A recent research commissioned by Housing Industry Association (HIA) reveals
that restricting access to negative gearing for residential property would
reduce investment in housing, erode housing affordability and put upward
pressure on rents.
Backing the positive impact of negative gearing, the report also
concluded that abolishing stamp duty on conveyances should be the top priority
for housing tax reform, making housing more affordable for both renters and
owner-occupiers.
HIA Managing Director Shane Goodwin described discounting residential
negative gearing in isolation as a retrograde step for tax reform in terms of
both efficiency and equity. He explains that new housing is one of the most
highly taxed sectors in the economy, and the removal of negative gearing would
only worsen the situation and discourage investment, which would, in turn
reduce housing supply and increase the cost of renting.
On the other hand, negative gearing promotes private investment in the
rental market, thus stimulating economic activity and taking the pressure off
social housing and the public purse.
According to Mr Goodwin, considering the ageing workforce and future
pressure on services, policy settings such as negative gearing that promote
wealth creation and self-sufficiency in retirement should be promoted.
He added that negative gearing was not the domain of the so-called
‘wealthy investors’; figures from the ATO demonstrate that 74% of tax payers
receiving rental income have a taxable income of less than $80,000.
The research paper titled ‘Economic Impacts of Negative Gearing of
Residential Property’ was commissioned by HIA and conducted by Independent
Economics.
