The Real Estate Institute of Queensland (REIQ) has expressed concern over reports that the Federal Government may be considering changes to negative gearing.
REIQ CEO Antonia Mercorella (pictured above) highlighted the potential negative impact such changes could have on the current housing market.
According to Treasury, negative gearing occurs when investment expenses, including interest, exceed the income earned from the asset. This loss can be offset against other income, like salary, under Australia’s tax system, which taxes income after deductions.
Investors often negatively gear, expecting future capital gains to outweigh initial losses. If the asset is sold after 12 months, only 50% of the gain is taxed. Treasury noted that non-tax factors, like market conditions and advice favouring property investments, also drive the popularity of negative gearing.
“As repeated studies have shown, there is a minimal link between negative gearing and higher house prices,” Mercorella said.
She warned that altering negative gearing during a time of low rental vacancy rates and long social housing waitlists could worsen the already strained housing sector.
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Potential economic consequences
Mercorella highlighted that abolishing or modifying negative gearing could strip away key economic benefits and fail to improve housing affordability, disproportionately impacting everyday Australians.
“Abolishing negative gearing would eliminate a range of economic benefits, fail to tackle housing affordability, and impact everyday Australians the hardest,” she said.
Changes to negative gearing could exacerbate rental market pressures, adding strain to households already struggling with high living costs.
Mercorella expressed disappointment, recalling the recent statement from the federal housing minister in August, which offered assurances that no changes would be made to the current system.
“The housing market requires stability and predictability, especially in these challenging times,” Mercorella said.
The REIQ urged the government to carefully consider the broader implications of any changes to negative gearing and engage with stakeholders to ensure the long-term sustainability of the rental market.
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