Scott Morrison’s negative gearing lie exposed

By Leith van Onselen

Let’s recall Australia’s real estate treasurer, Scott Morrison’s, speech to the Australian Housing and Urban Research Institute in April, whereby he argued that negative gearing was being used primarily by ordinary “mum and dad” investors like teachers, and to restrict negative gearing would hurt lower income earners:

Figures to be released later this week show 2 million taxpayers in Australia have an interest in a residential investment property. 72 per cent own just one property and 90 per cent own no more than two. 1.3 million of these taxpayers negatively gear their investments, including 58,000 teachers and one in five police officers. Two thirds of those taxpayers who negatively gear their investments have a taxable income of $80,000 or less.

They are mums and dads…

If mum and dad investors were not part of our private rental market, there would be fewer rental properties available, meaning higher rents, further crowding out of those on lower incomes and even greater pressure on already overstressed community and social housing resources.

Today, the ABS has released its Housing Occupancy and Costs, 2015-16, which reveals that it is not ordinary “mums and dads” that are primarily engaged in negative gearing, but rather higher income earners [my emphasis]:

Many Australians own a residential property other than the one they currently reside in. In 2015–16 there were 1.78 million households that owned residential property other than their usual residence. Such properties include those that are being rented out as residential investment properties and those used for other purposes, such as holiday homes.

Most households (72%) who owned other residential property owned a single property. Around one in twenty households (5%) who owned other property owned four or more properties.

Owner occupiers were more likely to own additional residential property, with around 1.39 million owner households owning other residential property. This compares to 342,000 households who own other residential property but are renting their usual residence.

Almost four in ten households who owned another residential property, excluding their current dwelling (38%) belonged to the highest quintile of equivalised disposable household income, while just over one in 10 of those households (11%) were in the lowest quintile of equivalised disposable household income.

According to the ABS, the top 40% of households accounted for 61.8% of all housing investors in 2015-16, comprising 38.4% in the highest income quintile and 23.4% in the fourth income quintile.

Myth busted!

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Comments

  1. Wasn’t that multi property investing pile of filth Peter Dutton a former cop? Perhaps he’s wrongly classified in ScoMo’s stats?

  2. You can chop and change the figures using all sorts of economic chicanery, but looking at the outright number of those using negative gearing, the majority would have jobs that would be considered (by most) as those of everyday Australians/M&D investors.

    • Lets see 58,000 negative gearers are teachers, plus one in 5 police officers (that’s 10,000). So there’s 68,000 out of 1.3 milllion.

      What jobs do the other 95% of negative gearers have? And what is their average taxable income *before* investment property interest deductions?

      • What’s clear from that is who isn’t claiming rental losses:

        Truck drivers (7.8%), sales assistants (3.8%), store-persons (4.8%), receptionists (6.4%), labourers (3.9%), aged and disabled carers (5.2%), chefs (5.5%), child carers (4.7%), factory process workers (5.3%), commercial cleaners (3.7%), cashiers (2.2%), food trades assistants (2.9%), fast food cooks (1.1%) etc etc

        In other words highly regressive effect on the tax system

      • Yes I get that anaesthetists, CEOs and finance managers are also “everyday Australians”, and quite possibly mums and dads too. And there are a small number of negative gearers in lower paid positions too. However the net effect is regressive, the tax breaks disproportionately go to the wealthy.

      • I am not saying that ‘anaesthetists, CEOs and finance managers’ are ordinary Australians (in the context of SM’s comments), they make up a minority % of those who are negatively gearing property.

        My point is that everyday Australians are negatively gearing property e.g.

        Tens of thousands of nurses.
        Tens of thousands of general clerks.
        Tens of thousands of teachers.
        Tens of thousands of accountants.
        10,000+ truck drivers.
        15,000+ electricians.
        etc etc etc

        These ordinary Australians far outnumber 891 Anaesthetists or even the 25,690 CEO/MDs.

        The tax breaks ‘disproportionately’ go to those on higher incomes because they pay a tax rate for a higher income bracket and are probably buying more expensive properties with greater costs. So what?

      • So what?

        So just that. We have a progressive income tax system which means people pay a higher proportion the more they earn. This is regressive, it reduces the tax burden disproportionately on those who own more. It is doubly so because those with higher income are far more likely to own an investment property.

      • You are just trying to change the context of what was being discussed.

        Scott Morrison is right.

        All else is irrelevant to my comment, maybe you should have left a comment elsewhere, rather than under mine if you were making some other random point.

      • I think maybe you should go look at the table in the story here:

        https://www.macrobusiness.com.au/2017/10/rba-warns-property-specufestors/

        You can see quite clearly that “Managers” make up 10% of tax payers, but 15% of property investors – disproportionate, no?
        On the next line you can see that “Professionals” make up 17% of tax payers, but 22% of property investors – disproportionate again?
        And “Labourers” make up 8% of the population but just 3% of all property investors. Poor them.

        Negative gearing steals from the poor to give to the rich. Regressive.

      • I understand what you are saying, but it is beside the point I was making.

        I expect those on higher incomes to disproportionately (to their % of the population) be more likely to invest in just about any asset class. It’s not rocket science.

      • Of course the other side of it is that 90% (and even more enrolled voters) of taxpayers don’t use negative gearing i.e. negative gearing is relatively rare, and not an ordinary activity, and hence anyone doing it can’t claim to be ordinary.

      • Yes Dan, they should be able to claim deductions just like anyone else. Yes I think the deductions should reduce tax at whatever their marginal tax rate is.

      • Also interesting to note from the other article today:

        “Relative to total income, however, the rental loss is largest for the lowest income bracket and gets progressively smaller for higher income brackets.”

  3. “Equivilised household disposable income” – which is based on total household income (taxable or otherwise) and therefore potentially more than one income earner – is not the same as taxable income which is a specific concept based on the tax act.

  4. Hill Billy 55MEMBER

    1 in 20 of rental property owners have 4 or more rental properties. Why are the politicians who tell these lies so far outside the “norm”? Why are they not held to account?

  5. And of course this information will be ignored by all and sundry, it certainly wont be pointed out by media dependent on real estate advertising and the wanker politicians will ignore it and the circle of life continues.

    thusly

    http://www.watoday.com.au/federal-politics/political-news/scott-morrison-moves-to-reassure-investors-australias-housing-market-isnt-heading-for-a-crash-20171012-gyzgnp.html

    Next speech he gives will be reaffirming that labor will destroy your house values and that NG is only for mums and dads battlers trying to get ahead.

    • I’d say a Treasurer assuring peeps the market is good and not crashing is a red flag two or three times the size of a shoe shine boy giving you a stock tip.

  6. Tassie TomMEMBER

    What would be really interesting is not “how many people of each quintile own at least one investment property”, but “how many investment properties are owned by people of each quintile”.

  7. TailorTrashMEMBER

    What is it about Australian treasurers and the smirk ……Scomo has it ,Costello had it and Wayne swan had it …….are they thinking of their parliamentary pension ( paid for the the sucker taxpayers ) and the nice Cushy job that awaits ?

    • It comes with the sound track to their ministership: “We’re in the money… we’re in the money….

      • TailorTrashMEMBER

        Your right …forgot he was treasurer ….he is forever in my minds eye as Primeminister Placido Domingo….a
        boverboy in a nice double breasted suit ……

    • You forgot Joe Hockey and his let them eat cake smirk when he said if housing was unaffordable nobody would be buying it.

  8. Who cares? I’m sick of talking about it. If Australian voters are all dumb enough to believe the LNP’s and the property lobby’s moronic claims about NG, and to re-elect the LNP based on that policy, then they get what they deserve.

  9. Perhaps this is why ScoMo and the like are against same sex marriage.

    Because it’s mums and dads who are negatively geared property investors. Not dads and dads, and definitely not mums and mums.

  10. SchillersMEMBER

    Opposition shadow real estate treasurer Chris Bowen has an almost identical smirk. Let’s not forget that Labour have pledged to keep negative gearing tax breaks in full for the approximately 2 million investment properties that are currently negatively geared. They are also keeping the NG tax breaks in full for every newly built IP moving forward.

    Their “reform” of negative gearing is yet more smoke and mirrors in the wastland that is genuine housing reform. Make it seem like we are doing something when we are really just the same old same old. The ALP have no intention of doing any of the hard yards required to quell speculative demand whilst boosting the supply of truly affordable land. No desire or intention at all.

  11. my theory are politicians are overwhelmingly derived from those smug know-it-all kids who wore their pants up too high everybody knew and didnt like in high school. the utter maliciousness with which they treat ordinary people when in power is their form of revenge on all the kids who didnt appreciate their self-perceived brilliance in HS.

    that explains the smug face. its the “who’s the dork now, b1tch”, look.

  12. What does ‘mum and dad’ investor even mean? Gina Rinehart’s a mum, Rupert Murdoch is a dad, and so is Harry Triguboff.

    • Exactly. In my novice eyes justt reform the whole taxation system to make simpler and fairer such that noone gets a free ride.

  13. 1.78 million property investors, eh?

    Imagine if economic times tightened, the housing market slumped a bit, and 1% of those “investors” who were financially marginal decided to stop their losses and bail out of the market. Nearly 18000 houses would go in the market across the country in a relatively short period, with consequent effects on prices.

    Coming soon to a housing market near you.

  14. The Wealth Navigator

    You have to be careful using this data as it is based on a sample of just under 18,000 households out of 9 million. As well this includes holiday homes (which generally will not be a tax deduction and owned by wealthier people) and there is no comment on whether the properties are negatively or positively geared.
    And the conclusions that can be drawn from this are varied.
    For example the data says that only 22% of households aged 55 to 74 own another property. But it also says that 23% of those aged 35 to 54 own another property. So possibly more Gen x own another property than the baby boomers. If this is true why all the hate targeted at baby boomers. Note only 15% of 15 to 34 year olds own another property
    And what about this stat 12% of renters own another property (maybe they have worked out it is cheaper to rent where they want to live and buy a property elsewhere – rent vesting)
    Now lets get to the incomes. The incomes are in quintiles and according to the ATO;s own data for the 2015 -2016 year only 20% (or the top quintile) have taxable income over $80,000. The bottom 42% earn less than $37,001. So effectively the 2nd highest quintile earns somewhere between $37001 and $80,000. If we split this in half, the second quintile has a taxable income of over $60,000. So based on ATO income quintiles, the top 40% of income earners have incomes probably $60,000 and above. I am not sure then if the ABS data does actually bust the myth.