NEGATIVE GEARING LIES RESURFACE

 

 

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NEGATIVE GEARING LIES RESURFACE

KEY POINTS:

-Labor argues that 70 per cent of the value of benefits of negative gearing went to the wealthiest 10 per cent

-Taxable income is the wrong measure to use as it is the income that is left over after various deductions like negative gearing

-October 2017 the ABS released its Housing Occupancy and Costs, 2015-16, which revealed that it is primarily higher income earners engaged in negative gearing

So much for the claim that “Labor’s policy to slash the widely used practice would hit more lower-income earners with only one investment property”.

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Negative gearing lies resurface

By Unconventional Economist in Australian Property

April 27, 2018
By Leith van Onselen

Treasury analysis of Australian Taxation Office (ATO) data from 2015-16 suggests that people with taxable incomes of less than $80,000 a year would be hardest hit by Labor’s proposed negative gearing reforms. From The Australian:

Almost two-thirds of all investors who negatively geared property were on taxable incomes of less than $80,000 a year, according to new tax office data that suggests Labor’s policy to slash the widely used practice would hit more lower-income earners with only one investment property…

The statistics also included figures on the number and occupations of people affected by Labor’s $20bn plan to scrap negative gearing on new purchases of existing properties, showing 62 per cent were on taxable incomes of under $80,000 a year.

*Labor has rejected claims that lower income earners would be hit by scrapping negative gearing, arguing that 70 per cent of the value of benefits from the practice went to the wealthiest 10 per cent. “Despite spurious claims being made about the benefits of negative gearing being overwhelmingly claimed by nurses and policemen, the evidence from analysis by the Grattan Institute shows that in fact it is finance managers and anaesthetists that benefit from these investment subsidies,” Labor’s policy document says.

*Taxable income is the wrong measure to use at it is the income that is left over after various deductions like negative gearing.

In October, the ABS has released its Housing Occupancy and Costs, 2015-16, which reveals that it is not ordinary “mums and dads” that are primarily engaged in negative gearing, but rather higher income earners [my emphasis]:

Many Australians own a residential property other than the one they currently reside in. In 2015–16 there were 1.78 million households that owned residential property other than their usual residence. Such properties include those that are being rented out as residential investment properties and those used for other purposes, such as holiday homes.

Most households (72%) who owned other residential property owned a single property. Around one in twenty households (5%) who owned other property owned four or more properties.

Owner occupiers were more likely to own additional residential property, with around 1.39 million owner households owning other residential property. This compares to 342,000 households who own other residential property but are renting their usual residence.

View:

http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4130.0~2015-16~Main%20Features~Ownership%20of%20Other%20Residential%20Property~10000

Almost four in ten households who owned another residential property, excluding their current dwelling (38%) belonged to the highest quintile of equivalised disposable household income, while just over one in 10 of those households (11%) were in the lowest quintile of equivalised disposable household income.

*According to the ABS, the top 40% of households accounted for 61.8% of all housing investors in 2015-16, comprising 38.4% in the highest income quintile and 23.4% in the fourth income quintile.

So much for the claim that “Labor’s policy to slash the widely used practice would hit more lower-income earners with only one investment property”.

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