Flat White

What’s so bad about negative gearing?

8 November 2018

4:33 PM

8 November 2018

4:33 PM

As Scott Morrison tours the Queensland coastline, his mind is most probably wandering across a range of policies that he will hope to announce in anticipation of the next election. He has already announced increased access to alien strawberry pickers which will obviously bring him at least 10 votes. I don’t think it will take the Treasury forecasting model to predict that his policies will focus on promoting economic growth, policies that are all well and good, possibly bring a further 37 votes.

What he seems to have missed, however, is that economic growth, strawberry picking and tourism are an issue but they are not the issue. The issue is the economic health of families, of couples with children, of their incomes, houses and taxes. If Morrison PM is worried about where to get a couple of million votes, they are the people he needs to court. They are waiting for a leader who actually believes in looking after them and whose policies are aimed directly at improving their prospects.

Did you know that there are people who own many houses as investment properties and by that I don’t mean a couple of houses. I mean 50, 60 or more homes which they rent to those who cannot afford a deposit on a house. The rest of the investors own two or three houses, even five or ten. Why they own them is not the issue. This is a free country and the right to possess property is a natural right. But they only reason they own them is that they are an investment. Land is rare and over time, there will be an appreciation in value.

Some of these people own these houses in a family trust framework, others in superannuation trusts. Some people just own them outright in their own names or in joint names with their spouses or partners. For all of those investment properties, the owner of the houses will seek to obtain tax benefits, by writing off expenses and loan interest against the entity’s income in order to minimise the tax liability.

There are some people who take the exercise further. They live in each house they purchase for a year in order to obtain the State government stamp duty concessions for the principal place of residence. Then they move on to another home and do the same thing. When the time comes to sell, those people will move back into the house for a year, declaring it to be their principal place of residence and they’ll lie about it so they don’t pay any capital gains tax on the sale.

The ALP has called for an end of negative gearing and I’m sure it will be mentioned during the next election cycle. They call for it, but only because they know it can’t be implemented; a sort of socialist economic virtue signalling. But the truth is that the cost of housing is one of the biggest expenditures that a family can incur and renting has become the only way that families can make ends meet. Some you will recall that the family used to be the concern of the ALP, at least before the lunatic academic socialists took it over during the Whitlam years.

So, if PM Morrison is really interested in making the lives of families better, he can start by easing some of the economic pressures on them while building their security. And he can do that by extending the benefits of negative gearing to the family home so that interest and maintenance expenses on the family home are accepted by the taxman as deductions against family income.

With just a few rules to prevent fraud, that policy could make the difference between young families being able to afford their own home and still having enough cash left for Christmas and families confined to an eternity in the rental market of outer Sydney (aka inner Mongolia). Whichever way you look at him, this would make ScoMo a very fine Father Christmas and it would wedge the ALP perfectly.

David Long is a retired solicitor, economist and PhD candidate

Got something to add? Join the discussion and comment below.

Show comments