AT THE DOOR: Investors at both middle and higher-income levels benefit from negative gearing.

Housing bubble or not, negative gearing should stay

The perennial debate about negative gearing of residential property investments has been reignited yet again, by two reports in the past month.


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The age of entitlement is supposed to be over and minimising tax through negative gearing should be removed entirely, whether for property or for shares etc,. Let the investor take the full risk of their decisions rather than offsetting it against the broader tax paying community.

If there was an ideal time to remove negative gearing from today onward it would be when interest rates were very close to yields on residential property , as is the case today. This means the tax shortfall position is minimal and the consequence for the market as a result of the change is minimised. This is very different to the circumstances when it was removed and reintroduced in the 1980 s . As a result , rents would rise by around 10% and a lot of the existing negatively geared property would now become neutrally or positively geared , thus further reducing the tax burden. Just be careful making decisions when the Sydney market is booming and investors are at all time highs .

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