Senior economists have suggested the Federal Government should scrap negative gearing, a move that would save $5 billion in the first year. Negative gearing allows property investors to claim expenses for a rental property including interest payments, repairs and council rates to reduce tax paid on any other income. Bank of America Merrill Lynch chief economist Saul Eslake said the original idea behind the tax break has not worked. In my view its serving to push up the price of the existing dwelling stock to the disadvantage particularly of younger people, who would like to become home owners, and previous generations who would have been home owners by now already, Mr Eslake said. He said that the original idea of negative gearing on residential property was to promote the construction of new houses and increase the stock of rental properties, but that has not worked. Weve reached a point now where investors account for more than half the borrowing thats undertaken for the purchase of established properties, and nearly half of all the borrowing for purchases of properties of any type, he said.
Posted on: Thu, 06 Nov 2014 08:56:46 +0000
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