Negative gearing isn’t evil: Deloitte

A new report that claims to bust negative gearing myths has provided analysis that is likely to please and annoy both sides of the debate.

The Deloitte report, Mythbusting Tax Reform, said it is a myth to claim that negative gearing is a horrible tax loophole that should be closed.

“The blackest hat in Australia’s tax reform debate is worn by negative gearing. Yet negative gearing isn’t evil, and it isn’t a loophole in the tax system,” according to the report.

“It simply allows taxpayers to claim a cost of earning their income. That’s a feature of most tax systems around the world, and a longstanding element of ours too.”

The report acknowledged that negative gearing is being over-used – this was attributed to low interest rates, easy access to credit, heated property markets and problems in taxing capital gains.

“Sure, the rich use negative gearing a lot, but that’s because they own lots of assets, and gearing is a cost related to owning assets – no smoking gun there.”

However, Deloitte said it is wrong to claim that ditching negative gearing would send rents soaring, which is a claim often made by those who oppose ending the tax break.