http://www.theage.com.au/national/negative...90414-a69c.html
Negative gearing on the way out
* Peter Martin
* April 15, 2009
NEGATIVE gearing is disappearing as a tax strategy for landlords, and it seems it won't be missed.
Falling interest rates and rising rents over the course of the financial crisis have made it increasingly hard for landlords to make deliberate losses to offset their other income for tax purposes, and the Government's Henry Review has the practice under the microscope.
But if we are to believe what landlords themselves have told a research project conducted for the Australian Housing and Urban Research Institute, they won't much mind.
The in-depth telephone and face-to-face interviews with 20 to 40 landlords from each Australian state paint pictures of "amateurish' and "emotional opportunistic" decisions dictated by circumstance and familiarity rather than economics.
"This very amateurism can be problematic policy-wise, because investors are not easily susceptible to policy levers," say the researchers from Swinburne, Monash Queensland, Western Sydney and NSW universities.
"But it can also be a positive, in that many such investors appear not to be as reactive to market fluctuations or poor short-term returns as more professional investors."
Only one of the investors interviewed nominated negative gearing as the chief reason for deciding to become a landlord.
Many did it to have somewhere to live when they retired or to be near other members of the family. They distrusted complex investments and could understand "bricks and mortar".
Most were primarily concerned what they called the "long-term" returns or "capital gains". Many year-to-year outcomes were not that important.
Some actively opposed the concession, saying that "governments do enough" without it. Others thought it would not last, but took advantage of it nonetheless.
Launching the Henry Review consultation paper in December, Treasury head Ken Henry said he "still wears the scars" from a short-lived experiment with limiting the negative gearing tax concession in the mid-1980s.
The views of landlords themselves suggest that this time they might be more receptive. The changing financial environment has forced more and more into "positively gearing" — actively making money, as an alternative to attempting to make deliberate losses. But the interviews also paint a picture of landlords reluctant to raise the rent.
The researchers report that many landlords were aware of their role in providing a social service and took it seriously.
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