The Truth about Negative Gearing

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Last week the Australian Tax Office (ATO) released taxation statistics for the 2012-13 Financial Year.


It’s interesting because we have been told that negative gearing was used predominantly by the rich however the statistics tell a different story. 

  • 15.4% of all taxpayer or 1.9 million taxpayers declared a net rental income on their tax returns  
  • Of all taxpayers who declared rental income;
  • Around 64% were negatively geared or declared a net loss.
  • Around 36% were positively geared or recorded a net profit.
  • The ATO reported that rental deductions fell by – 3.9% over the year.
  • The number of Taxpayers claiming a profit was up 8.3%.
  •  Around 1.2 million taxpayers claimed a net rental loss amounting to $12 Billion with the number claiming a loss down -4.2% over the year while the value of these losses declined by 16.3%.
  • The average losses were at their lowest level since 2009-10 and reported losses was $6,123 per taxpayer, down from $7,316 the previous year.
  • Taxpayers claimed a total of $5 million in losses and were -34.6% lower over the year
  • Across the tax brackets, the respective income levels claim the following,
  • less than $18,200 (12.7%)
  • $18,200 to $30,000 (1.3%)
  • $30,000 to $80,000 (37.6%)
  • $80,000 to $180,000 (35.6%)
  • More than $180,000 (12.8%),

As you can see from the above the greatest income levels that claimed the most are in the $30,000 to $80,000 (37.6%) followed by $80,000 to $180,000 (35.6%) and this is contrary to many commentators who have claimed otherwise, but often simply based on ideology and ignorance and not based on facts. As only 12.8% of people earning more than $180,000 used negative gearing than we can assume that the closer we are to the $180,000 in the $80,000 to $180,000 range, the smaller percentage use negative gearing versus those closer to the $80,000 mark.

If negative gearing was removed it would hurt a significant number of average Mum and Dad investors trying to save for their retirement and in so doing saving the government billions of dollars in paying a government pension.

Ed Chan
Founder & Non Executive Chairman Chan & Naylor Accountants

Ed Chan

Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.

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