Mortgage Choice CEO John Flavell has labelled the changes to negative gearing proposed both by the federal government and the Labor Party as “fundamentally flawed”.
The federal government recently announced it would make some significant changes to the current negative gearing policy by either capping the number of properties that can be geared or limiting the annual tax deductions that can be claimed.
Meanwhile, federal opposition leader Bill Shorten said the ALP would restrict negative gearing to new properties under its new policy.
Mr Flavell said there seems to be little or no regard from both parties of the effect that their stances on negative gearing would have on housing affordability.
“Given that the government has not been prepared in the past to commit more of the community purse to the provision of public housing, negative gearing was introduced to increase the number of investors, and therefore rental properties, in the market,” he said.
“In part this has worked, providing investors with additional incentive to meet the needs of the rental market. That said, housing undersupply remains a critical issue.
“With the Australian property market in short supply, it would be seemingly remiss of the government to change its current stance on negative gearing and further constrict supply. At the end of the day, both investors and renters are set to suffer if changes of the nature proposed should come to be.”
Mr Flavell is not the only industry figure to voice his concerns over the proposed changes to negative gearing.
Graeme Wolfe, HIA’s chief executive of industry policy and media, said new housing is one of the most highly taxed sectors in Australia’s economy, and the removal of negative gearing would only make the situation worse and discourage investment.
“Negative gearing promotes private investment in the rental market, both stimulating economic activity and taking the pressure off social housing and the public purse,” he said.
“With an ageing workforce and future pressure expected on publicly funded services, policy settings such as negative gearing that promote wealth creation and self-sufficiency in retirement should be promoted.”
Mr Wolfe said it is important to remember that negative gearing is not the domain of ‘wealthy investors’.
“Figures from the ATO demonstrate that 79 per cent of tax payers with a rental property declare a taxable income of less than $100,000,” he said.
“In fact, 7 out of 10 tax payers with a rental property earn less than $80,000.
“A body of independent research has been developed over a number of years that demonstrates categorically that negative gearing is a positive force for the Australian economy,” Mr Wolfe said.
[Related: My take on negative gearing reform]