(UPDATE: Some changes to negative gearing were made in the 2017 Budget – Read about the Budget changes here).
Now I’m not one to whinge about a system without a solution…I think the current Negative Gearing model needs some repairs for two reasons.
Reason 1 – The system was not designed so that someone could buy 100 properties, off-set those losses against personal income and never pay tax in the foreseeable future!
Reason 2 – Someone should not be able to buy a $20M house, get a terrible yield of 1-2% on such a large purchase price and offset the difference against personal income.
NEGATIVE GEARING SOLUTION
Solution 1 – Cap negatively geared property to a maximum of 3 properties per person over their investing life.
Solution 2 – Cap an individual property to the median price of an Australian property. (This takes into account the vast range of average prices across the board). So someone could buy a house in Sydney + one more in Brisbane for instance, or perhaps 3 properties in Hobart?
I’m interested in your thoughts so please leave your views below…