Playing with negative gearing means playing with SA economy

Playing with negative gearing means playing with SA economy There’s been much talk recently about the Federal Opposition’s proposal to change the tax rules on housing investment if Bill Shorten wins the next election. If they get their way, only new homes purchased after July 2017 can be negatively geared. Existing investors, they say, will not be affected. Over the past three weeks, the Property Council has been shining a national spotlight on the great big risk this policy presents. It’s a big risk to an industry that accounts for almost $11 billion in GSP and 168,000 jobs in South Australia. Policy-makers shouldn’t forget that our sector is one of the few parts of the economy that is actually faring well across the country. And whenever you make big risky policy changes, you run the risk of causing a downturn, with unintended consequences, and a big impact on the economy. Take the proposed halving of the capital gains tax (CGT) discount, for example. This will be bad for new housing supply, even with the Opposition’s negative gearing changes. Let’s contextualise all of this for a moment – you’ll be paying stamp duty on the way in, high land tax rates on the way through and more through CGT on the way out if these plans are implemented. The great big risk is that investors will simply walk away from property as an investment choice, which would dry up supply at the time the country needs it most. Not to mention driving up rents. There’s also been a strong focus on ‘mum and dad’ investors, and quite rightly. Two million Australians own an investment property and of those people, 1.2 million Australians use negative gearing. Of those 1.2 million people, 840,000 Australians who negatively gear properties earn less than $80,000 per year. And to put our state into perspective, 130,000 South Australians own an investment property including almost 90,000 who use negative gearing. The top two suburbs where investors who use negative gearing live are Golden Grove and Woodcroft. Mount Gambier comes in at fourth place. Negative gearing is the way that hundreds of thousands of average people secure their financial future. These aren’t property barons or property tycoons – they’re ordinary people using property to secure their financial futures and help strengthen the economy. That’s why policy makers need to be careful playing games with negative gearing, which means playing games with the economy.