CANBERRA: The value of negative gearing tax deductions claimed by Australia’s nearly 1.3 million landlords is falling, dropping close to $2 billion in a year thanks to record low interest rates.
New statistics from the Australian Taxation Office show that the value of negative gearing tax breaks claimed for rental properties fell from $13.8 billion to $12 billion between the 2011-12 and 2012-13 financial years.
But the value of net capital gains claimed jumped from $9.7 billion in 2011-12 to $9.9 billion in 2012-13, the ATO reported.
The taxation statistics for 2012-13 show that 1.26 million people deducted losses made on investments (including mortgage interest) from their overall income, from a total of 12.77 million individual tax returns lodged for the period.
Between 2011-12 and 2012-13 there was a decrease in the number of people claiming net rental losses (negative gearing) and an almost equal increase in the number claiming to have net profit from rental property (positive gearing).
The ATO said this was mainly due to a decrease in the value of rental interest deductions for the 2012-13 income year.
The biggest band of property investors claiming tax deductions was in the $37,000 to $80,000 a year tax bracket, with 485,440 people claiming $4 billion in rental losses. There were also 225,280 people in the same tax break reporting positive rental returns of $2 billion.
The smallest band of property investors claiming losses were those earning over $180,000 – 79,500 of them claimed $1.5 billion in losses.
However, the average loss made per property more than doubled for those in richer tax brackets. For those who made a loss, the average reported in 2012-13 was $9558, but this loss more than doubled for people earning over $180,000 to $19,470.
While low interest rates have reduced the value of deductions, the 2013 numbers don’t capture the latest investment-fuelled rise in house prices in Sydney, which mainly took hold in the latter later part of 2013 and the current financial year.
The ATO said that information gained after the release of Taxation Statistics 2011-12 – given that many people file tax returns late or backdate returns over a number of years – shows that the updated 2012 value for total losses claimed via the negative gearing system was $14.4 billion (up from it’s report last year that said $13.8 billion).
This makes it a much bigger drop from one year to the next. But the 2013 figures could also be updated in next year’s tax stats, the ATO said, so the best like-by-like comparison is with the old $13.8 billion figure.
