Negative gearing: Is it a tax concession?
Author: Paul Tilley
Negative gearing is a phrase used in Australian tax policy debates, typically in regard to rental property investments. It is claimed to be a tax concession that an investor receives a tax deduction for interest expenses that contribute to a current loss on a rental property investment, and can combine that with wage income for tax purposes. The deductibility of interest for tax purposes, though, is simply part of the general provisions of the tax act, ie that expenses incurred in earning of assessable income are deductable for tax purposes. So where does the idea that this is a tax concession come from?
It is also said, often in the same debate, that there is a housing crisis in Australia, including that there is a shortage of affordable rental accommodation. Basic economics tells us that a policy change that increased tax on investments in rental properties would most likely lead to fewer rental properties and rent increases. So where does the idea that increasing tax on investments in rental properties will help with the housing crisis come from?
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