If you have a home loan for an investment property in the Rockingham area, you have probably been paying close attention to talk about abolishing tax benefits for negative gearing. A lot of small investors count on the tax breaks provided by negative gearing to compensate for all of the money they have to spend on their first investment properties. Here is the case for keeping negative gearing.
Abolish Now, Welfare Later?
A lot of time and energy has been put into convincing the baby boomer generation that unless they invest, there may not be enough money for them when they retire. Since so many people are depending on the tax advantages of negative gearing for investing, abolishing the tax benefits may cost more in welfare down the road.
Who Suffers the Most?
Contrary to what many say, it isn’t the wealthy who are going to suffer the most from abolishing negative gearing: it’s the mums and dads with one or two investment properties trying to save for a decent retirement. Simply put: many small investors won’t be able to afford investment properties without the tax breaks they were told they would get.
Less Rental Properties
Right now, approximately 25% of rental properties are owned by private entities: people just like you. If tax breaks are taken away, many of these people won’t be investing in rental properties. This will create a shortfall and cause rents to increase.
Less Tax Money Later
Most properties are only negatively geared for the first 3-5 years before rents become high enough to take care of the expenses associated with a rental property. After that period of time, investors start paying taxes on their profits.
Every other business is allowed to count their losses against their gains. Why select one class of business and tell them that they aren’t allowed to?