Negative gearing remains one of the hottest topics in Australia’s property and taxation debate. With pressure mounting from all corners, the Albanese government is being asked to consider how this policy affects the housing market and whether it should continue. Investors, renters, and first-home buyers are all watching closely, each with different stakes in the outcome.
In a recent conversation with the Treasurer Jim Chalmers, the issue was brought front and centre. Chalmers, speaking to Steve Cannane on ABC Radio, confirmed that he frequently receives advice on economic issues, including negative gearing. While he dodged the direct question of whether he asked for specific advice on the policy, he reiterated that getting briefings on contentious issues was part of his job. “I’ve made it clear,” he said, “I got this advice because it was a contentious issue… It’s not unusual for a Treasurer to seek this kind of information when necessary.”
The core of the debate boils down to whether negative gearing is fuelling the housing crisis. Greens leader Adam Bandt has been vocal in his opposition, claiming that negative gearing benefits property investors at the expense of first-home buyers and renters. According to Bandt, the tax concessions enable property speculators to dominate the market, driving up house prices and leaving ordinary Australians struggling to get on the property ladder. “These unfair tax handouts,” Bandt said, “are driving the rental and housing crisis.”
However, critics of Bandt’s stance argue that removing negative gearing may not deliver the solution he’s proposing. Investors argue that the policy helps make property investment more viable, increasing the supply of rental properties and thereby easing the rental squeeze. For them, winding back negative gearing could have a damaging effect on the property market, causing an exodus of investors and further reducing rental stock.
Data from the Australian Taxation Office suggests that high-income earners are the primary beneficiaries of negative gearing. In 2021-2022, Australians earning more than $180,000 collectively reduced their tax bill by $1.3 billion through the policy, with those earning over $1 million claiming the largest individual losses. These figures reinforce the perception that negative gearing favours wealthier Australians with the means to own multiple properties. On average, negatively geared investors own 1.4 dwellings, indicating that many use the policy to expand their property portfolios.
As Treasurer Jim Chalmers faces pressure to tackle housing affordability, the challenge is to find a balance that doesn’t alienate investors while addressing the needs of renters and first-home buyers. Chalmers has made it clear that while he’s been advised on negative gearing, any drastic changes to the policy are not currently part of the government’s housing agenda. Nevertheless, the speculation about Treasury’s advice has fuelled public debate and reignited calls for reform.
The Greens, led by Adam Bandt, have seized on this uncertainty to push for changes. Bandt believes that winding back negative gearing could be the key to securing a stronger housing policy. “Pressure works,” he stated, emphasising that Labor’s reconsideration of the policy was due to the growing anger from renters and first-home buyers across the country. The Greens, who have previously blocked Labor’s housing bill, see this as a potential opportunity for negotiations.
Australia Institute Executive Director Richard Denniss has also weighed in on the issue, pointing out that the roots of the current housing crisis stretch back to decisions made decades ago. He recalls that in 1999, the Howard government introduced a 50% discount on capital gains tax (CGT) for property investors, significantly benefiting the investor class. “Look what happened to house prices since,” Denniss commented. He also noted that family homes remain exempt from capital gains tax, meaning the concessions primarily benefit investors rather than owner-occupiers.
The combined effect of negative gearing and the capital gains tax discount has long been a target for reformers who argue that these policies inflate house prices by encouraging speculative investment. Critics say that without these tax breaks, property prices would likely stabilise, making homes more affordable for everyday Australians. But any proposed changes will likely face stiff opposition from the real estate sector, as well as from investors who rely on negative gearing to make their investments profitable.
On the other side of the debate, Peter Strachan, a financial commentator, has argued that John Howard’s decision to triple overseas migration in the late 1990s also contributed to the sustained rise in property prices. By boosting demand, the government effectively guaranteed that prices would continue to climb, ensuring that property remained a lucrative investment for those who could afford it.
As the government grapples with housing affordability and the broader economic challenges facing Australia, the question of whether negative gearing will stay or go remains unresolved. While Treasurer Chalmers has downplayed the possibility of immediate changes, the issue isn’t likely to disappear anytime soon. For now, investors are left wondering if their tax benefits will remain intact, while first-home buyers and renters continue to hope for relief in a market that has priced many out of homeownership.
The debate around negative gearing touches on broader issues of wealth inequality and housing affordability, and while the government has yet to commit to any policy changes, the pressure to act is growing. Whether negative gearing will be scaled back, maintained, or reformed entirely is still up in the air, but one thing is clear: the battle for Australia’s housing market is far from over.
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The negative gearing debate intensifies in Australia, with pressure on Treasurer @JEChalmers to reassess its impact on #housing. As investors, renters, & first-home buyers weigh in, what do you think should happen next? 🤔🏡💰📊🇦🇺 #TheIndianSunhttps://t.co/tj61mAnCL9
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