Labor’s negative gearing model ‘dangerously misleading’
As the federal election draws closer, an industry lobby group for property investors has warned that the Labor Party’s proposed policy changes to negative gearing are hinged on insufficient economic modelling and broad assumptions.
Ben Kingsley, chairman of Property Investment Professionals of Australia (PIPA), said Labor’s negative gearing model is “dangerously misleading”, and that such major reform requires a comprehensive and detailed strategy.
“Until there is real evidence to support such a policy, which industry experience tells us doesn’t exist, the opposition should be very careful about changing negative gearing and capital gains tax provisions,” he said.
“Our message is clear – $6.5 trillion worth of Australians’ wealth is tied up in property. That’s roughly three times that held in superannuation and equities. Don’t play with this unless you know what you’re doing.”
Mr Kingsley said the current negative gearing laws should not be changed in isolation, outside of a complete review of the nation’s taxation policy.
“Property investment plays an important role in supporting Australians in their pursuit to be self-sufficient retirees and reduce the burden on the public purse to support an ageing population,” he said.
“Moreover, the property market is a significant contributor to economic activity, providing one in four jobs in our economy.
“Labor’s proposed removal of negative gearing on established housing is a poorly informed policy that will drive property price reductions, increase rents, stifle new property construction rather than encourage it, and cause job losses. Is that a good policy?”
- <p>What a load of hogwash. When will you all wake up! Removing negative gearing does NOT remove anyone's right to a tax deduction. All investment property expenses remain 100% tax deductible. But first we must understand that a negatively geared property is one that is running at a LOSS. Seriously what sort of investment decision is that? Its a dumb one. Smart investors don't negatively gear if they can avoid it. By removing negative gearing, any property expenses that are in excess of the rental income for a given year (ie. the LOSSES) are rolled over into the next tax year. These losses continue to accumulate until a taxable event occurs - such as the rent exceeding the expenses in a given year or when property is sold for a profit. At that time the accumulated losses are offset against the profits and so reduce the investors taxable income in that year. There you go. Nothing lost! So the removal of negative gearing just postpones some of an investors tax deductions. That's all. It will force investors to be more responsible and so pay more attention to cash flow and hence pay realistic prices. The removal of negative gearing will also make it more difficult for people to speculate in property. This can only be a good thing as it is speculators and not long term investors that drive up property prices. Speculators also drive prices down when prices cool off as they rush to get out of the market.<br>I really cant see how removing negative gearing will increase rents as these are determined by market forces. Investors who had the privilege of negative gearing (prior to its removal) will hold onto their properties for much longer so there will be more rental stock due to less churn. And I can't see how limiting negative gearing to new dwellings will stifle construction. On the contrary it may add too much stimulus to construction of new dwellings.<br>So l said in the beginning, this article is a load of hogwash as the claims are all misleading and totally unjustified. Labor has it right. Its this writer that is dangerously misleading in my opinion.<br>As a property investor for over 30 years I will be happy to debate the matter any time.</p>0
- <p>If the policy is based on insufficient modelling, where is the modelling that shows it "will drive property price reductions, increase rents, stifle new property construction rather than encourage it, and cause job losses". Talk about self serving statements. Property investment decisions are based on a number of factors, taxation being just one. If they are based only on negative gearing benefits then the system needs changing anyway.</p>0
