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Negative gearing's all over the news



This week the Reserve Bank of Australia went in to bat for negative gearing reform – the latest in an long and illustrious list of peak industry bodies, experts and economists to acknowledge the distortionary impact of negative gearing on our property market. Rarely political, our central bank is calling for a government review of the negative gearing tax break.

The Abbott government has definitively ruled out negative gearing reform (and superannuation reform for that matter), despite Mr Hockey's calls for a "sensible, mature" tax reform debate. So what the Labor Party does next will steer the course of the tax debate in a critical election year.

With the 2015 Labor Party National Conference taking place next weekend – where the Federal Opposition will debate what tax policy they'll take to the next election – this is the opportune moment for Labor to adopt negative gearing reform as part of their national policy platform. But the ALP will only take on reform if they feel the community's behind them.

Will you help demonstrate community support for negative gearing reform by signing the petition now? After all, from housing unaffordability to unfairness to wasted revenue, when it comes to negative gearing all Australians lose.
Negative gearing operates as a tax break for investors. For property investors, this means using their rental property costs to reduce their taxable income. (E.g. If the costs-associated with your property are higher than the earnings from your poperty (rent), you can use that loss to pay less income tax.)

It may seem complicated, but it's very simple when it comes to who wins and who loses.

The winners are the wealthiest 10 per cent of income earners who receive the vast majority of the tax break.

The losers are the low income earners, who are shut out of an already hot housing market, with negative gearing fanning the flames.

But in the end, all Australians lose. With negative gearing, the government is wasting potential revenue on wasteful tax breaks for the wealthy. This money could instead be spent on services we all need, like better schools and hospitals.

It's also important to remember that Australia is one of the few countries to allow negative gearing losses to directly offset your taxable income. It is far more restricted in Britian, and even the United States.
There's growing consensus that it's time to reform negative gearing – from the Chief Economist at Bank of America Merrill Lynch to the Reserve Bank of Australia to the Australian Council of Social Services. And it's not hard to see why: in one fell swoop we could have a fairer budget that saves the bottom line billions and makes housing more affordable, especially for younger Australians trying to buy their first home.

One possible solution is to reform negative gearing so that it applies to new construction only – this is the crux of The Australia Institute's report. Doing so would create more of an incentive to invest in new housing, therefore increasing supply and driving down prices and rent.

Click here to read the full policy report: http://www.tai.org.au/content/top-gears
Housing experts and economists agree that a key government policy driving unaffordable housing in Australia is negative gearing. Sound all a bit too complicated? Watch this 10-year-old explain how this ill-directed tax break works.

The Government and the Labor opposition are looking for ways to save money in the Budget — so GetUp members are getting on the front foot to ensure these savings are fair and sustainable over the long-term. Instead of the austerity cuts that attack everyday Australians, we're campaigning for a Brighter Budget this time around.

Here are the policies we're launching as part of our Brighter Budget campaign:

  • Reform negative gearing. Restrict tax concessions for negative gearing so they only apply to new housing stock. Australia is one of the few countries to allow negative-gearing losses to be offset against income – and no wonder given that fifty percent of this tax break goes to the top two percent of income earners. Reforming negative gearing will encourage investment in new housing stock, put downward pressure on rent and make housing more affordable.
  • Reform superannuation tax concessions. Instead of giving all the tax breaks to those at the top, give the bigger concessions to those who need them most, and in the process ensure everyone can save for their retirement. Click here to sign the petition.
  • Introduce the 'Buffett Rule'. Thanks to tax loopholes and high priced accountants, Kerry Packer famously reduced his effective tax rate so he paid less tax than his gardener. 'The Buffett Rule' would put a cap on loopholes for the top 1% of income-earners to ensure they pay at least the same tax rate as middle-income Australians. Click here to sign the petition.
  • Scrap the capital gains tax discount. Concessions on capital gains tax predominantly benefit the wealthy, who have a larger proportion of their income from investments. Getting rid of the discount could save about $4 billion.
  • Cut fossil fuel subsidies. Right now, the government hands over $11.5 billion a year in industry subsidies that incentivise pollution. We need to cut industry subsidies that aren't actually helping to create jobs and are just giving a hand out to multi-million dollar companies whose profits go overseas.
  • Impose a super profits tax on banks. The big banks make inflated profits thanks to a lack of competition. A tax on those super profits would help compensate Australians for higher fees and charges.
  • Introduce a 'Tobin Tax' on high frequency financial transactions. Big investment banks use powerful computers to trade in the financial market at huge volumes. This high frequency trading pushes up share prices for normal mum and dad investors. A tax of less than half a percent on these big investment banks' transactions would improve market stability and raise over $1 billion a year.
  • Place a duty on wealthy estates. Place an inheritance tax on large estates.

WILL YOU ADD YOUR NAME?

It's time to reform negative gearing, to make housing more affordable and save the government billions.