It’s a NO from us for negative gearing reform, here’s why…

This week crossbench senators David Pocock and Jacqui Lambie have proposed a sweeping reform of property tax concessions, aiming to generate up to $60 billion in revenue over the next decade that they say will support social housing. While it might sound positive at first glance, all we see is that this proposal highlights the disconnect between policymakers and the realities of the housing market; at best it is a misguided policy by uninformed politicians.

At the heart of this proposal is the overhaul of negative gearing, a tax concession that allows property investors to offset losses from their rental properties against their taxable income. 5 options are being explored.

Now, reforming negative gearing isn’t a bad idea in a balanced market to create long-term positive changes, so long as the right supporting policies are in place. But let’s face it, that’s not what’s happening. Instead of sorting things out, the government is painting property investors as the bad guys, turning heroes into villains that the nation must take money from. It’s not the right move, it’s certainly not the right time – we can have the conversation about changing negative gearing after the housing crisis is resolved through solutions that get to the actual core of the crisis, which is supply.

The biggest issue we see in this reform proposal is the deeper failure to acknowledge the pivotal role played by property investors in providing housing. Residential property investors contribute to more than 90% of housing for tenants, a fact often overlooked by policymakers eager to vilify them as the scapegoats for housing affordability woes.

At a headline level, people may think changing taxation laws to gain back money from greedy rich investors and developers to provide more affordable housing is a good idea, but it’s really not when you look at the numbers and when you break down the stereotypes.

Firstly, 80% of people providing rental accommodation have a taxable income of less than $80,000 pa, far from the ‘rich elites’. A little over 70% only have 1 investment property. Rather than being greedy, consider that they are taking pressure off the government – every one of them is trying to provide for their future retirement. Something else our governments are failing on. These are Australians trying to provide housing for other Australians, investing for their future as an alternative to superannuation. If their retirement plans are halted because of this ineffective reform then consider the burden on Services Australia having to pay out more pensions.

Next, of all the people who rent in Australia, only 8% of them need and use social housing provided by the government, and the government isn’t even doing that small percentage well.

Yet, when we look at the residential property investors who supply 90% of the rental accommodation in the country, around 80% of them use negative gearing benefits. So if we do some rough calculations around the people impacted by a change in the negative gearing policies, there is the very real possibility that a high percentage of 1.2 million Australians could be out on the street.

By demonising residential property investors and proposing measures that could jeopardise their investments or deter future investors from entering the market, politicians risk exacerbating the very crisis they seek to address; a consequence of failing to grasp the intricate dynamics of the housing market.

Policymakers should strive for an approach that acknowledges the importance of investors and focuses on enabling more supply. How about reducing red tape and incentivising those who can help house the growing population?!

Residential property investors should be empowered to create more rentals versus these kinds of calls that will discourage more rental properties.

The housing market cannot rely on the government to solve this because it is the abject failure of successive governments that have created this glacial crisis that we face today.

Come on Australia, we need to push back and not allow the government to serve up another scapegoat and befuddle the nation with big numbers.

We are already seeing horrific implications from the housing crisis, and we do not want these to take permanent hold of our country. We are seeing a rise in abuse of kids and teens, single mums living in cars with young families, and the elderly forced out as a direct result of housing pressure. And the tent cities we predicted are already here.

We need to have a robust debate, solve the crux of the issue and empower those who can make positive change.

Now, before we all let the rage take hold or throw up our arms in defeat, let’s remember what we can do. We can do the research, understand the opportunities and make choices to change our families and other families’ futures. Our team at Investor Property, powered by the research and insights of the Optiwise Property Group market intelligence, understands the intricacies of the property markets and has identified real opportunities to build wealth and support communities through appropriate housing. We have more than a decade of accurate predictions and have stood strong through many storms.

Talk to us today about how you can take informed steps today to improve your financial future and navigate the landscape of residential property investment for the better. If anything, if you’ve been looking for a sign to take the leap, this threat of a negative gearing reform may be just the ticket with its proposed 1 July 2024 cut-off.

Talk to us to find out what this means for you and your property investment strategy.