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Government urged to continue negative gearing support

By Stefanie Garber
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Amidst fears negative gearing benefits could be in the firing line at next week’s Budget announcement, major players in the property industry have called on the government to preserve the policy.

RP Data research analyst Cameron Kusher said negative gearing continued to be a contentious issue, but encouraging investment could be in the government’s best interests.

According to data from the 2011 Census, the government only owns and rents out around 4.1 per cent of total housing stock.

“If negative gearing was to be removed, the government would likely have to play more of a role in constructing new homes and managing a portfolio of properties,” Mr Kusher said.

“On balance, they probably see that foregoing almost $8 billion in taxation revenue is more cost effective than developing and managing a greater proportion of new housing stock.”

A government review of Australia’s tax system released last week recommended deductions and income associated with negative gearing be discounted by 40 per cent.

Analysis by the Real Estate Institute of Australia (REIA) shows this change would cause rents to rise by four per cent.

REIA president Peter Bushby said any amendments would create differential treatment for real estate in the tax system.

“To amend the current negative gearing provisions for housing would be treating real estate differently to other asset classes, create a distortion on the investment landscape and result in a resource misallocation,” he said.

He called the idea that negative gearing only benefited wealthy investors “a myth”, arguing that 80 per cent of taxpayers claiming the deduction earn less than $80,000 a year.

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