I could almost dedicate this blog to commenting on what the media is commenting on!  The idea that negative gearing is going to get the axe has been around for a long time.  The Hawk/Keating duo had a crack at it in the 80’s and it’s been on the table ever since.  As the inequality between the rich and everyone else is getting larger, the target and the chanting is getting bigger and bigger.

Negative gearing is when you claim losses on an investment (typically a geared investment) in your tax return against other forms of income.  It’s a great system – lose money over here, get a little back from the ATO over there.  The theory is sound in that investment is important.  Investment in property, investment in companies, investment in innovation and infrastructure.  Sometimes, this investment doesn’t turn a profit straight away, so to encourage that money to be invested, the government lets the investor offset those losses against unrelated income.  In 2015, Australians claimed a touch over $12billion in deductions from investments, much of it real estate.

I meet so many people that, when asked, tell me that the main thing they want to do is reduce tax.  This is one of the more popular things about negative gearing and is one of the key drivers.  But saying you want to pay tax is the same as someone that is training to run a marathon saying that the main thing they want to do is lose weight – losing weight may be side benefit, but the main benefit of running a marathon is the achievement, and the overall fitness level you’ll need to be at.  The weight is just a bonus.  You should be investing to make money – lots of money if possible.  What’s the worst thing if you make a $1,000,000 profit?  You’ll pay some tax on it.  For some people, that’s to be avoided, so my advice to them is just send me the money, I’ll pay the tax and keep the rest.