The negative gearing debate has become rather heated with vested interests and now party policy in an election vying for position. How are we to assess the real issues and recognise a balanced solution? Danika Wright, a lecturer in Finance at the University of Sydney gives us be better framework for our considerations.
“Despite being widely described as a “tax rort for rich investors”, negative gearing is not a tax concession (a tax deduction as opposed to an exemption or rebate). It does, however, encourage over-investment and over-leveraging in Australia’s housing market, as the Financial System Inquiry Murray Report concluded.”
“Negative gearing should not be analysed in isolation from capital gains (on which the Grattan Institute has published a comprehensive report) and other special treatments of housing such as stamp duty, land taxes and first-home-buyer exemptions. Rather than take a sledgehammer to the current policy, a good reform should encapsulate this spectrum of housing market distortions.”