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Do you think that the federal government will abolish the tax concessions that encourage negative gearing? If so, under which conditions or scenarios do you think they would do so?
Responses
WOW. Great question Lewis!!
If only we had a crystal ball to predict what will happen.
Negative Gearing is in place to attract investors into the market.
Abolishing this will have an impact in a negative way on the investor and property market. I read a report today stated that investment lending is down 6%. So perhaps with this market now slowing they may not do anything?
As I am not an accountant I am not privy to information that may be more relevant or current behind the scenes but it will be interesting to see what happens that's for sure!
No definitive answer but hope this gives a little insight?
Nicole
Hi Lewis,
What a great question.
Why would the government remove negative gearing when the last time they tried the number of small investors deserted the market
If they remove negative gearing it would only be due to political pressure or the belief they could capture some lost revenue.
I believe the actual unintended consequence would simply be more people investing in property trusts as a means to invest in property. These property trusts would intern run the investments purely for a return on capital and therefore the small investor would get a lower rate of return.
Alternatively there would be a reduction in the supply of rental properties which would eventually lead to higher rental returns.
Personally I feel it would be very difficult for the government to ever get rid of negative gearing since more sophisticated investors would align positively geared assets against those which have a negative return.
I hope that helps & feel free to contact me if you would like to discuss further.
Lewis, in line with what Rebecca and Nicole wrote, the impact it will have makes it unlikely I believe.
In fact, the whole housing market in Australia is build on (and relies on) investors. The extend of that reliance became obvious to me when I came to Australia from Europe. The whole housing market operates completely different without the influence of investors. Free market operations and self regulation is part and parcel of our model with little government interference.
It would be a monumental shift... I can't see a strong case for the change.
(And there is of course the investment properties our politicians hold personally to consider.....)
The LNP won't do it. Too many politicians with big investment property portfolios. Keating did that in the 90s and it was a bad move politically. They might tweak it but they'll increase GST before they rob Peter to pay Paul.