Am I the only one who is sick and tired of the harping on about ‘negative gearing’? You’d think we were dealing with one of the greatest moral issues of our time. I hate to break it to them – it really isn’t.
For those who are confused by all the self-important jibber jabber which seems to be impeding any intelligent debate, negative gearing is a fairly simply concept. It allows property owners to claim a tax deduction from any income loss from investments, in the same way that businesses can claim a tax deduction for any losses incurred.
While negative gearing can assist wealthy property investors with reducing the impact of losses, negative gearing also means that rental properties can be supplied to the less well off at a more affordable price. Negative gearing is neither intrinsically good or bad.
I find myself rather unexpectedly agreeing with some remarks made by Prime Minister Malcolm Turnbull in relation to the scheme. Rather than this talk of class warfare, what we should really be asking ourselves is this:
If negative gearing is funneling investment into property when it would otherwise be invested into businesses which actually improve productivity and boost economic activity, then negative gearing should perhaps be scrapped. If it isn’t doing that, then we should probably keep it.
The way the debate is currently couched in terms of class based politics is extremely unhelpful. That is, if we don’t want to follow in the footsteps of countries such as Venezuela.
Photo by DonkeyHotey