Is Negative Gearing here to stay?

Is negative gearing here to stay? The jury’s out on this one.

The devil is in the proverbial negative gearing reform detail. The article below highlights the fact that the Grattan Institute is all for Labor’s negative gearing policy as they suspect that these policies will increase government revenue by $5 billion per year whilst only affecting property prices negatively by 2%.

That is an interesting summation of what effects abolishing negative gearing will create within our economic landscape. Malcolm Turnbull believes the effect willbe a lot more devastating than a mere 2%.

As investors, negative gearing is a great way ensure the upkeep of controlling an investment property stays low. Without this, the costs associated with keeping these properties will be higher which will undoubtedly place pressure on everyday mum and dad investors.

Notice the graph shown by the Grattan Institute which beautifully distorts the real numbers behind the study to bolster their agenda. The graph shows the proportion of each individual within a particular occupation, not the number of individuals in Australia that utilises this strategy. The Institute may or may not have intended the general public to interpret this graph as “we shouldn’t be helping the high income earners with tax breaks”.

A better more unbiased way of presenting the facts would have been a graph showing the exact numbers of people from each profession utilising this strategy and total savings per profession/occupation. I wonder whether this graph would look the same then?

Negative gearing is undoubtedly a strategy that can be utilised today and there seems to be some pressure to review and perhaps even change or abolish this with new policies. Since grandfathering rules apply to any new changes that will take place, it may be worthwhile exploring this option as once it gets taken off the table, the landscape of property investing will change forever.

Strategic planning helps take advantage of opportunities that are available to us today. Missing the boat can cause significant restrictions to investor wealth curves. Knowing the rules of the game as you build towards your financial freedom is key and in our ever changing environment, one needs to be either vigilant and stay top of these changes or be capable of outsourcing these responsibilities to professionals who can help educate, empower and ultimately lead you into making the correct informed decision for the benefit of your financial future. Staying ignorant has massive wealth implications in the long run.

Australian Financial Review Negative Gearing Article

We certainly have interesting times ahead of us. What do you think about negative gearing? Feel free to share your thoughts.