Crush socialism’s creep and start a grown-up era
The current attack on negative gearing of property investment is illinformed and foolish. Socalled negative gearing is not a tax lurk. Individuals who negatively gear their property are already suffering a loss from the property – a loss of cash, before the ATO gives them a tax deduction for a portion of the loss. It is hardly a lurk.
Well done to Treasurer Jim Chalmers for unequivocally ruling out any changes to negative gearing.
Criticism of negative gearing is matched only by that other lunacy emerging from Canberra from time to time, proposing to tax businesses on the basis of gross rather than their net revenue after deducting allowable costs. No country in the world taxes revenue instead of net income – and for that matter, few countries in the world tax net income at the exorbitant levels we do in Australia.
The real lurk is the Commonwealth’s heavy impost on taxpayers. That’s why so much talent, innovation and investment leaves Australia for other countries that tax less and grow more.
The foundation of Australia’s economic system is private investment. The goal is to encourage private investment by enabling the investors to receive a return on their investment and compensate them for the many risks taken in a volatile and difficult world.
We rely on investors to develop property, whether office blocks or housing. The investors often borrow to build or purchase the property. They may then rent the property and, hopefully, make a positive return.
One of their legitimate costs is the interest they pay on the mortgage they took out to make the investment. Interest costs may result in a loss on the investment, which can be carried across as a legitimate deduction against other assessable income, which is fair and reasonable.
This is a foundation of our tax system that drives investment. If they cannot claim the loss then the quickest solution would be raising the rent, which hardly helps the community.
Some property investments may never generate an operating profit but the investor could make a profit on the sale of the property. In this case they will of course be subject to capital gains tax.
The foolish proposed abolition of negative gearing is not only an attack on the foundation of our successful and equitable tax system. If adopted, it would be a disincentive to investment not only in property but across the board. This will come at a time when we are suffering from a housing shortage and we should be encouraging private investment, given the financial pressures on most Australian governments.
Most governments in Australia have an unhealthy level of debt. As a country we have nowhere near the reserves we thankfully had when Covid hit.
Another crisis could hit us at any time and we are not prepared.
In fact, the only thing keeping us solvent at present is the success of the dreaded resources sector which, as usual, is saving the bacon.
Government investment is a misnomer. Governments don’t earn any income as they appropriate it from citizens, visitors and businesses. However, thankfully, we have a large pool of private capital in Australia looking for a good home thanks to our compulsory superannuation system, in which most of us have an interest. We should use it.
Creeping socialism is a disease holding our country back and threatening the prosperity we enjoy.
The principle of taxation is simple. We as individuals own all the money we make legitimately through our labour. Elected governments, through taxation and levies, then redistribute some of this wealth in accordance with established principles of fairness and equity, while recognising the underlying economics and the need for profitable and sustainable businesses and willing workers.
Our tax system is far from perfect, where 90 per cent of the tax take comes from only 10 per cent of the different taxes. The other 90 per cent of the taxes cost the taxpayer a fortune to collect and include such anomalies as a tax on employment in the form of payroll tax. We certainly need tax reform but not through the abolition of negative gearing.
We need to lift our debate on tax beyond class warfare. We need a tax debate so most Australians realise the heavy lifting of a minority in terms of tax payments. How can we make the tax system fairer and more globally competitive? How can we make things more aligned with similar countries in a competitive world? Even Sweden has a much lower company tax rate than Australia.
We live in a competitive world. How we retain and develop talent and how we encourage innovation and investment should be one of the key issues for a tax summit. Attacking socalled negative gearing is attacking the investors we need and whose efforts are crucial to coping with the housing shortage.
In a sentence, grow up Australia.