Federal Election 2016: Lenders play musical chairs on negative gearing
Some high-profile lenders show that their views on negative gearing are changeable.
The Coalition’s campaign to retain negative gearing tax breaks for home investors took a credibility hit on Monday after revelations that Aussie Home Loans founder John Symond had previously argued the policy was unfair to low-income earners and should be overhauled.
Since February, Mr Symond has been actively campaigning against the Labor Party’s proposal to rein in negative gearing concessions, warning that it could trigger sharp falls in property prices and widespread economic damage.
“This could be economic Armegeddon,” he told Channel Seven’s Sunrise program on Sunday.
“This could create hundreds of thousands of people losing their jobs.
“This could cause people to be thrown out of their homes.”
Mr Symond’s alarming comments contrast sharply with observations he made on the ABC’s Q&A program in November 2013 when he argued the tax breaks needed to be overhauled because they were unfair.
In response to a question from a struggling renter, Mr Symond said that negative gearing wasn’t designed for people who could afford to buy million-dollar properties as a way to offset their tax bills.
“Negative gearing does need to be looked at in the tax system because I don’t think it’s fair at the moment,” Mr Symond said at the time.
“I think it leans very heavily to the high-income earners and that needs to be brought in line.”
Mr Symond’s fervent support of the Coalition’s policy to retain negative gearing tax breaks won backing from rival home lender Mark Bouris of Yellow Brick Road Home Loans.
But Mr Bouris’ attitude towards negative gearing also seems to be changeable.
In 2003, he told ABC Radio that tax breaks for investors should be amended because many Australians were exploiting the policy only to reduce their taxes.
“My strong view is that negative gearing is something that should not be available to investors where the purpose of the acquisition is to obtain a tax benefit only,” he told Radio National.
“Some people are going to think I’m a heretic saying this but at the end of the day it’s the wrong reason to buy real estate and too many Australians do buy real estate just because they are going to get a tax deduction.”
Mr Bouris said at the time he was concerned that negative gearing was being used by spruikers of property investment schemes to lure retail investors.
He described tax-driven investment schemes as “a very dangerous practice”.
“I think they should take a serious look at the practice of negative gearing and perhaps make some amendments to the legislation.”
While Mr Bouris did not argue for total abolition of the tax breaks for genuine property investors in 2003, he supported the push by then Shadow Treasurer Mark Latham for the eligibility requirements to be tightened.
“I’m sure the Reserve Bank would like to see these types of amendments made to the legislation,” he said in 2003.
However, Mr Bouris has been warning this year that the Australian economy would be damaged if negative gearing was overhauled.
In a statement emailed to The New Daily, Mr Bouris stood by his 2003 comments, saying there should be a review of whether tax breaks were driving property investment.
However, he also repeated his opposition to Labor’s plans to abolish negative gearing.
“Let me be clear today in 2016 I do not believe that the price structure of the asset class, namely property, is artificially high due to negative gearing,” Mr Bouris said in the email.
“The investor community has driven our economy for a number of years and in these uncertain times any meddling could have dangerous consequences for that asset class.”
A cynic might suggest that home lenders are now stridently opposed to reforming negative gearing tax breaks because investment borrowers now account for a larger proportion of all home lending compared to 2003.
Data published by the Australia Bureau of Statistics shows that investment loans accounted for 42 per cent of all home lending in June 2015 compared to less than 30 per cent in June 2003.