The Federal Government is looking at putting limits on negative gearing as part of its tax reform agenda.
Recent newspaper reports say Treasurer Scott Morrison is tossing up whether to put in place a limit on the amount property investors can claim as a tax deduction through negatively geared investments.
It’s part of the much-discussed white paper on tax reform currently being undertaken by new Prime Minister Malcolm Turnbull and Mr Morrison.
Opinion is very much divided on the issue of limits or an end to negative gearing, and Rich Harvey from Property Buyer told Your Investment Property that changes to negative gearing laws could have a huge impact on Australia’s property market.
“Negative gearing seems to be the hot potato that always gets kicked around when it comes to talk about taxation changes. It seems to be an easy target for people to criticise or use so it looks like they’re doing something,” Harvey said.
“But people need to remember that negative gearing is one of the best ways to ensure the creation of affordable housing.”
“Real estate in Australia is quite expensive, so there does need to be some sort of way to incentivise people to be involved and ensure there is a supply line of housing.”
Mr Harvey said the Government might actually shoot itself in the foot and make itself worse off by making bad changes to negative gearing tax law.
“Whenever I hear people talking about negative gearing and changing it, I think back to what happened in when the Keating government got rid of it,” he told Your Investment Property.
“The cost of public housing blew out and they ended up bringing it back pretty quick. Making changes to negative gearing often sounds good, but it’s something that’s fraught with danger.”
Mr Harvey believes the Government should focus its energies on reforming stamp duty instead of tinkering with negative gearing.
“Stamp duty is where changes should be made,” he said.
“It’s a regressive, inefficient tax.
“It’s anti-environmental in that is discourages people from moving and living closer to work and people suffer because of bracket creep. It’s the area where changes should be made, but the governments are making too much off it to change it anytime soon.”