Negative gearing is the ability to offset a losses on an investment against other income in your taxation return. Negative gearing isn’t restricted to just property but also other investments such as shares.
There is plenty of commentary that negative gearing causes issue’s to the housing market and should be revoked, but could the removal of negative gearing do more harm than good? Not many people remember but negative gearing was frozen back in the late 1987 when Paul Keating was Treasurer of Australia.
During this time it lasted 18 months before the Government realised it wasn’t a good idea. The freezing of negative gearing created a massive slow down in the property market, before people say yes, meaning house prices will drop, we have to think of the overall economy. A downturn in housing impacts many sectors and therefore your employment.
It also meant tenants suffered with landlords missing the tax benefits, rents increased. This caused housing affordability to increase for those mostly likely able to afford it.
When you hear the rumours of negative gearing being removed, let’s not forget it’s been tried before and failed, same as the rumours of removing the capital gain concessions. Also the Government can’t remove laws for investors already in the system so it will only be future investors that will suffer