NEGATIVE GEARING OF INVESTMENT PROPERTIES
The Christian Democratic Party supports the negative gearing of investment properties as long as only the legitimate business expenses are used as tax deductions. We are committed to carefully examine all the expenses used by investors to close any excessive claims beyond the legitimate expenses of owning and running a domestic rental property. This same approach is to be done on all tax deductions for all business so that only real business expenses are used for tax deduction in line with our policy of “One Law for All”.
Recent political discussion
There has been a deliberate move in recent years to demonize investment property owners in the same way there was, during the late 60’s and the early 70’s, a deliberate attack on wealthy people getting a pension and so the pension was removed from many. It seems that we are facing a similar attack on rental property owners.
What is negative gearing anyway?
A person owning a rental property is in a business and all expenses in any business are expected to be tax deductable and in the rental business it ought to be the same as it currently is. Now there are many business deductions that need a careful examination as perhaps that are “convenient” business expenses so as to create a tax deduction, and these need always to be carefully looked at. These tax deductions are called negative gearing if the total deductions, including loan repayments exceed the rental income in any given year. This gives a net rental loss.
Why is there a move to reduce or remove Negative Gearing?
The increasing prices of housing as well as increases in domestic rent need a solution and the politics of envy often are used when real solutions are not easily found or rest uneasy with other objectives of the decisions makers. The politics of envy need someone to blame and who better to blame than the “wealthy” landlords? The way to do it to try to show the landlords are getting something for nothing or more than they deserve and this is what is happening in the political debate at present.
The facts are:
1. Housing property prices are affected by many things and almost nothing to do with negative gearing at all.
2. A rental property is negatively geared if it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on the borrowings.
3. It is estimated that 80% of Landlords claiming deductions had an income of less than $150,000 for the financial year ending 30 June 2013.
4. The most probable result of removal of negative gearing is increased rents for all.