Latest tax data proves negative gearing benefits wealthy the most

https://www.theguardian.com/business/grogonomics/2017/apr/13/the-latest-tax-data-proves-it-negative-gearing-benefits-the-rich-the-most?CMP=soc_567

  • Release of taxations statistics for 2014-15 by the ATO reveals that, while the number of people negative gearing has levelled in the past three years as interest rates have fallen, the greatest share of the benefits of negative gearing has gone to above average earners
  • In 2014-15, 1.27 million people recorded a rental net loss
    • This was down slightly from the 1.3 million in the years before and meant that 12.8% of taxpayers were negative gearing
    • This was again down from 2012-13 when 13.4% of taxpayers were recording a rental loss
  • The decrease in rental net loss can be in part attributed to recent RBA interest rate cuts, which decrease the size of payments on the interest of a mortgage, making it harder to record a loss.
  • Over the past 4 years the number of people claiming a deduction for payments of interest on a rental property has increased, but the total amount claimed has fallen
    • In 2014-15, the net result from rentals was a loss of $3.6bn – down from the $8.4bn total loss in 2011-12
  • The number of people claiming income through rents has remained around the same level over the past few years, but the costs to the government through negative gearing has declined because of falling interest rates.
  • When interest rates rise again, so too will rental losses and the cost to the government. Thus, it is critical for the government to pass legislation on negative gearing now while revenue forgone is at its lowest.
  • Analysis by the Grattan Institut’es John Daley found that while 12% of teachers negative gear and 9% of nurses do, 29% of surgeons and anaesthetists, the two professions with the highest average income, engage in negative gearing. They also achieve a much higher average tax benefit – over $3000 compared to nurses benefitting by $226 and teachers by $289.

Negative gearing

  • In 2014-15, 40.1% of individuals earned less than $37,000, accounting for 24% of all people negative gearing, but only 19% of the total amount of taxable income loss
  • In contrast, those earning between $80,000 and $180,000 accounted for 19% of individuals but 32% of negative gearers, and 34% of the amount of rental loss
  • Only 3.4% of individuals earn over $180,000, but they accounted for 8% of all negative gearers and 15% of the total rental loss amountMore negative gearing.JPG
  • Negative gearing is thus more likely to be done by those on higher incomes, who also simultaneously receive the largest share of the dollar benefit
  • Data also showed that while landlords own only one property, the biggest growth has been among those who own more than five properties
  • While 71% of those earning income from rents own just one property, since 2012-13 there has been a 9.2% increase in the number of landlords ho own five or more properties
  • Data suggests one way to limit negative gearing is to thus put a cap on the number of properties able to be used for the purpose
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