Negative gearing sparks war of words

Adam Smith 27 April 2016

the plan to remove capital gains tax concessionsThe fight over negative gearing looks unlikely to abate, with a war of words erupting between the government and industry pundits.

Following a report from the Grattan Institute claiming negative gearing was disproportionately benefiting wealthy property investors, Prime Minister Malcolm Turnbull has defended the government’s pledge to leave the tax concession untouched. Turnbull, appearing on the ABC’s 7:30, said the income of investors benefiting from negative gearing was irrelevant.

"That's beside the point — of course people on the highest incomes will make the highest gains because they tend to have more property," Turnbull told host Leigh Sales.

Turnbull argued it was “common sense” that the removal of negative gearing would cause a downturn in property prices.

"Around a third of the buyers for residential property currently are investors. What Labor is proposing will take all or almost all of them out of the market. If you take a third of the buyers out of the market, prices, values will fall. That's common sense," Turnbull said.

But pushed by Sales to present modelling for the claims, Turnbull appealed to “the laws of supply and demand”.

The Grattan Institute’s John Daley seized on the comments, arguing in an opinion piece for The Australian Financial Review that Turnbull made incorrect assumptions about negative gearing, particularly that removing negative gearing would lead to an increase in rents.

“No study of the real world has ever found tax changes with this impact. Instead, in markets where property development is limited by planning permissions, changes in returns typically reduce property prices. Again, this is an issue that our report works through in detail. Nor is it plausible to claim, as the Prime Minister does, that the removal of negative gearing caused rental crises in the UK and US. Any number of countries that do not allow negative gearing have functional rental markets,” Daley wrote.

ABC finance journalist Michael Janda also fired back at the Treasurer Scott Morrison's claims that negative gearing primarily benefited the middle class. Janda wrote in an opinion piece that Morrison was "clearly guilty of serious spin".

"What Mr Morrison is saying is that it's mainly the middle class who use negative gearing to get ahead," Janda wrote. "His argument runs completely counter to almost all reputable, independent analysis."

More great ideas from finder.com.au

Get a life insurance quote
Get a life insurance quote

Find out what it costs to protect yourself and your family

More info...
Refinancing home loans
Refinancing home loans

Choose from offers with rates as low as 3.39% p.a.

More info...
Google Pixel
Google Pixel

Compare plans for Google's flagship Android phone

More info...
Christmas ideas
Christmas ideas

Visit our Christmas homepage for gift ideas, markets, travel & deals

More info...

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback