Prime Minister Tony Abbott said "Negative Gearing won’t be touched." Whilst property investors pay less tax the government and other individuals actually benefit from negative gearing.
This article first appeared on LinkedIn Pulse.
Overview Of Negative Gearing Benefits:
Negative Gearing delivers benefits to more than just the property investors. It also delivers benefits to the Government, the Australian taxpayer and to those wanting/needing rental housing.
These are all excellent reasons to retain the current negative gearing policy, but there is yet another reason politicians won’t scrap Negative Gearing.
The government doesn’t want to upset over 1.2 million Australians that are using the tax benefit to offset investment property expenses such as repairs, maintenance and loan repayments. Scrapping Negative Gearing would most likely be a career limiting move and/or political suicide for the individual politicians and the government involved.
Property Investor Benefits:
The main benefit with negative gearing is that the property ownership losses can be offset against other income earned, which reduces your assessable tax income and therefore reducing your tax payable.
With negative gearing you are using the Tax Office and your Tenant to fund the bulk of your investment property costs and usually only require a small contribution out of your own income to support the property in the first few years.
With interest rates at an all time low we are able to help investors invest in property for less than a latte a day and in many cases even offer a cash flow positive result. (Putting extra money in your pocket rather than taking it out).
Benefit to Australian Government:
With the increasing gap between available housing and the increasing demand for rental housing, the Australian Government has pressure on them to provide more housing. The building of rental housing by the government is an extremely costly exercise and is certainly not the most cost effective way to create extra housing. If the government were to try and build housing for the rental market it would end up costing them and the Australian Taxpayer much more than it currently does by offering negative gearing benefits to the property investors providing this stock.
Having the general public buying and/or building properties, as an investment, is a very cost effective way of providing extra housing for the increasing rental demand in Australia.
The negative gearing benefits are an incentive that encourages average Australians to invest in property, often individuals who would not have invested without the added incentive of negative gearing.
Benefits To Tenants:
Without the extra properties being provided by property investors this would undoubtedly reduce the amount of investment in property and subsequently push rents up. This increase in rents being charged to tenants would come about as a result of reduced supply and the continued increasing demand for housing in Australia.
This gives another reason for the politicians to keep negative gearing benefits in place, to encourage the investment in more properties and help avoid rents from spiralling upwards out of control.
Negative Gearing Here To Stay:
There has been a misconception around that only the rich and famous invest in property and take advantage of the negative gearing tax benefits. This was proven wrong recently when Social Services Minister Scott Morrison pointed out that 54,000 teachers, 36,000 nurses and thousands of ordinary workers make up those that claim rental losses through negative gearing.
With approximately 1.2 million Australian voters using negative gearing for their investment property or properties, including many politicians, it is highly unlikely that it will ever be abolished!
Learn more about Negative Gearing in our Free Video Series
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About Darryl Simms
Latte Property has a large following of successful property investors who have enjoyed professional guidance in the purchase of quality new apartments, new townhouses and new homes.
Darryl is also the Author of “50 Must Know Property Investing Tips” and is currently busy writing his next Property Investment publication.
Darryl’s favourite quote is:
“Try not to become a man of success, but rather try to become a man of value” – Albert Einstein
Contact Darryl at www.latteproperty.com.au/ask-darryl
This article was written on 12/05/15 and first appeared on LinkedIn Pulse