The Great Negative Gearing Debate: Who Really Wins and Loses?
The property investment debate has reared its head again, and frankly, it’s about time. The Parliamentary Budget Office recently dropped some numbers that have got everyone talking: 80% of capital gains tax discount benefits flow to the top 10% of earners, while 60% of negative gearing benefits go to the top 20%. When you put it like that, it’s pretty stark, isn’t it?
What’s fascinating is watching the responses unfold online. There’s this persistent narrative that any changes to negative gearing would devastate mum-and-dad investors, but the reality seems far more nuanced. One user made an excellent point about how properties naturally become more positively geared over time, meaning established investors with multiple properties would largely be unaffected by changes. It’s really the high-income earners buying expensive coastal properties with terrible rental yields who’d feel the pinch – and honestly, that doesn’t sound like such a tragedy.
The stamp duty discussion is where things get really interesting though. People are genuinely frustrated about the cost of moving house, and rightfully so. Someone mentioned paying nearly $50,000 in stamp duty just to downsize – that’s absolutely mental. Here we are trying to encourage older folks to move out of large family homes to free up housing stock, yet we’re penalising them financially for doing exactly what makes economic sense. It’s backwards policy at its finest.
What strikes me about this whole debate is how it reveals our weird relationship with housing in this country. We’ve somehow convinced ourselves that property investment is this sacred cow that must be protected at all costs, even when the evidence suggests these tax concessions primarily benefit the already well-off. The argument that “those who pay the most tax benefit the most from tax deductions” misses the point entirely – we’re talking about policy choices that actively distort the housing market.
Living through Melbourne’s property boom over the past decade has been surreal. Houses that would have been considered modest family homes are now pushing towards the $2 million mark, and don’t even get me started on what passes for a “starter home” these days. When someone can casually mention that $1.5 million gets you a pretty average house in Brisbane, you know we’ve lost the plot somewhere along the way.
The technology sector has taught me a thing or two about system optimisation, and our current housing tax system feels like legacy code that’s been patched so many times nobody remembers why it works the way it does. We’ve got negative gearing, capital gains discounts, first home buyer grants, and a dozen other interventions all pulling in different directions. Sometimes the simplest solution is to tear it down and rebuild it properly.
What gives me some hope is that people are finally having these conversations seriously. The suggestion to limit negative gearing to one investment property makes perfect sense – it maintains the policy’s original intent without allowing it to be weaponised by high-income earners building property empires. Similarly, the idea of removing stamp duty on primary residences while increasing it on investment properties could help restore some balance to the market.
The grandfathering argument is probably inevitable, and politically it makes sense even if it’s economically messy. Change is hard, and asking people to adjust their investment strategies overnight isn’t reasonable. But we need to start somewhere, and stopping the damage from getting worse while existing investments naturally transition seems like a pragmatic approach.
Change won’t be easy, and there’ll be plenty of vested interests fighting to maintain the status quo. But when the current system is clearly benefiting the wealthy at the expense of housing affordability for everyone else, doing nothing isn’t really an option anymore. Sometimes you need to accept that the perfect solution doesn’t exist, and focus on making things a bit less broken than they are today.