There is no doubt negative gearing is a hot topic, but was it intended to be abused in the way it often is.

I say this because there are several investors out there who buy a property, wait until the equity reaches 20%, then borrow against that equity for the next property, eventually holding multiple properties, all with 20% equity and all benefiting from negative gearing.

So, as an alternative, what about if government said that in order to claim deductions from losses on a rental property, the borrower must be able to demonstrate, within reason, that the property will become self funding within an allotted time frame, say ten years.

They did this with the likes of Queen street farms and more recently, charter boats, as many charter boats were simply holes in the water that owners threw their taxes into, rather than paying taxes. Quite often, the boats never went on charter.

A change like this would see genuine investors retain the benefits of NG, whie also reducing some of the pain on first home buyers as investors would be encouraged to hold their investment properties longer, and invest in alternatives as well.

"So, as an alternative, what about if..."

You haven't established that there's anything wrong with it in the first place.

Think of it this way. There are businesses, like the supermarkets, that operate on only a 1 or 2 percent profit margin (or so I understand). Whatever the profit margin is, just take that as an example.

If the income tax was levied against gross income, instead of income net of expenses, then the tax would be say 30% while the income net of expenses would be say 2%.

This would drive almost businesses bust and collapse the economy. That's why expenses are tax deductible. Negative gearing is not any exception to this.

Thus we don't have negative gearing because governments are somehow being mysteriously nice or considerate to capitalists. We have it because: "a good parasite does not destroy its host".

There is no more reason to end negative gearing than there is to end tax deductibility of expenses generally.

Merely pointing out example investments where people borrow against capital gain, does not establish any kind of abuse.

If the purpose of the exercise is for the government to reduce economic "pain", the obvious way to do that is to reduce taxes, not to increase the complexity and conditionality of them.