Federal, state, and local governments are flat out trying to fund the Nation’s essential infrastructure let alone rental accommodation. The percentage of Australian residential dwellings that are funded by governments has shrunk to a miserly 2.9% per year. Mum-and-dad property investors need to continue to be encouraged to add to the rental pool of Australia’s growing population.
According to official ATO records, 30% of all Australian residential dwellings receive rental income. The other 70% of dwellings are occupied by the owner (whether mortgaged or debt free).
For as far back as history books can take us, Australian governments have not had the capacity to fund properties that make up the rental pool for what has become the fastest growing population in the developed world. Governments can’t manage to fund essential infrastructure such as roads, hospitals, ports, and public transport.
Approximately eighty (80) years ago, the then federal government came up with an initiative to encourage those private citizens in Australia who did have some capacity to fund property/s that would add supply to the growing demand on Australia’s rental pool.
The incentive effectively treats such (investment) properties as a ‘business’ in that there is an asset which receives income. Just like a more conventional business, the owner is entitled to claim all expenses associated with running that business. Big companies like Coles, BHP, and Commonwealth Bank claim their expenses as do small businesses like the local hairdresser.
Property investing is essentially a business which provides accommodation / shelter. Over the years, the term ‘negative gearing’ has been adopted.
The tax policy applicable to accommodation businesses (property investment) is consistent with all other businesses and share investing (refer margin loans).
About Propertyology Head of Research and REIA Hall of Famer, Simon Pressley
Simon Pressley is a 3-time Australian Buyer’s Agent of the Year, an REIA Hall of Fame Inductee, a tertiary-qualified Property Investment Advisor, and a graduate of Australian Institute of Company Directors. His reputation as a thought-leading property market analyst is unparalleled, including correctly forecasting Hobart’s boom, Sydney-Melbourne’s last downturn, numerous regional star performers, and Australia coming out of COVID with the biggest boom in more than 15-years.