ABC Fact Check hits Morrison’s negative gearing claims

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ABC Fact Check has today taken apart Treasurer Scott Morrison’s oft-argued claim that the majority of people that utilise negative gearing are on “modest” incomes:

The claim

“In terms of how I have described my attitude towards negative gearing, I have always understood that for the vast majority of Australians who use negative gearing they are modest income earning Australians, nurses, teachers, police,” Treasurer Scott Morrison told the National Press Club in February.

“Two thirds of those who use negative gearing have a taxable income of $80,000 or less. Seventy per cent own just one property, and 70 per cent have a net rental loss of less than $10,000″…

The verdict

Mr Morrison’s claim is selective.

Australian Tax Office data shows that one in 10 Australians who files a tax return is negatively geared in terms of rental property.

Data provided by Mr Morrison’s office, based on Treasury calculations, showed 67 per cent of the people who use negative gearing have taxable incomes of $80,000 or less.

This was backed up by Fact Check’s analysis of ATO statistics.

However, as 82 per cent of all taxpayers have taxable incomes below $80,000, it is not surprising that most of the negative gearers fall into this category.

As this category represents only 67 per cent of negative gearers, it is clear that these taxpayers use negative gearing proportionately less than taxpayers with higher income.

Put another way, only 8 per cent of people with taxable incomes less than $80,000 use negative gearing, compared with more than double that proportion among people with taxable incomes above $80,000.

Similarly, people with taxable incomes over $80,000 receive 42 per cent of the negative gearing benefit, but they only represent 33 per cent of all negative gearers.

Finally, those with a total income of $52,000 a year or less — an income more in line with the definition of modest as a “moderate” or median income and where the negative gearing benefit has not been subtracted — represent 59 per cent of all taxpayers, but only 40 per cent of negatively geared taxpayers.

Only 4 per cent of these people use negative gearing…

Miranda Stewart, from the Tax and Transfer Policy Institute at the Australian National University told Fact Check it wasn’t surprising the majority of negative gearers had taxable incomes below $80,000 because the majority of taxpayers were in that bracket.

“The numbers of negative gearers may be high below $80,000 but the proportions of them in each tax bracket gets higher as taxable income rises,” Professor Stewart said…

Professor Stewart said the large number of taxpayers with negative taxable incomes who were negatively gearing showed that it was a strategy being used as a tax shelter…

Of course, as noted by the RBA, “the ATO figures do not capture the fact that many negatively geared properties are owned by people with low taxable income but high ‘actual income'”. And when actual income is examined, the top 40% of households by income hold nearly 80% of the outstanding investor mortgage debt:

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Bottom line: Morrison is dead wrong to claim that negative gearing is utilised by “modest income earning Australians”.

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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.