June 30, 2025 • 5 mins
Why is negative gearing so politically dangerous?
Join Sean Aylmer & Michael Thompson as they answer questions on business, investing, economics, politics and more.
If you have your own question for Ask Fear & Greed, get in touch via our website, LinkedIn, Instagram or Facebook!
Find out more: https://fearandgreed.com.au
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Michael Thompson
and hello.
Speaker 2 (00:10):
Sean Aylmer, Hello Michael.
Speaker 1 (00:12):
Today's question combines a few of those topics. Sean, it
is about negative gearing, and the question is basically, why
is negative gearing so politically dangerous?
Speaker 2 (00:25):
Well, there's about a million Australians that take advantage of
the negative gearing rules. Okay, it's a tax break, according
and Treasury reckons, there's a million people. If you took
that away, that's probably a million votes you're about to lose.
I mean, that's the short answer.
Speaker 1 (00:42):
For the longer one, which is your specialty. Yes, and
taking a short answer and making it.
Speaker 2 (00:48):
Long, Yeah, we can do that.
Speaker 1 (00:49):
Yeah. But okay, start with the definition of negative gearing.
What are we talking about when we're doing this, and
then we'll kind of explain kind of why it becomes
a politic.
Speaker 2 (00:57):
We always think of negative gearing on housing, which is
the most regular, but it's actually on any asset, and
it's where expenses associated with the asset, including interests that
you're paying on it is greater than the income earned
from the asset. So let's say you buy a house
and you pay interest on that, and you pay rates,
(01:18):
and you pay all sorts of things. If that's greater,
then the income you're getting from renting that house at
you are effectively negative gearing your home and you can
use that to write off against your other income.
Speaker 1 (01:33):
It becomes a tax off set.
Speaker 2 (01:35):
It's a tax off set. It costs the budget about
six billion dollars each year. So could you imagine closing
that loophole that six billion dollars that the federal government
will get. It must come from somewhere, and it must
come from the million people who are using negative gearing,
so they're going to be worse off.
Speaker 1 (01:58):
We have seen attempts in the past or just even
if it gets mentioned anywhere near an election, it becomes
an election issue, right because, as you say, it's a
very politically sensitive topic. Was it Bill Shorten? I think
who might have had something to do with negative gearing
a few years back. And anyway, as as soon as
(02:19):
it comes up, everybody jumps all over it, from the
media through to the other side. There is a lot
of commentary around it. So I mean, you can see
why it becomes a lightning rod for criticism of any
party that mentions it. So as soon as you start
talking about tax reform or reform overall, negative gearing is
really one that everyone kind of backs away from.
Speaker 2 (02:38):
But it's actually not a bad idea to reform negative
gearing it Let's say let's say dangerous. Let's say you've
got a rental property and you're getting twenty five thousand
dollars from it and it's costing you thirty thousand. So
there's that five thousand dollars which is excess that you're
paying than receiving. If you know an advance that you're
(02:58):
going to record a loss from that envas you can
actually apply to the tax office to reduce the amount
of tax taken out of your salary for example. Really yeah,
it's called POWERYG withholding variation. It can actually provide you
with more money to your personal cash flow, and then
when you sell the house, hopefully you're making all your
(03:18):
money because your house has gone from four hundred thousand
to eight hundred thousand or whatever it is. So you're
doing that in a really tax effective manner. The other
thing which we shouldn't get there's a cable gains tax concession.
So if you own your house for more than twelve
months or an own asset for more than twelve months,
you sell it, you get a fifty percent caple gains
tax concession. So if you're on the top marginal tax trate,
(03:41):
you're only paying about twenty five percent tax on whatever
you're selling. That is actually different though, to negative gearing.
That one, the cable gains tax concession, that's more like,
I don't know, making it up fifteen twenty billion dollars
a year.
Speaker 1 (03:54):
Okay, that's big, that's big. All right. It all comes
to the tax reform issue, and we've talked about this
on previous episodes that anyone tackling tax reform in this
country needs a certain amount of political courage.
Speaker 2 (04:09):
Right, yeah, yeahs I think is the word you're looking for,
political cohness. Susan Lee actually last week or a couple
of weeks ago, when she gave that National Press Club,
they asked about jest. Would you'd be interested in changing jest?
And she said, my instinct is no, because that one's
too hard. Jim Chalmers more or less said the same thing.
(04:31):
He hasn't actually wielded out. Jim Chalmers changing the GST.
But if you're going to the tax reform and you're
really serious about it, right, so the tax concessions for
superannuations a big one, negative gearing, cauple GAINST, tax concessions
on assets sold like houses and stuff. That's the other one,
and jest is the third one. If you really want
(04:51):
to reform it and make us pay less income tax,
they're the three things you have to target.
Speaker 1 (04:56):
Okay, But in the end, to answer the question, negative
gear is politically dangerous because it affects a lot of people.
Speaker 2 (05:02):
Well, you won't be in your job if you're a
politician and you push it too hard, people will worte
against it.
Speaker 1 (05:07):
Okay, there we go, Thank you, Sean, Thank you Michael. Remember,
if you've got your own question that you would like
us to answer it, go to the website fearangreed dot com,
dot au, send it on through there or any of
the social media platforms, and Michael Thompson and this is
ask Fear and great
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Michael Thompson
and hello.
Speaker 2 (00:10):
Sean Aylmer, Hello Michael.
Speaker 1 (00:12):
Today's question combines a few of those topics. Sean, it
is about negative gearing, and the question is basically, why
is negative gearing so politically dangerous?
Speaker 2 (00:25):
Well, there's about a million Australians that take advantage of
the negative gearing rules. Okay, it's a tax break, according
and Treasury reckons, there's a million people. If you took
that away, that's probably a million votes you're about to lose.
I mean, that's the short answer.
Speaker 1 (00:42):
For the longer one, which is your specialty. Yes, and
taking a short answer and making it.
Speaker 2 (00:48):
Long, Yeah, we can do that.
Speaker 1 (00:49):
Yeah. But okay, start with the definition of negative gearing.
What are we talking about when we're doing this, and
then we'll kind of explain kind of why it becomes
a politic.
Speaker 2 (00:57):
We always think of negative gearing on housing, which is
the most regular, but it's actually on any asset, and
it's where expenses associated with the asset, including interests that
you're paying on it is greater than the income earned
from the asset. So let's say you buy a house
and you pay interest on that, and you pay rates,
(01:18):
and you pay all sorts of things. If that's greater,
then the income you're getting from renting that house at
you are effectively negative gearing your home and you can
use that to write off against your other income.
Speaker 1 (01:33):
It becomes a tax off set.
Speaker 2 (01:35):
It's a tax off set. It costs the budget about
six billion dollars each year. So could you imagine closing
that loophole that six billion dollars that the federal government
will get. It must come from somewhere, and it must
come from the million people who are using negative gearing,
so they're going to be worse off.
Speaker 1 (01:58):
We have seen attempts in the past or just even
if it gets mentioned anywhere near an election, it becomes
an election issue, right because, as you say, it's a
very politically sensitive topic. Was it Bill Shorten? I think
who might have had something to do with negative gearing
a few years back. And anyway, as as soon as
(02:19):
it comes up, everybody jumps all over it, from the
media through to the other side. There is a lot
of commentary around it. So I mean, you can see
why it becomes a lightning rod for criticism of any
party that mentions it. So as soon as you start
talking about tax reform or reform overall, negative gearing is
really one that everyone kind of backs away from.
Speaker 2 (02:38):
But it's actually not a bad idea to reform negative
gearing it Let's say let's say dangerous. Let's say you've
got a rental property and you're getting twenty five thousand
dollars from it and it's costing you thirty thousand. So
there's that five thousand dollars which is excess that you're
paying than receiving. If you know an advance that you're
(02:58):
going to record a loss from that envas you can
actually apply to the tax office to reduce the amount
of tax taken out of your salary for example. Really yeah,
it's called POWERYG withholding variation. It can actually provide you
with more money to your personal cash flow, and then
when you sell the house, hopefully you're making all your
(03:18):
money because your house has gone from four hundred thousand
to eight hundred thousand or whatever it is. So you're
doing that in a really tax effective manner. The other
thing which we shouldn't get there's a cable gains tax concession.
So if you own your house for more than twelve
months or an own asset for more than twelve months,
you sell it, you get a fifty percent caple gains
tax concession. So if you're on the top marginal tax trate,
(03:41):
you're only paying about twenty five percent tax on whatever
you're selling. That is actually different though, to negative gearing.
That one, the cable gains tax concession, that's more like,
I don't know, making it up fifteen twenty billion dollars
a year.
Speaker 1 (03:54):
Okay, that's big, that's big. All right. It all comes
to the tax reform issue, and we've talked about this
on previous episodes that anyone tackling tax reform in this
country needs a certain amount of political courage.
Speaker 2 (04:09):
Right, yeah, yeahs I think is the word you're looking for,
political cohness. Susan Lee actually last week or a couple
of weeks ago, when she gave that National Press Club,
they asked about jest. Would you'd be interested in changing jest?
And she said, my instinct is no, because that one's
too hard. Jim Chalmers more or less said the same thing.
(04:31):
He hasn't actually wielded out. Jim Chalmers changing the GST.
But if you're going to the tax reform and you're
really serious about it, right, so the tax concessions for
superannuations a big one, negative gearing, cauple GAINST, tax concessions
on assets sold like houses and stuff. That's the other one,
and jest is the third one. If you really want
(04:51):
to reform it and make us pay less income tax,
they're the three things you have to target.
Speaker 1 (04:56):
Okay, But in the end, to answer the question, negative
gear is politically dangerous because it affects a lot of people.
Speaker 2 (05:02):
Well, you won't be in your job if you're a
politician and you push it too hard, people will worte
against it.
Speaker 1 (05:07):
Okay, there we go, Thank you, Sean, Thank you Michael. Remember,
if you've got your own question that you would like
us to answer it, go to the website fearangreed dot com,
dot au, send it on through there or any of
the social media platforms, and Michael Thompson and this is
ask Fear and great
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.