Coalition defends negatively-geared ‘battlers’

By Leith van Onselen

Just when you thought policy making couldn’t get any lower, we got the following from Social Services Minister, Scott Morrison, who defended negative gearing as a way for battlers in the suburbs to get ahead:

“You’d be surprised how many people…particularly in small business who don’t earn a lot of money who have invested through negative gearing into properties to provide for their own retirement. That is a fairly common practice”…

So it is okay for the Government to deny under-30s access to unemployment benefits, slash university funding, and slash funding to the states for health and education, but Australia’s army of negatively geared ‘battlers’ must be protected?

Seriously, you can’t make this stuff up. Let’s remind Mr Morrison of how former Treasurer, Paul Keating, described negative gearing in a Cabinet Submission on the subject in 1987 – written with input from the Australian Treasury [my emphasis]:

The negative gearing measure was introduced [in 1985] to partially close-off a generally recognised tax shelter, a rationale which remains broadly valid…

The three basic features of a typical tax shelter are the absence of a full nominal capital gains tax, the deductibility of full nominal interest expenses, and the mis-match in the timing of the deductions and the recognition of taxable income (for example, because capital tax is payable on a realisations rather than accrual basis).

Rental property investment clearly exhibits each of these features, as do some other activities, and so effectively obtains tax benefits under the current tax system.

Gee, we better protect those tax shelters, hey Mr Morrison.

As to Morrison’s claim that negative gearing is a battler’s activity, what poppycock. As explained by ABC’s Michael Janda last year:

The very reason that many housing investors fall below the $80,000 threshold is because they have used negative gearing to slash their tax bill…

One other interesting fact from the ATO’s figures is that the average ‘total income’ of Australian taxpayers was $55,000.

That means that on the way the tax office calculates ‘total income’ – looking at net rent and net capital gains, and excluding non-taxable items – someone on $80,000 is already a relatively high income earner.

Moreover, the Household Income and Labour Dynamics in Australia (HILDA) survey shows that the wealthy hold most of the negatively geared investment homes, as explained by The Guardian’s Greg Jericho last month:

…The Reserve Bank uses data from the Household, Income and Labour Dynamics in Australia Survey. That survey found that in 2010 that the richest 20% of households were much more likely than other households to have an investment property loan:

It is very poor form for Australia’s social services minister to slash welfare expenditure, whilst simultaneously defending a known tax shelter like negative gearing.

It also suggests that the Government is intent on blowing the housing bubble for all it’s worth, in the hope that it can see it past the next election.

Make no mistake, the Abbott Government is managing a bubble, not an economy.

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