Negative Gearing and All that Tax

This post is dedicated to my late Grandfather, State Liberal MP, Horace (Race) Hogben.

My Grandfather spent most of his time as a Liberal MP in the 1930’s working on a plan to bring affordable housing to South Australians, that became the Housing Trust.  “Concerned about housing problems during the Depression, in 1934 he and (Sir) Keith Wilson (the president of the Y.L.L.) formed a committee to examine the ‘shortage of low-price houses and the concomitant of rising rents’. Hogben undertook the research, at the expense of much of his accountancy practice and income.”

He then spent time on the Board of the Savings Bank of South Australia and believed the central role of the bank was to offer low interest loans for housing.

How the Liberal Party came from that point to where it is today I don’t know, but my Grand-father would roll in his grave over the policies on negative gearing and the effect it has had on pushing up the price of housing, especially over the last fifteen years.

Housing in Australia is up to twelve times the average income.  After 9/11 when fear was created in investing internationally, many Australians decided to invest in domestic housing.  The policy of Negative Gearing allows investors to write off costs or losses against their income.

Negative gearing as a policy covers many areas of investment but the question is, should it include the essential need of housing?  The GST (Goods and Services Tax) in Australia doesn’t apply to food, so I’m not sure why we would allow any investment tax breaks on housing when the obvious outcome would be to push up the price of housing.

Our State Government is phasing out Stamp Duty on transfers of non-residential and non-primary production real property, while it will still apply on residential properties.  Does this mean a property purchased as non-residential for the investor is exempt?

Somebody pays for all tax breaks and exemptions and it is inevitably low income earners who pay a higher ratio of tax per income and/or rent to allow higher income earners to get tax breaks and accrue more assets.

Using essential services such as housing as a tax break should never have been part of the negative gearing policy.  It has forced a generation into renting and removed their ability to build up an asset to pass to future generations.  The Federal Government has acknowledged the family home is an individual’s biggest asset and at the same time ensures that current and future generations will be unable to afford that asset unless they have substantial financial assistance from their family (assuming that family already owns property).

Negative Gearing for housing ensures home owners are able to buy more houses or units and renters stay in rental accommodation for future generations, widening the gap between the ‘haves and have nots’.

Other articles:  Almost 20,000 Canberrans unable to afford essentials due to housing costs, survey finds

 

 

 

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Eucalypso

Artist in Adelaide, South Australia. I enjoy viewing and participating in street art and experimenting with photography for surface design.

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