Negative gearing needs to stay

30 June 2016. In the lead up to the Federal Election, REIWA engaged the WA community in discussions on property investment and negative gearing to gain an understanding of how the tax arrangement benefits everyday West Aussies.

REIWA President Hayden Groves said that the majority of West Aussies understand what negative gearing is and indicated that property investment is important to securing their future.

“Negative gearing helps the WA community fund their retirement and provide for their future and that of their families, which ultimately takes the pressure off the Australian Government’s aged pension system,” said Mr Groves.

“A survey of investors debunked the myth that property investment is just for the wealthy with most respondents having small portfolios of just one or two properties and earning a gross salary of less than $100,000.”

Another REIWA survey of property investors found that more than half of the respondents would stop investing in property if negative gearing is changed.

“If this is the case, we’ll see a significant impact on the supply of private rental accommodation. Rent prices will also increase as they did in the eighties when negative gearing was removed,” said Mr Groves.

“While rental stock is at healthy levels now, limiting supply in the long term will put pressure on the Government’s social housing system which is already strained despite being well supported by the private rental market.”

In the latest survey by REIWA, respondents were asked if they felt the restriction of negative gearing to newly built homes only, would limit their housing choices.

47 per cent of respondents looking to buy felt their choice in property would be limited if negative gearing was restricted, 33 per cent said it would not be limited and 20 per cent said they weren’t sure.

“The proposed changes to negative gearing are very much based on the behavior of markets in the Eastern States, like Sydney and Melbourne, and aren’t taking into consideration slower markets like that of Western Australia,” said Mr Groves.

“Our public discussions with the WA community have reaffirmed the need for broader tax reform where the system is simple, fair and efficient, rather than tinker with one part of what is a very complex system.

“No matter what the outcome of the Federal Election, we’ll be continuing our discussions with all political parties to ensure that the benefits of property investment for all West Aussies are considered during any future tax reform.”

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