Vaste majority of recent property investors are subsidising tenants.

At current prices, in many, many cases, easily to the tune of $10-$20k EACH year. That'll prolly go on for 7-10yrs before the investor gets on top of the debt and the numbers start to swing.

Free lunches? Who says there's no such thing?

How much of a free ride do ya want anyway?

Do what you suggest and watch rents RISE.

SHARPLY.

oh, they just did that in the last 2 yrs (+20 to 30%). How forgetful of me.

Reality: The price of housing construction, in real terms, has been very stable over the past fifty years (in fact there has been a very slight decline). What has increased significantly is land price.

Solution #1: Modify negative gearing to what it should be for - encouraging housing supply (i.e., to new buildings).

Solution #2: More site value rating for local councils and more land tax rather than taxes on buildings or other forms of production. Result is more buildings and more effective use of space.

Let me understand this better:

>>The consequence of [ignoring the Productivity Commission Report] is that we have now had five years of unaffordable housing in Australia<<

For five years, no-one has been able to buy their own home? I can't believe that, nor have I seen any evidence of it. The windows of every Real Estate Agent I see are full of properties for sale, and as far as I am aware, people are still buying them.

What the writer means of course is that first-time buyers are having to face a higher entry threshold, in terms of a percentage of disposable income, than in earlier times. At that point, and at that point only, does the purchase price of a property become a social issue; at every other point in the trading cycle, buyers have the option to use the sale price of their previous property as their starting point.

So i) "affordability" is a relative, not an absolute term and ii) the difficulties of property purchase are faced by one particular segment of the population - everyone else is benefitting from rising prices.

Given that we have narrowed down the problem to a more manageable, and less visceral level, it becomes far easier to see that selecting one solution - abolish negative gearing - is an entirely blunt instrument, and will have many flow-on effects on the economy (like perhaps, the value of your Pension Fund) that are both unpredictable and unsavoury.

So the proposition remains that we should re-jig a perfectly sound system, designed to accurately reflect a business' right to offset expenses against income before calculating tax, in order to subsidise a small subset of our population.

Sounds a pretty emotional argument to me.

In my opinion, all monies going into a savings or investments should not be taxed but when all monies is withdrawn, excluding superannuation which should remain 100% tax free.

With the housing shortage, the only way forward as far as I believe, is to limit private ownership of housing, capped at three. More allowed for business(etc) should they be providing this housing as part of an employees salary, etc.

Realistic immigration numbers that suits Australian's, not solely business and, there is clear need for government built housing for those who need it with an encouragement to purchase the home like a home. Not in the same failed method by the NSW Greiner government.

Large expensive programs are necessary but with foreign big business required to pay honest tax and other suitable programs and stoppage of government wastage, money is there to pay for such essential infrastructure.

Col Rouge, glad to hear a voice of reason! There is no reason why someone risking their capital and income on housing investments should get different treatment to someone risking their capital and income on any other form of money-making venture!

Remember guys, any housing investor getting a negative gearing deduction, is only getting at MAX 46.5% of his expenditure back as a tax offset. Ie, to get $1 of benefit, you have to spend $2.15. And this doesnt take into account the additional costs of maintenance, commission, rates, insurance etc. Negative gearing refers to your interest costs being more than your income. These people are losing money on revenue account to try to make it on capital account. There isnt a scam going on here, there are no artifical tax deductions.

As for those investors that arent claiming their full deduction entitlements, I am happy to provide my business card!!

Country Gal explains exactly why negative gearing is such a rort. And with such self-interested people determining policy, I fear eet may be correct that we'll never be able to correct this travesty.

It just does not make sense that people know they can only get back - at most - 46.5% on the dollar invested, yet still do it! They are investing precisly to *lose* money! There is obviously some whacked-out government policy going on here to induce such perverse investment decisions.

It is simply a fact that the combination of negative gearing, the halving of the CGT plus low interest rates has forced housing prices up, encouraged un-productive investment in *existing* housing stock and put a generation of youngters in the rent-trap. Deny this and you might as well deny the existance of the sun.

Col, I've got no problem limiting gearing on other forms of business. Why should the taxpayer subsidise a loss-making business? If the business-owner isn't good enough to turn a profit, they should go into another line of business.

Creative descruction, I believe you capitalists call it.