equal. Thats why property must be singled out – Equality! You see, you hit the nail on the head and did not even see it.


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      March 1, 2016 @ 3:27 pm Shane

      The short sightedness of claiming that your business model will be self sufficient in the future clearly points out that you don’t understand the very basics of market drivers. If the market out-prices the buyers, then demand drops… so does your profit and any chances of self-sustainment. You will retire with very expensive assets that you cannot leverage, sell or even profit from rent. You will die stressed.


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        March 1, 2016 @ 3:51 pm Michael Yardney

        Why did you change your name – you just posted as SeanB a moment ago?


  18. Avatar for Property Update

    April 24, 2015 @ 1:15 pm Libby

    I’m a single parent and without negative gearing I would not ever have been able to purchase a home.


    • Avatar for Property Update

      April 27, 2015 @ 2:17 pm jim

      Seriously Libby, how does that work exactly? You can’t negatively gear the property you are living in….


      • Avatar for Property Update

        February 19, 2016 @ 2:29 pm Richard

        You can rent it out first before moving in. She would have qualified for larger loan as an investor.


    • Avatar for Property Update

      February 17, 2016 @ 10:34 am john

      If negative gearing is removed or compromised too much, you will not be able to afford your rent. !


      • Avatar for Property Update

        February 17, 2016 @ 10:39 am Michael Yardney

        You’re right removing negative gearing will hurt many more people than it will help


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          March 1, 2016 @ 3:23 pm SeanB

          Seriously, this conversation is spurious at best. What the plan is to do is to cease the excess and exploitation of the Negative Gearing loopholes. Michael, the fact that you own a business that thrives of negative gearing means you are biased and should not comment. The bulk of your profit would be from the second, third or fifth property, not the single investment. Don’t espouse the impact based on your self interests, it’s false advertising.


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            March 1, 2016 @ 3:54 pm Michael Yardney

            I’m not sure why you think my business thrives on negative gearing.
            Having said that 10,000 or more people read my blog posts every day because they’re interested in my thoughts,opinions and biases.

            By the way…Why did you change your name and put another post up as Shan? It spoils the credibility of your argument.

  19. Avatar for Property Update

    April 24, 2015 @ 11:02 am Plinio

    Hi Michael, I’m a property investor and often debate negative gearing with friends, colleagues who are not invested in property.
    How would you answer a question often asked:
    If negative gearing were to be abolished, wouldn’t the price of property come, therefore make properties more affordable, thereby reducing the number of people looking to rent, thereby reducing the demand for rentals, thereby reducing the cost to rent?


  20. Avatar for Property Update

    April 24, 2015 @ 10:30 am MarK Greenberg - Lambert Advisory

    AGREE 100%:
    “People like you and me have chosen to run our own little property investment businesses. If I set up a dog wash business or a restaurant, I’d be able to claim a tax deduction for legitimate business expenses including loans to set up our business or purchasing business equipment. Why should it be different for property investors who take on a business risk?”


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      April 25, 2015 @ 1:26 pm H3Lb

      Mark. Greenberg You miss the point completely. Unfortunately you dont undertsand negative gearing nor the impacts of its removal. Its all about cash flow. Not tax deductions. Tax deductions will still be allowed but quarantined to the amount of income earned from the property each year. Excess expenses will be carried forward and claimed against future property income – same as it is in a business. The removal of negative gearing will force investors to run property investments just like a business instead of a tax haven. In a business you cant claim excess business losses against another entity – being yourself. Hence your argument actually supports removal of negative gearing so investment properties will be run just like a business.


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    April 24, 2015 @ 8:07 am Hamish

    In the USA you can claim a tax deduction for your own home (up to $1m). http://en.wikipedia.org/wiki/Home_mortgage_interest_deduction#United_States

    The flip side is there is capital gains tax payable when you sell (fair enough, and there is some symmetry there).
    The capital gains tax rate in the USA is 15%.

    So when you sell your investment property and claim the CGT concession (after having held for 12 months), the effective tax rate could be as high as 22.5% (50% x marginal tax rate of 45%). Effectively the CGT concession allows for some averaging of the gain, even though it is crystallised in one tax year.


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