In Australia, property owners receive two distinct tax advantages:
Negative Gearing: If your rental property runs at a loss, that loss can be used as a tax deduction against other income. Effectively that means that the government & other taxpayers subsidise your loss-making.
While running at a loss sometimes will offset profits sometimes is valid for business taxation, that is when it is within the same business. With negative gearing, people purposefully operate at a loss to reduce tax on other incomes, like employment.
Capital Gains Tax Concessions: When you sell your own home, or the property you have “nominated” to be your home (no need to actually live in it…), your capital gains tax is halved. That explains in part why rich people sometimes own extraordinarily expensive homes – they get the regular rise in property values but only pay half the tax.
The government will tell you that these benefit mom and dad “investors”, who have the Australian dream of an investment property, and that it inspires more investment in the housing industry. What it actually does is help the rich pay lower tax rates than the poor.
- 57 per cent of negative gearing deductions go to the top 20 per cent of income earners
- the top 10 per cent of earners claim more in capital gains tax deductions than the remaining 90 per cent combined
Negative gearing, is clearly being taken advantage of by the rich:
Under the Greens’ current policy of allowing just one investment property to be negatively geared, the Australian government could make a $63 billion saving over a decade