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Scrap negative gearing at your peril, REIA warns

Tony Abbott will harm the cause of rental affordability if he eliminates negative gearing in the next Budget, the industry’s peak body has warned.

The Real Estate Institute of Australia has made a pre-Budget submission that calls for negative gearing to be retained in its current form.

The submission said negative gearing was helping to make properties more affordable in Melbourne and Sydney by enhancing supply.

The institute also denied claims that it was responsible for driving up prices in the nation's two largest cities.

“The current taxation arrangements provide many Australians with the opportunity to invest in property and augment their savings… and at the same time improve rental affordability through an increased supply of rental housing,” the submission said.

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“Further, to amend the current negative gearing provisions for housing [would] treat real estate differently to other asset classes and create a distortion on the investment landscape and result in a resource misallocation.”

The submission said it is wrong to portray negative gearing as a perk for the rich.

It pointed to statistics showing that 70 per cent of property investors who benefit from negative gearing earn a taxable income no higher than $80,000, and that 73 per cent of investors have just one investment property.

“Evidence shows that negative gearing and the capital gains tax discount are not driving excessive, unproductive and speculative investment in housing but instead they are adding to housing supply with currently $7 billion a year invested in new dwellings,” the submission said.

“Conversely, the repeal of the current arrangements would shrink savings and investment and see increases in rents and the need for greater government investment in social housing.”

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