Noel Whittaker is the author of Wills, Death & Taxes Made Simple and numerous other books on personal finance. Email: [email protected]​

Housing is front and centre in this election campaign, and a flood of opinions is swirling around how to solve the crisis. One of the least realistic comes from the Greens: scrap negative gearing and freeze rents.

Their proposal reveals a deep misunderstanding of how negative gearing works and the long-term benefits it brings, not just to investors, but to the broader economy. Let’s start with the basics.

Negative gearing simply means that when the costs of owning a rental – interest, maintenance, land tax, insurance – exceed the rent it earns, the investor can offset this loss against other income. Most negative gearers today are in the 30% tax bracket – not the top one. So, if they lose $10,000 a year, the tax deduction is worth about $3,000. The remaining $7,000 is paid by the investor. It’s hardly the ‘rort’ that critics claim.

‘It’s not a loophole – it’s delayed revenue.’ Image Credit: Shutterstock

This is a long-term play. Consider a common scenario: someone buys an investment property, and over time, it moves through three phases. In the first five years, it’s negatively geared and might cost the government $15,000 in forgone tax. In the next five years, it’s neutrally geared: no deduction, no tax. From year ten onward, it becomes positively geared, producing income and tax revenue for decades.

Fast forward 35 years. The investor reaches pension age. The property has appreciated, but they fail the asset test and miss out on the age pension. To fund retirement, they sell – and get hit with a capital gains tax bill. That’s another big payday for the government. For a modest up-front cost, the return to Treasury is substantial. It’s not a loophole – it’s delayed revenue.

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[ARL]

What rubbish. Most investors sell after 3 or 5 years, as any renter can tell you. The investor then gets a capital gains discount. No other country allows property losses to be offset against non property income. Why is that?
Why are articles written with incorrect facts?

 

[Ittybitty]

What rubbish. Most investors sell after 3 or 5 years, as any renter can tell you. The investor then gets a capital gains discount. No other country allows property losses to be offset against non property income. Why is that?
Why are articles written with incorrect facts?

There is no discount on capital gains.

 

[ARL]

There is no discount on capital gains.

Yes there is. Suggest checking facts

CGT discount for affordable housing | Australian Taxation Office

Work out how you can reduce your capital gains tax when you sell a property that you used for affordable rental housing.

www.ato.gov.au

 

[Jest]

What rubbish. Most investors sell after 3 or 5 years, as any renter can tell you. The investor then gets a capital gains discount. No other country allows property losses to be offset against non property income. Why is that?
Why are articles written with incorrect facts?

and you think you know more than this gentleman. ME THINKS NOT.

 

[ARL]

and you think you know more than this gentleman. ME THINKS NOT.

Would not be hard. Have you ever rented, are you an accountant? Do you think he is unbiased, given his job?
If he is correct why is there a housing crisis? Why is rent unaffordable? The assumptions and figures are a joke.
Perhaps you need to think more
This forum authors some very dubious articles.
Few investors hold a property more than 4 years. Check ABS or here.

How Long Would You Ideally Hold a Home or Property Investment? – Current Real Estate

We all want to know our home purchase is going to pan out long term. Sometimes we can glean how things are going in the market from looking at how long

currentrealestate.com.au

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