Debunking the Grattan Institute's hit on 2 million property owners

On the same day as the Australian Bureau of Statistics released new data that shows that property taxes have risen over 10 per cent in a year to an astounding $45 billion, the Grattan Institute has released a paper calling for further dramatic increases in property taxes.

“The Grattan recipe will result in less investment in housing, higher rents and less jobs in the property industry. Tens of billions in new taxes, is the wrong recipe for an economy in transition”, said Ken Morrison, Chief Executive of the Property Council of Australia.

“This proposal would be a retrospective hit on property investors – who have bought in good faith knowing what the rules are.

“This is a sloppy proposal that has given no thought to second and third order affects – including the impact on the 1.1 million employed in the property industry and the millions of Australians who would face higher rents because of these new property taxes.

“The Grattan report repeats previous negative gearing myths and makes statements which are just not true. We are happy to debunk these statement and arguments.”

 

Grattan:  Negative gearing mainly benefits those on higher incomes  

Fact:  58% of net rental loss deductions by value go to the people with taxable incomes less than $80,000.  Only 13% go to those with taxable incomes above $200,000.

Rental losses for those with negative net rental income by taxable income, 2012-13

 

Grattan: Investors account for more than half of new loans for housing

Fact: Investors are making up a smaller amount of the market.  Total new lending to owner-occupiers rose from $55 billion to $69 billion over the six months to December 2015.  By comparison, the value of new loans for investor lending dropped from $41 billion to $29 billion.  This represents a drop in the share of new investor lending from 43% to 30%.

New residential term loans to households approved, APRA, February 2016


ADIs with greater than $1 bn of term loans ($ million)

 

Grattan: Negative gearing disproportionately benefits surgeons and anaesthetists

Fact: There are 891 anaesthetists and 1,020 surgeons who negatively gear.  By comparison, there are 6,980 cleaners and 42,938 nurses and midwives who negatively gear.  

Over 770,000 people who negative gear have taxable incomes below $80,000 a year. The Grattan Plan will shut the door to these people to build a ‘nest egg’ for the future.

 

Grattan: The impact of proposed changes on new development is also likely to be small.

Fact: Grattan claims that 8 to 14 percent of investment lending is for new dwellings.  In fact, 27 percent of all new developments are financed by investors, helping projects move from conception to construction. 

These new dwellings are taking the edge off house price increases and providing needed rental accommodation.

Housing finance commitments in 2014 (value of loans)

Note: OO stands for owner occupier.  * ABS does not separately report investors’ loans for purchase of new and existing dwellings.  Source: ABS Catalogue 5609.0, Housing Finance, Australia, August 2014, Table 11

 

Grattan: Negative gearing is a big hit on the budget

Fact: The cost to the budget of negative gearing is dropping.  Net rental losses from investment properties have fallen from $7.9 billion in 2011-12 to $3.7 billion in 2013-14.  This is a drop of 53% in two years.

Individual rental income and deductions, ATO Taxation Statistics 2013-14