Hockey eyeing an end to negative gearing?

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ScreenHunter_02 May. 21 09.21

Update: Note that the office of Joe Hockey has approached MB and denounced the West Australian story as scurrilous misreporting.

By Leith van Onselen

From The West Australian newspaper today comes news that a Coalition Government might look to abolish negative gearing:

Joe Hockey’s tax review could pave the way to end the $13 billion a year tax break 1.2 million Australians claim on investment properties.

The coalition has promised a white paper on tax reform if it wins office and the shadow treasurer confirmed yesterday this could include a look at negative gearing…

Previous attempts to wind back negative gearing were met with political pain.

In 2003, shadow treasurer Mark Latham floated the idea in an interview but within hours ALP leader Simon Crean had to deny Labor would change the tax break.

And in 1985, treasurer Paul Keating introduced laws to prevent losses on negative gearing being used to offset a person’s income.

After fierce criticism from the real estate sector, particularly in Sydney, the Hawke government abandoned the idea in 1987.

Recent tax office figures show a 31 per cent jump from the previous year in tax losses through negative gearing in 2010-11 with the average loss almost $11,000.

Opposition Leader Tony Abbott has said “lower, simpler, fairer taxes” would be pivotal to the planned tax white paper…

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The fact that the Opposition has confirmed that it would examine ending negative gearing in its upcoming tax review is a positive, and contrasts previous refusals to consider changes by both major parties.

With a cost to the Budget of around $4 billion per year at a time when the Opposition is seeking savings to a variety of programs (e.g. self education expenses and the Gonski schools program), it would be inconsistent not to axe negative gearing, which does nothing to boost rental supply or affordability, and acts to push-up house prices, adversely affecting first home buyers.

Tomorrow, we will officially launch a detailed research report, available exclusively to MacroBusiness members, examining the latest Australian Taxation Office statistics on negative gearing, as well as post a podcast, available to everyone, discussing the report.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.