April 10, 2019 by Dymphna

Should nurses be able to negatively gear their house?

Category 5 rant warning – property investors are entrepreneurs too!

Look, I want to clear something up.

The whole debate about negative gearing is raging all around us. It’s all over the shop, but there’s one thing that keeps getting over looked.

And that’s the economic logic of allowing property investors to access negative gearing.

The key here is that property investing is a business. It’s something you do. You have expenses and overheads like any other business. And if you do it well, you have profits.

Negative gearing is about what we do with the costs of doing business, and whether we can offset business losses against personal income.

As you know, I’m not a huge personal fan of negative gearing myself, but I am a bit sick and tired of people treating investors like they’re just along for some sort free ride.

They’re not. They’re taking risks, burdening costs and creating economic activity like any other business.

And that’s why this proposal from Teacher’s Mutual got my goat a bit. They want negative gearing to be extended to ‘essential service workers’. That is, let nurses and police officers claim their mortgage expenses against their personal income.

Drastic measures are called for by one of Australia’s largest mutual banks, in new research on the deep-rooted barriers to housing affordability, and most of all those workers in this mutual bank’s newest target market.

… The survey found that 79 per cent of these key workers in Sydney and Melbourne “believe that home ownership is not achievable for them [and] as a result, almost one in four are looking to either relocate away from those cities or change careers altogether,” the mutual bank wrote in its overview.

“We are potentially looking at a drain of key workers from Australia’s two largest cities, when demand for their services is growing and at a time when 57 per cent of the general public believe a shortage already exists,” Steve James, CEO of Teachers Mutual Bank, said yesterday.

PwC, TM Bank and Genworth are putting their weight behind “tax deductibility for borrowing expenses”, a tax lurk that for now is the preserve solely of property investors.

…“The Australian Government could consider extending this tax deduction to key workers in Sydney and Melbourne looking to buy a home, to encourage them to remain in these cities, where demand for their services is greatest,” PwC argued in the report.

Ok, I think they’re well-intentioned here. Essential service workers do need support.

But negative gearing is not a ‘lurk’ to be handed out to segments of society at random.

The way I see it, it is something that helps people step away from their full time jobs towards full-time property investing.

And if you want to extend it, if you want to make it universal, allow anyone and everyone to offset any business expenses – whether that’s from property investing, or a start-up, or a new pizza-shop or whatever – allow them to offset any business expenses against their personal income.

Do that, and encourage an entrepreneurial society for all Australians.

Because that’s the reality for many property investors – they are entrepreneurs just trying to get ahead.

And stop treating them like free-loaders on the look out for whatever ‘lurks’ they can get. It’s just not the reality. And we don’t want to treat our entrepreneurs that way.