Negative gearing policy cover up

Here is an interesting story from the AFR:

Labor has deleted substantial detail on its negative gearing and capital gains tax policies from its housing policy website.

On Tuesday Labor’s website has just over 10 paragraphs explaining the policies whereas less than a fortnight ago on April 5 there were almost 100 paragraphs with charts and diagrams.

The changed information comes less than a week after The Australian Financial Review revealed that Labor’s negative gearing could be overstatedby between $2.5 billion to $8 billion due to inaccurate assumptions on the level of investment in new housing stock.

To be clear – what the ALP don’t want us to see anymore is here.

What is particularly interesting is this segment.

Recall Chris Bowen has gotten into trouble with that particular statistic.

Looking at the Source for that graph I have been able to replicate it and update it.

So the ALP have been looking at housing finance data not individual purchase data. Okay – as a rough and ready proxy that would be fine in an academic study with heaps of qualifiers and robustness checks. But the ALP are doing tax policy.

So what have they done precisely?  They divided the data for “Investment housing – Construction of dwellings for rent and resale” by the sum of “Investment housing – Purchase for rent or resale by individuals” and “Investment housing – Purchase for rent or resale by others”.  On the assumption that all investment properties were homogeneous that might be useful information.

That just tells us that Landlords (as a business class) tend not to buy off the plan – not surprising, that is quite risky. I suspect it would be quite difficult to get a loan to do that for a small unincorporated business.

But let’s have a look at all new construction housing finance data. In the graph I show the data for all construction housing finance data and then investment construction housing finance data.

It seems to me – eyeballing the graph – that the investment construction housing finance data has been fairly stable over time. Since about 2000-01 the gap between the two series has been stable at about a third. Unsurprising given that the home ownership rate in Australia is about two-thirds.

This entry was posted in 2019 election, Taking out the trash, Taxation. Bookmark the permalink.

7 Responses to Negative gearing policy cover up

  1. stackja

    Paul Keating showed how to do this!

  2. Not wanting to open up a Pandor’s box … but.

    To suggest that investors have a tax advantage over home buyers is idiotic. Home owners are not subject to any capital gains tax. Perhaps Dr Andrew Leigh consulted on this policy and line.

    If these rocket scientists wanted to really level the playing field, they would make the own home subject to capital gains tax (TAFKAS not advocating for).

    But this is not about leveling the playing field. This is about a tax grab from a constituency the ALP does not like.

  3. Sinclair Davidson

    If these rocket scientists wanted to really level the playing field, they would make the own home subject to capital gains tax (TAFKAS not advocating for).

    … but then allowed a mortgage deduction on your personal income tax.

  4. … but then allowed a mortgage deduction on your personal income tax.

    Yes. But that would be tax minimisation according to the ALP and punishable.

  5. Rob MW

    That just tells us that Landlords (as a business class) tend not to buy off the plan

    That very simple statement underlines the whole policy problem for Labor. Their lying eyes refuse to recognize a ‘Business’ (whether registered or not) when they trip over one. Sheep have a higher IQ and there is only one thing stupider than a sheep, and that’s the bloke/shella that owns em.

  6. struth

    I see …………….a subsidy is basically being taxed on your net income and not your gross!!!!!!

    Genius.

  7. RobK

    How do these figures handle a high rise development loan which then spawns hundreds of owner occupiers loans. Or an estate development of 200 houses largely developed on speculation.
    Are the % figures on the y-axis the number of loans or the value of loans? What are we talking?

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