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Negative gearing is not the issue REIWA calls for wider housing debate


Perth 17 July 2015. President of the Real Estate Institute of Western Australia, David Airey, has called for a wider and more mature debate around property tax reform and specifically the role negative gearing plays in the provision of rental housing.

The Reserve Bank has recently expressed concern around the high use of negative gearing around the nation which is estimated to cost taxpayers $12 billion annually.

Mr Airey said that negative gearing provided much needed rental accommodation across the nation and helped moderate rental prices through the tax breaks to investment property owners.

“It should be remembered that negative gearing is not a specific tax break, but in fact is a tax provision for earning income on assets,” Mr Airey said.

“It is too simplistic just to target negative gearing as an issue for review without looking at the wider housing system and the clumsy patchwork of property taxes across the country,” he said.

Mr Airey said that a recent report independently commissioned by the Real Estate Institute of Australia and conducted by ACIL Allen, debunked the myth that negative gearing was a sop to the rich. 

“The report found that two-thirds of property investors earned a taxable income of less than $80,000 per year and that 73 per cent of those who negatively geared owned just one property.

“Too many people are quick to jump on the negative gearing bandwagon with unsubstantiated claims that it adds to overall house prices and doesn’t add to new stock. 

“There is no credible evidence for this and it distracts people from the real issues that contribute to affordability, including stamp duty,” Mr Airey said.

In its recent pre-budget submission to the State Government, REIWA reiterated its call for reform of property taxes.

“Stamp duty is the biggest hurdle to the ingoing costs of a new home. It is a huge sum of money and it can also be prohibitive to retirees looking to downsize.

“We need a mature debate about abolishing this inefficient and outdated tax and replacing it with a modest land tax across all owners. This will help greatly with affordability and assist state governments with a more predictable revenue stream,” Mr Airey said.  

Mr Airey said the current Federal tax system review is a good opportunity for a mature discussion on taxes, the GST and particularly property taxes.

“I encourage the Barnett Government to commit to a review of state taxes in the lead-up to the next state election. For too long discussion around property taxes has been ill informed and ad hoc. We really need to pull it all together and thrash out the issues properly in an integrated way rather than focus on isolated bits of what is quite a complex housing system.    

“The problem with property taxes is not negative gearing, it’s negative discussion,” Mr Airey said.

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