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Negative gearing not broken, no need to fix

9 May 13

The Real Estate Institute of Australia President, Mr Peter Bushby, says the Government should retain negative gearing for property investment in its current form.

"Recent chatter suggesting there are changes in the wind is extremely concerning and would negatively impact on the supply of housing and the level of rents in an already tight rental market," says Mr Bushby, speaking in the lead up to next week’s Federal Budget.

"It would adversely affect the most disadvantaged in our community, who are caught in the rental trap while facing a long wait for social housing."

"We need to remember what happened in 1985 when the Hawke Government abolished negative gearing for property, only to bring it back in 1987. During that period rents increased by 57.5% in Sydney, by 38.2% in Perth and by 32.0% in Brisbane."

"It is important to know that the 2010 Henry Review stated that any changes to negative gearing arrangements should only occur after reforms to the supply of housing and to housing assistance," added Mr Bushby.

"Current arrangements, in addressing the supply of rental accommodation, are complementary to the Government’s goal of increasing the supply of rental property."

"Negative gearing could be the difference between investing or not in rental housing in a subdued market, as is the case at present. Any tweaking to the current taxation arrangements could tip the balance against property investment."

REIA says the view that negative gearing is only for wealthy investors, is a myth. According to ATO data, around 80% of the total individual taxpayers who claimed a tax deduction for property, earned less than $80k pa.

"To amend the current negative gearing provisions for housing would be treating real estate differently to other asset classes, creating a distortion on the investment landscape and resulting in a resource misallocation. It would be a grave mistake," concluded Mr Bushby.