Why the cost of negative gearing tax breaks is likely to rise | TawarRazaghi
The cost of negative gearing tax breaks fell to its lowest point in two decades but is likely to rise as interest rates go up.
At its peak, negative gearing cost taxpayers more than $9 billion in 2007-08 thanks to high mortgage rates. That cost fell to $166.5 million in 2019-20, the smallest amount in two decades, the latest figures from the Australian Taxation Office released this week show. AMP Capital’s chief economist Shane Oliver said while it was unlikely the cost of negative gearing would reach peak levels of 2007-08, it would increase substantially.
“A 10 per cent rise in rents will partly offset the increased loss of the property of higher rates but if interest rates double it doesn’t nearly offset that increase in interest costs,” he said. He said defenders of negative gearing fail to highlight that it is overwhelmingly used by the wealthy to reduce their tax.
“The irony is this is portrayed as a left-wing thing to do. Scaling back tax privileges enjoyed by property investors is not the exclusive preserve of left-wing governments.”
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