Project Review by Alex Dunn: December 9, 2016

Federal Treasurer Scott Morrison has announced that the government will stand by its negative gearing policy, during a meeting with state and federal treasurers.

Mr Morrison argues that the removal of negative gearing would decrease rental stock and push rents up, impacting low-income residents the most. Counter-arguments have often remarked that the incentive makes purchasing a property too competitive for first-home buyers.

The government is instead seeking other means to drive private investment into affordable housing, as Sydney’s median dwelling price climbs to $845,000. Brisbane in contrast has an average dwelling price of $485,000, the most affordable of the eastern states and territories.

Shadow Treasurer Chris Bowen has accused the government with being out-of-touch with younger Australians who are struggling to enter the market. “[Mr Morrison is] more concerned at defending tax concessions for investors … than he is for a renter or young family saving for their first home.”

Negative gearing is used to offset losses on assets, by using the amount lost to lower taxable income. An example would be that an investor who earns a salary of $90,000 and has a property that makes an annual loss of $1,200, can use that loss to bring their taxable income to $88,800.

 

Sources:

The Real Estate Conversation – Scott Morrison says negative gearing rules will stay 

ALP – Negative Gearing 

Michael Yardney Property Update – Sydney’s population growth has created an undersupply of housing

CoreLogic – Capital city home values rise in November

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