For many professional landlords, the popular strategy of negative gearing could be facing some major changes. The federal government is reportedly exploring new rules to limit how investors use this tax break. The potential reform, which could cap the number of properties that can be negatively geared, is raising eyebrows across the property sector. As the government aims to balance the housing market and improve fairness, what does this mean for Australians who rely on negative gearing to build their wealth?<\/p>\n\n\n\n
For those who might not be familiar, negative gearing allows property investors to claim a tax deduction on losses made from rental properties. This means if a landlord\u2019s property doesn\u2019t make a profit, they can offset the loss against their taxable income. It\u2019s been a widely-used tool for high-income earners, particularly in the property market, where capital growth often outweighs the initial loss. But the numbers tell a different story\u2014negative gearing is costing the federal budget an estimated $100 billion over the next decade, according to the Parliamentary Budget Office.<\/p>\n\n\n\n
In Australia, more than 1.2 million people are benefiting from negative gearing, with over half of all investment properties set up to make a loss, reports Yahoo Finance<\/a>. The average deduction for negative gearing is about $8,700. It\u2019s no surprise that many Australians are calling for changes to the system, especially given the housing affordability crisis in major cities like Sydney and Melbourne.<\/p>\n\n\n\n