Published on 01 Aug 14
by "THE TAX SPECIALIST" JOURNAL ARTICLE
Negative gearing occurs when finance is utilised to purchase an asset and the income generated by the asset is insufficient to cover the interest expense, creating a net loss position. For taxation purposes, negative gearing deductions include other investment expenses in addition to interest. This article commences with a brief review of what negative gearing is and how it works. The distinctions between the Australian and UK negative gearing rules are then considered, followed by the identification and consideration of other policies increasing the incidence of negative gearing in Australia. The policy of negative gearing is then considered in the context of the principles of equity, efficiency and simplicity.
The article concludes with a review of the outcomes of previous attempts to limit negative gearing and an analysis of other reform options other than its abolition.
James is an Chartered Accountant with ELG Accounting and Taxation.
Current at 1 August 2014 Current at 11 September 2014