Julia Gillard rules out scrapping negative gearing tax provisions for property investors

Negative gearing tax breaks for property investors will not be removed, says Prime Minister Julia Gillard.

Gillard says her government has ruled out removing the tax break.

It was in response to a question asked on the ABC’s Q&A program.

“We didn’t agree with the Henry Tax Review,” Gillard said.

“We think that an abolition of negative gearing will cause distortions to the property market that we did not want to see,” she said.

The federal opposition also appears loath to remove the tax break, with Coalition spokesman Joe Hockey tweeting after the broadcast that negative gearing “holds down rents... just ask Bob Hawke and Paul Keating. They tried to get rid of it and reversed their policy.”

However Sarah Toohey, spokesperson for lobbying group Australians for Affordable Housing, disagreed with Hockey, tweeting that “rents only rose in Sydney and Perth when Keating changed [negative gearing].

“[Rent rises] have been nationwide if that [were true],” she tweeted.

Property buyers’ advocate Catherine Cashmore agreed with Toohey, tweeting that negative gearing needed to be phased out.

“No other country has such a generous gearing policy – it does nothing to ease housing affordability,” she tweeted.

Negative gearing was used by around 2 million property investors in the last financial year to reduce their tax bill, according to ATO figures.

A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceed the rental income it produces.

The Henry Tax Review called for a raft of investment tax breaks – including negative gearing – to be replaced with a 40% discount on the marginal tax rate.