Negative Gearing: No changes to negative gearing says Tony Abbott

Changes to negative gearing rules were ruled out by Tony Abbott, Prime Minister of Australia on Thursday 16 April 2015

In response to questions about a report by Australian Council of Social Service that called for the ‘tax break’ to be restricted, Mr Abbott stated that there would be no changes to negative gearing.

 

Mr Abbott indicated that his government did not want to increase taxes but rather to control government spending and removing the allowable negative gearing allowance would amount to an increase to taxes.

 

Contrary to what some believe negative gearing is not primarily a tax break for the rich. Data from the Australian Tax Office (ATO) shows that the bulk of the tax deductions and largest band of beneficiaries earn incomes between $30,001 and $80,000. However, higher income earners are able to claim the biggest tax deductions against their total income as they earn more and have a higher rate of tax.

 

1.3 million landlords in Australia claimed almost $14 billion in tax losses that were offset against tax on their other income. Therefore, any changes to the negative gearing allowances would clearly impact a large number of people who would not be considered as “rich”.

 

Changes to the negative gearing rules have previously been ruled out due to concerns over its discouraging investment in housing and resulting in reduced supply; and increasing rent prices resulting in increased demand for public housing, as landlords raise rents to cover losses otherwise offset by negative gearing allowances.

 

Hopefully this announcement by Mr Abbott will prevent further speculation about negative gearing changes and provide for a more certain investment environment for property investors.

Are you looking to invest in Australian property?

You may be able to take advantage of the negative gearing allowances when you invest in Australian property. Learn more about investment property loans or contact trusted mortgage brokers to compare your investment property loan options. Note: Contact your accountant or financial adviser regarding taxation matters that suit your specific needs.

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