What is negative gearing?

The reform of negative gearing has been debated for years as the gap between Australian’s disposable income and house prices gets bigger and bigger.

Transcript

00:00Negative gearing costs the Australian

00:02taxpayers a lot of money.

00:03Negative gearing is a term we hear

00:06bandied about often when it comes to

00:07Australia's housing crisis.

00:09It's estimated that at current interest

00:12rates, people would need at least 50

00:14percent of their income to service

00:17a new mortgage.

00:18Negative gearing occurs when the costs

00:20of owning an investment property like

00:22mortgage interest and maintenance

00:24exceeds the rental income it generates.

00:27Investors use this loss to reduce their

00:29taxable income, while many believe it

00:32pays off as property values rise over

00:35time.

00:35It's potentially taken away from home

00:38ownership, born from the fact that there

00:41are more investors who are competing

00:43for property ownership against first

00:45homebuyers say, but also because that

00:47additional demand for limited supply of

00:50property adds to the value of homes and

00:53makes them more unaffordable to buy.