Negative Gearing Here To Stay - August 2010
In good news for budding investors, the federal government plus the opposition party have ruled out the prospect of abolishing negative gearing.
At a debate held at the National Press Club in Canberra this week, both parties said they would not consider abolishing the investment strategy.
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Real Estate Institute of Australia (REIA) president David Airey welcomed the government's unanimous stance.
"This is fantastic news for renters, affordable housing and real estate investors," Mr Airey said.
Mr Airey added that negative gearing for the purpose of property investment was necessary as it addressed the supply of rental accommodation, which benefited the overall industry.
"The Hawke Government abolished negative gearing for property in 1985 only to have it reinstated in 1987," he said.
"During that period rents increased by 57.5 per cent in Sydney, by 38.2 per cent in Perth and by 32.0 per cent in Brisbane.
"At the same time building approvals fell by 13.8 per cent," he said.
According to Mr Airey, when negative gearing was reinstated, the government said that any tax advantages conferred by negative gearing were countered by the CGT regime when capital gains were realised.
"To amend the current negative gearing provisions for housing as some critics have suggested would be treating real estate differently to other asset classes and create a resource misallocation," he said.