Extract from ABC News
Photo: Malcolm Turnbull says Labor's negative gearing plans would "smash" house values. (AAP:Dan Himbrechts)
The Federal Government's argument that negative gearing mainly benefits average Australians has been undermined by documents obtained from its own Treasury.
- FOI report shows more than half of negative gearing tax benefits go to top 20 per cent of incomes
- Bottom 20 per cent of earners getting 5 per cent of benefits
- Modelling predicts negative gearing and CGT policies could add $6b to the budget bottom line
Negative gearing allows investors — notably property investors — to deduct losses against other sources of income, such as wages.
Federal Labor earlier this year vowed to go after the tax deduction if elected, by restricting it to new properties from mid-2017.
An ABC Freedom of Information (FOI) investigation has revealed most of the advantages of the property tax break go to high-income earners.
The modelling — prepared by a third party for Treasury after Labor's February announcement — said more than half of the negative gearing tax benefits go to the top 20 per cent of incomes in Australia.
"Negative gearing benefits high-income families," the document said.
The report stated those in the bottom 20 per cent were getting just over 5 per cent of negative gearing tax benefits.
Discount 'overwhelmingly' benefits high-income families
Debate over negative gearing is raging after it was revealed the Reserve Bank had given some support for changing the system. But what is it?
The Capital Gains Tax (CGT) discount generally provides a 50 per cent discount on profits made from selling an asset, for example an investment property.
The modelling predicted the combined effect of Labor's negative gearing and CGT policies could add up to $6 billion a year to the budget bottom line "depending on the increase in new housing construction flowing from the new housing exemption".
Labor pledged to slash the discount to 25 per cent, while protecting existing investments.
According to the advice, the CGT discount "overwhelmingly benefits high-income families", with the top 10 per cent accounting for nearly three-quarters of the tax savings.
Labor's controversial pledge to go after the tax perks has seen the Government launch a fierce campaign against the move, claiming it would smash house prices and drive up rents.
Search our database to see which occupations are claiming the most negative gearing tax deductions.
Prime Minister Malcolm Turnbull has said Labor's policy would be a disaster.
"The vast majority of people who are negative gearing properties, that is to say they're offsetting a net rental loss against their personal income, have got taxable income of $80,000 or less. That's a fact," Mr Turnbull said last month.
"[It] will smash the value of properties and it will drive up rent. It will drive up rent."
But Opposition Leader Bill Shorten has maintained the changes are long overdue.
"Let's not fall for one of the big lies of the Liberal Party that somehow negative gearing is a Robin Hood tax concession which lifts the poor out of poverty. That's rubbish," Mr Shorten said last month.