Following on from my post this morning, The Australia Institute (TAI) has now released its full report examining the distribution of the $7.7 billion of negative gearing and capital gains tax (CGT) concessions amongst Australians, and found that the top 10% of income earners derive more than half of the tax benefits from these schemes:
Modelling from NATSEM featured in a new report from The Australia Institute, commissioned by GetUp, reveals that more than half (55%) of the benefit of capital gains discount and negative gearing goes to the top 10% of income earners.
Australia is one of only three OECD countries with this type of negative gearing regime. Working together with the capital gains tax discount, Australian taxpayers are being hit for $7.7 billion, which is going overwhelmingly to the wealthy, and is driving families out of the housing market.
Top Gears: How negative gearing and the capital gains tax discount benefit the top 10 per cent and drive up house prices, commissioned by GetUp, showed that one third (34%) of the benefits of negative gearing were captured by the top 10%, while a staggering three quarters (73%) of capital gains discount went to the top 10%.
“Negative gearing reduces tax revenue by $3.7 billion and the capital gains discount by $4 billion. That’s lost revenue which some politicians would rather collect when people buy fresh food at the supermarket. A far smarter move would be to phase out these taxes,” TAI Senior Economist, Matt Grudnoff said.
“Compounding this is the distortions it’s having on the housing market, pitting families looking to buy a house to live in against investors armed with generous tax breaks.”
“The majority of the lost revenue accrues to high income households, with 56 per cent going to the top 10 per cent of income households and 67 per cent going to the top 20 per cent.
“By comparison relatively little flows to low income households with just four per cent going to the bottom 20 per cent of households. The bottom half of Australian households only get 13 per cent.
“The claim that ‘Middle Australia’ is the principle beneficiary of negative gearing is simply not borne out by the evidence. This policy is driving greater inequality in the Australian housing market and, in turn, society…
“Negative gearing gives the wealthy an extra player on the property market pitch while middle income Australians have to play with a disadvantage. Changing negative gearing will level the game out for all Australians while giving our budget a revenue raiser rather than a wasteful handouts to support losing investments,” Connelly said.
The great big lies around negative gearing, perpetuated by both the property lobby and the Coalition, are finally being exposed for what they are: an egregious regime of entitlement aimed squarely at feathering the nest of Australia’s property rentiers.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
