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New Report Debunks Negative Gearing and CGT Myths

Around a third of all new home dwelling construction is financed by investors, according to a new report commissioned by the Property Council of Australia and Real Estate Institute of Australia.

The report, “Australian housing investment: analysis of negative gearing and CGT discount for residential property” by ACIL Allen Consulting, finds that negative gearing and the capital gains tax (CGT) discount are helping to boost the supply of new homes, placing downward pressure on prices and giving ordinary Australians a leg up the property ladder.

In fact, according to the report negative gearing, in conjunction with the CGT discount, promotes investment in rental properties and increases supply of new housing.

Property Council chief executive Ken Morrison says negative gearing and CGT “tick all the boxes by increasing supply, giving people an opportunity to get into the housing market and helping ordinary Australians build wealth for their future”.

“The reality is that if negative gearing was abolished there would be less investment and rents would go up,” Morrison says.

The report warns that the immediate removal of negative gearing without allowing to carry forward losses is likely to result in a portion of the average net rental loss being added to rental prices. In 2012-13, this was an average of $9500.

ACIL Allen Consulting’s research found that two thirds of property investors who benefit from negative gearing earn a taxable income of less than $80,000 a year. Those earning less than $80,000 a year also claim the majority of total value losses – 58 per cent in 2012-13.

According to REIA CEO Amanda Lynch, “mum and dad investors” are overwhelmingly those who benefit most from negative gearing policies.

“This isn’t some tax lurk for the wealthy, rather an incentive for people on low to average incomes. And it has benefits for the broader economy,” Lynch concludes.

Download Australian housing investment: analysis of negative gearing and CGT discount for residential property.

This article was originally published on the Property Council of Australia 
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