The Holes In Bowen’s Numbers…

The number Chris Bowen has been quoting for some time is bogus.

Source: IPA

Negative gearing savings overstated by up to $8b

Labor’s expected savings from its crackdown on negative gearing could be overstated by between $2.5 billion to $8 billion due to inaccurate assumptions on the level of investment in new housing stock.

Source: AFR

Negative gearing [is another name for] the well-known, and uncontroversial, principle that expenditure incurred in the production of taxable income is deductible.

If the government taxed revenue not income – every business with a return on sales less than the tax rate would go broke.

The principle of ‘negative gearing’ is that individual taxpayers can offset their property investment losses against other income.

The idea that large incorporated property investors can claim expenses and individual investors cannot will place smaller unincorporated businesses at a competitive disadvantage and also introduce distortions into the economy – investment should be independent of ownership structure.

A lot of middle income Australians use property investment as their only opportunity to have their own small business. This is a mechanism for retirement savings outside superannuation and an opportunity to top-up their income. If they succeed, they will become less of a burden on the welfare system and age-pension. The ALP has no good reason to discriminate against individual investor landlords by treating them differently to every other business or investor in Australia.

Source: IPA

Comment: And that’s only the start. Expenditure will increase when retirees are forced onto the Age pension. Lack of competition in property investment  and less supply will drive up rentals.

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