This always sounded suspect based upon my day-to-day experience in the market given that the overwhelming majority of property investors are only making at worst moderate net rental losses these days.
Yes, investors have been considerably more active recently due to prevailing low interest rates, but remember the ratio of stock versus flow, while new investors have been generally able to borrow money at around just 4 per cent, or somewhere close to it.
Net rental losses halved
And recall that the cash rate has been cut several times further since 1 July 2013, from 2.75 per to only 2 per cent, so there are yet further declines to net rental losses in the post.
The latest statistics for financial year 2013-14 show that just under 1 million or exactly 60 per cent of those claiming net rental losses have a taxable income of less than $80,000 (thereby paying tax at a highest marginal rate of only 32.5 per cent or lower), while only 133,307 or 8 per cent of those claiming are paying tax at the highest marginal rate.
It is true to a point that middle aged and slightly older Aussies tend to negatively gear property around their peak earning years. This rings true from my experience and the experiences of my peers - none of us owned rental properties as students, or indeed for some time after that as we paid off student debts and saved initial deposits, but plenty do now we are in our late thirties.
With a record 776,672 earning a profit for their rental properities, the total cost of negatively geared properties only fell by 12.5 per cent to a four year low of $10.9 billion.
And given that negative gearing losses are carried forward and taxes levied at a future date - or upon eventual sale in event of a capital gain - net rental losses are a timing difference only and the ALP projections are exposed as too optimistic.
Further declines in the post
Realistically, then, the projected $32.1 billion of savings could only feasibly come from cranking up the rate of capital gains tax, itself a crappy tax - an inefficient tax insincerely marketed as a "discount", although in the case of property it is actually levied on top of fairly vicious stamp duties as well as rates/land taxes etc.
Total capital gains reported by taxpayaers increased by 37 per cent to $34.4 billion, largely thanks to fewer loss making transacions as the financial crisis fades into the rear-view mirror.
Ironically, the ALP was in power for a six year stretch when scrapping negative gearing might actually have made a material difference to the budget, but alas that particular ship has now well and truly sailed.
Presumably this is for similar reasons that Labor took no such action when they weren't in Opposition - pollies actively deflating a housing market in the midst of a once-in-a-century terms of trade and resources investment bust? It seems like a remote possibility to me, but you can choose to believe whatever you want.
All of this has been well known about for some time, of course: scrapping negative gearing was never going to be much of a boon for the budget.
If negative gearing is going to be binned then it should be so on intergenerational grounds or because it represents iniquitous tax legislation, not based upon bogus claims of "billions" to be saved in the budget.
Finally for today, spare a thought for the taxation figures above, the line items of which I have charted simply as the ATO present them, for they're doubtless set to once again be tortured mercilessly come Monday morning.