Ben Hurley Reporter

Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

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Mum and dad landlords’ negative gearing helps pump property deductions to $38bn

Published 01 May 2013 10:56, Updated 02 May 2013 07:16

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Mum and dad landlords’ negative gearing helps pump property deductions to $38bn

Small residential property investors helped push negative gearing claims up 18 per cent to $38bn in 2010-11. Photo: Louie Douvis

Landlords claimed $38 billion in tax deductions in the 2010-11 financial year – an 18 per cent rise – according to newly released statistics from the Australian Taxation Office.

As the federal government considers new taxes to patch its budget black hole, the sacred cow of negative gearing contributed to $22 billion in tax-deductible interest claims in the 2011 financial year, which was a 23 per cent increase on the previous year.

Negative gearing allows landlords to claim losses on an investment property as a tax deduction when mortgage repayments outstrip the income coming in from rent. It is widely used, with 67 per cent of individuals with rental income reporting a net loss.

Successive governments have backed away from tinkering with negative gearing rules, and for good reason. Out of an astonishing $13.2 billion in net losses reported by negatively geared property investors in 2010-11, the greatest proportion came from those with a taxable income of $37,000 to $80,000, in other words the “mum and dad investors” of Australia.

The figures also show 27 per cent of 1.8 million landlords around the country own more than one property.