Negative gearing explained by a Primary School student


This is my dolls house. Because of negative gearing, my dad says it’s probably going to be the only house I’ll ever own. Here’s how negative gearing works. You borrow a lot of money from your bank to buy an asset The word “asset” means “thing” in money-speak. The “thing” most people buy when they negatively gear is a house that they rent out to someone else. When the rent is less than the costs of the mortgage the investors loosing money. You would think this would make the investor really sad, because they’re losing loads of money every week. One time I lost the two bucks I got from the tooth fairy, and I’m pretty sure that was the worst day of my whole life. But it turns out losing money on a spare house can be fun for some people, because they get to subtract it from their income and pay less tax. That means the Department of Treasure loses about $5 billion every year in tax money. And that’s enough to buy everyone in Australia 434.7826 Freddo Frogs each. And it could get us better universities, hospitals and stuff. But, because of negative gearing we get nothing. And I’ll have to try and live in here. And here’s the real kick in the shins. The negative gearer-er-ers can pay more for a house than people who want to live in it. Which my Dad says is “flippping ridiculous” Except he doesn’t say “flipping”. Now, does anyone know why politicians are scared to reform negative gearing? Well in the 1980’s the government tried to abolish negative gearing and people thought that it destabilised the rental market, pushing up rent. What actually happened, Richard? What we found out later that it wasn’t really negative gearing that pushed up rent. It was economic growth and population growth and the fact that we weren’t building enough new houses. Very good Richard! Here have a freddo frog. Did you get all that Tony? Why didn’t Joe do this in the last Budget? Joe?

4 Comments

  1. I'm sure they considered the fact the size of the average family unit has halved since that time, thus doubling housing requirement from that factor alone. Perhaps I'm over analyzing.

  2. I like this ad, but hospitals are state controlled. That $5b increase in tax revenue won't always go towards these things.

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