Our rules reward bad management
Negative gearing is a particularly Australian tax benefit, which – unlike in other countries – benefits dud landlords: those who can’t make money by renting out properties.
If they lose money (by paying out more in interest, maintenance and other expenses than they are receiving in rent) we let them offset that loss, not only against income from other investments, but also against income from their wage or salary.
It means they can cut their wage for tax purposes, cutting the tax they pay on it. And at the same time, they can hang on to a property they can later sell for a profit, which will be taxed at only half the normal rate, thanks to Australia’s 50% discount oncapital gains.
It isn’t allowed in theUnited Kingdomor theUnited States. There, if you are a landlord who can’t make money, you can offset your losses against profits from other investments – but not against your wage.
InCanadayoucanoffset rental losses against wages, but there must have been an “an intention to make a profit”. That would probably rule out most Australian negative gearers.
the conversation LINKgiven the support for NG on Hc......
are investors in housing being deliberately trained to be "poor managers" of their interest in order to claim higher tax refunds?
would investors be more profitable if NG was abolished or changed to apply only to new homes?
would abolition of NG result in higher rents?
or would it, as some claim, drive out investors from owning rental property? what would be the effect of less small investors?
