Business Advisors & Tax Accountants Melbourne

Negative Gearing Discussions

It’s been tough recently without hearing arguments of pros and cons with the removal of residential property investors’ negative gearing taxation rebates. As it stands, the negative gearing process allows people to claim deductions against the income generated less the expenses on residential investment properties allowing for higher refunds to be claimed.

Proposed changes to cost more than they save

Negative gearing was stopped from 1987-89, and many landlords couldn’t afford to keep their investment properties. The ones that remained in the market, rents were astronomical and resulted in the pressure on the public housing system. Waiting lists grew as tenants were priced out of private rentals – a situation that can happen again if these proposed changes are reintroduced.

Why repeat history when it so clearly didn’t work the first time?

Both parties are looking at negative gearing as they’re under public pressure from people not fully aware of the implications for the housing sector if things were to change. On one side of the coin, it looks as though the government is paying out millions in taxation rebates but in actual fact, they wouldn’t be saving as much as they think they will. Any perceived ‘savings’ would actually end up as higher costs because the government would have to make up for the accommodation shortfall (via public housing) if investors leave the market.

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