Abolishing negative gearing would be a blow to battlers

Home Media Releases Abolishing negative gearing would be a blow to battlers

Abolishing negative gearing would be a blow to battlersAverage Australian families would be the real victims of any move to target negative gearing in the debate about tax reform, according to new analysis of Australian Tax Office statistics. Its abolition would lead to serious negative flow-on effects in housing affordability for renters and homeowners, according to the Property Council of Australia. Analysis of Australian Taxation Office Statistics shows that of the almost 1.26 million Australians who declared a net rental loss in 2011/12, 883,325 people – or 79 per cent – earn around $80,000 per annum or less. Those 883,325 individuals are right across the age spectrum with 118,880 aged 29 or under and 436,030 under 40 years of age. These statistics are highlighted in today’s Tax Discussion Paper, which says: “Negative gearing does not, in itself, cause a tax distortion, but it does allow more people to enter the market than those who might have had the equity alone to do sothe majority of tax filers with negatively geared properties fall into the middle income bands.”(Re:Think p.64 March 2015)While negative gearing is a favoured target in some quarters when it comes to the debate around tax reform, calls for its abolition ignore the reality that such a move would hit middle Australia the hardest.A breakdown of net rental losses by occupation shows that average workers made the majority of declarations. They include:62,000 clerical staff;54,000 teachers;47,000 salespeople;36,000 nurses; and tens of thousands of hospitality workers.The majority of Australians who negatively gear a property – almost 73 per cent – only own one investment property. A further 18 per cent only own two investment properties.The Property Council of Australia’s Chief Executive Ken Morrison said that while a wide-ranging debate on tax reform was welcome, it had to be based on facts not false perceptions.”Negative gearing is one of the most misrepresented and misunderstood parts of Australia’s tax system,” Mr Morrison said.”The ATO’s data explodes the myth that negative gearing is only for the wealthy. “Any move to abolish negative gearing would be a blow to Aussie battlers and have an adverse impact on household savings and housing affordability.”The data doesn’t lie – far from being a perk for the wealthy, negative gearing is actually an indispensable tax measure that enables middle income Australians to save for their retirement.”The ability for low to middle income Australians to negatively gear their investments also unlocks an important source of finance for the supply of new housing stock, which benefits affordability in the rental market.”Negative gearing to allow deductions for the cost of repairs and maintenance on investment properties is also an important source of jobs. “If negative gearing was to go, so would the capacity to provide work streams to hundreds of thousands of carpenters, electricians, plumbers, gardeners, and other property maintenance people across the country, as owners scale back to providing only the most essential repairs with more comprehensive maintenance becoming uneconomical.”Similar harmful implications would flow from the removal of capital gains tax exemptions on the family home.”With Australia, and Sydney in particular, facing significant shortages in housing supply, which is putting upwards pressure on houses, it would be both irresponsible and counterproductive to abolish two of the key tax measures that help address these problems.” Media contact: Fiona Benson | M 0407 294 620 | E [email protected] Analysis of net rental interest and loss by salary, ATO Statistics 2011/12Individual rental interest declarations by salaryNumber of Individuals who declare a net rental interest Number of Individuals who declare a net rental lossPercentage Average net rental lossIndividuals earning under $19,000 p.a.349,240204,99559%-$10,665Individuals earning under $37,000 p.a.648,325384,18559%-$9,836Individuals earning under $80,000 p.a.1,343,520883,32566%-$9,615Implications of the removal of negative gearing:Higher rents as investors recoup the gearing shortfall and as investment halts reducing supply of new housing stock, which pushes house prices up.The exclusion of middle Australia from property as an investment class, making it the exclusive domain of the wealthy.Increased demand on an already critically undersupplied stock of public housing.Implications of the removal of capital gains tax exemption on the family home:Significantly reduced savings for homeowners.Creation of a barrier to household mobility by discouraging homeowners from selling.Analysis of net rental interest and loss by age group, ATO Statistics 2011/12Individual rental interest declarations by ageNumber of Individuals who declare a net rental interest Number of Individuals who declare a net rental lossPercentage Average net rental lossIndividuals aged 18-29131,440118,88090%-$8,441.29Individuals aged 30-39378,285317,184%-$9,919.44Individuals aged 40 -49483,360362,57575%-$11,700.39Individuals aged -597,330336,33066%-$11,931.01Individuals aged 60-64178,45586,63549%-$10,856.46Individuals aged 65-6994,34531,27033%-$10,372.22Individuals aged over 70100,08014,03514%-$9,227.03Total1,873,2951,266,875-$10,152https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-statistics/Taxation-statistics-2011-12/ Note: this is the latest available data from the ATO, with the release of 2012-13 Tax statistics report due mid-year.