The costs of negative gearing to the budget have been in decline for some years now in any case, with net rental losses falling by 53 per cent across the past two tax years alone, with further declines to come next year.
Turnbull's blog piece was right about one other thing: Grattan's suggestions are not actually in sync with Labor's proposed policy, and Grattan is also in part critical of the ALP stance of quarantining deductions to new build properties.
This is particularly so in an era where it is now much easier to simply borrow (tax free) against the equity of the asset. Thus not only with the so-termed budget "savings" never transpire, there will be sundry costs to boot.
Grattan's latest Hot Property report notes that "the median taxable incomes (sic) for taxpayers who negatively gear is $61,533". This ties in with what I found myself from the ATO data, while most of us are active in investment property around our peak earning years (and not, say, while studying at Uni) as one would expect.
Of course, it is a truism that higher tax paying households can save more tax because they also pay more tax, while the tax benefits are of little use to the half of all households that pay no net income tax after welfare benefits are included.
Some of Grattan's claims are unsubstantiated, such as the statement that most landlords own only one or two properties due to land tax constraints. This point is obviously made up and self-evidently untrue - the truth is that property investment is a low-yielding cottage industry and largely the domain of middling income earners, while investors overwhelmingly choose sub-optimal and often unprofitable assets which lead to administrative and financial headaches for the landlord, and fairly often to the speedy sale of the property.
Lol. I can't imagine for one second that in the history of the Great Southern Land a single person has ever bought a house in for the purposes of making a loss, then sold that house to buy another house because the rents increased and the first house was making too small a loss. Stop and think about that for a second. It's a completely ridiculous line of argument.
An interesting exercise in fiction, one can only assume that somebody was toking too hard on the wacky baccy that afternoon, the common sense check foregone in the befogged quest for munchies...
Of course in the real world such a daft tax-avoidance strategy would never work in a month of Sundays due to the prohibitive transaction costs, which leads us on neatly to...
It's also usually conveniently overlooked that interest deductions claimed by property investors are mirrored by the interest booked as revenue by the lender, with bank profits taxed accordingly thereafter, so the actual "savings" in the budget would be $nil.
I was planning to upload a few charts here to show just how hard governments have been scouring housing markets for taxation revenues over the past 15 years, but Cameron Kusher of CoreLogic-RP Data has already produced those particular goods. The answer is "a startling amount", with revenues up by 150 per cent.
Such harebrained theories might seem plausible in a theoretical vacuum, but are totally illogical in the real world.
A key underlying point here is that nobody can forecast housing markets accurately (refer to almost any media article or property blog from 2008 to 2012 versus what followed thereafter), and certainly not with such as questionable level of understanding of property investor motivations. Yet predictions to within a 1 per cent accuracy are reported more or less as gospel on both property prices and rents. Most concerning, if not completely bonkers!
More of the same tomorrow, I'd hazard. 'Til then!