A prominent social services organisation is urging the government to cut tax breaks that investors receive on negatively geared property.
The Australian Council of Social Service (ACOSS) has made the request to government in a bid to address rising poverty and homelessness and claims the tax breaks are contributing to rising housing costs.
ACOSS added that the tax breaks have a knock-on effect on the country’s poor.
“We do need the political parties to be having a stronger focus on what needs to be done to address poverty and inequality in Australia,” said Cassandra Goldie, ACOSS chief executive.
According to The Sydney Morning Herald, the recommendations follow the release of an ACOSS report, which revealed 81% of emergency housing providers were struggling.
Paul Bieg, director of Big Property Investments, told Australian Broker Online that ACOSS' assertions were misguided.
"I feel they should seek further advice,” he said. "Removing one of the main incentives to purchase will result in less sales and construction. Australia already has a housing shortage so making it worse will not have the affect the ACOSS is looking for."
Negative gearing overrated?
Executive director of Smartline Personal Mortgage Advisers Joe Sirianni cautioned that negative gearing should be viewed as a tool to get into a property investment – rather than as a long-term strategy.
“If you take a long-term view of your property investment, and property should always be a long-term consideration, if you are negatively geared for 20 years, that means that for 20 years you’re paying more money out of your pocket than you’re recouping from the property,” he said.
“You need to view your investing in the same way you would a business. While it might be manageable to run at a loss for a short period of time as you establish and grow the business, it’s not sustainable long-term. At some stage your business – and your property investing – needs to be putting money back into your pocket.”
Sirianni said that many people justify having their property negatively geared because they believe the capital growth of the property will make up for the losses in the long run. He added that rather than focusing on capital growth, investors should make investment decisions based on the income they can derive from their property.
“Ultimately, it’s actually the income that the property generates over time that is more important. For very long-term investments, it’s the income that has the most benefit and makes investing worthwhile,” he said.
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