Two sets of analysis have estimated that the Coalition’s flagged $20,000 cap to negative gearing expenses would raise around $1 billion in Budget revenue, well below Labor’s policy, and capture only the top 10% of negatively geared investors. From The AFR:
The change would affect 125,000 taxpayers, who claim at least $20,000 a year of net rental losses.
They make up 10 per cent of rental investors, according to Ben Phillips, the principal research fellow at the Australian National University’s Centre for Social Research and Methods…
Mr Phillips said imposing the cap would raise an extra $1 billion a year, which is less than what would be raised under Labor’s plan to restrict negative gearing to new property and reduce the capital gains tax discount to 25 per cent…
Grattan Institute chief executive John Daley said capping negative gearing at $20,000 would hit 138,000 taxpayers. He agreed it would raise about $1 billion a year.
This sounds about right. As shown in the next chart, which comes from the FY2013 Australian Taxation Office Statistics (latest available), the average negative gearing loss was around $9,600, with the highest income earners (i.e. those with taxable income over $250k) claiming just over $24,100 in property losses:
Still, the Coalition’s $1 billion in Budget savings is a pittance when compared against Labor’s policy, which was estimated by Ben Phillips to save the Budget up to $5.9 billion a year in the longer-term. Labor’s policy would also help to boost dwelling construction, making it far superior.
Commenting on the modelling results last week, Ben Phillips labeled Labor’s policy as “potentially the biggest housing affordability policy the country has seen”, while noting that “most of the benefit of negative gearing clearly goes to the top 10 per cent, and it’s the same for the capital gains tax, by a very large margin”.
QED
