Negative gearing escapes the chop for now

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Budget night was not a time homeowners were looking forward to. They knew that Joe Hockey is looking at many options for the chop, and one area that has been floated for reform is the property sector. In particular, negative gearing.

However, the existing arrangement has been left as it is, which is good news for home buyers, and arguably not so for the budget.

According to Grattan Institute research, quarantining negative gearing losses would save the budget around $4 billion per year initially and fall to a saving of around $2 billion per year over the longer term.

SQM Managing Director Louis Christopher argues that the federal government would not want to impact negatively on a construction recovery or jeopardise the economy just to bring the budget pack to surplus.

“If negative gearing was repealed or altered, investors would back off buying into the housing market, which is what those who are demanding lower dwelling prices want to see,” says Christopher.

The other area the federal government didn’t touch was the family home. It was expected by some that the family home would be means tested for the aged pension.

In fact, it was proposed by the Commission of Audit to include the family home in the assets test from 2027-2028, but the government also ruled this out.

However, one disappointment for property advocates was that the government did not proceed with the final round of the National Rental Affordability Scheme and withdrew $235.2 million from the scheme over three years.

Nick Proud, Executive Director of the Residential Development Council, says the move was not to his liking, but welcomed the chance to participate in a new scheme.

“The property industry has long advocated for a review of the program to improve the outcomes and ensure it remains focused on delivering affordable housing supply.

"The scrapping of the National Rental Affordability Scheme is disappointing but leaves the door open to the government to focus on new levers to improve housing supply and affordability.”

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