Taxpayers could be forking out hundreds of millions of dollars every year in financial concessions for property investors using homes as short-stay accommodation, a new report has found.
The research by the national housing campaign Everybody’s Home estimates that this financial year, the federal budget could be losing between $111 million and $556 million in forgone revenue through negative gearing deductions claimed on short-stay rental properties.
Across Australia 167,955 entire homes are estimated to be operating as short-stay accommodation instead of long-term rentals, yet owners can still claim negative gearing and the capital gains tax (CGT) discount.
READ MORE: How Labor’s fast-tracked 5 per cent deposit Home Guarantee Scheme will actually work
Negative gearing is a tax concession that applies when the cost of owning an investment outweighs the income it generates.
The owner can then deduct that net loss from their overall income and lower their total taxable income, and therefore reduce their tax bill.
It can apply to any kind of investment in Australia but is most commonly associated with investment properties.
Despite there being no official breakdown of the number of negatively geared short-stay properties, the Australian Taxation Office (ATO) has reported that about half of all property investors utilise negative gearing in any given year.
Researchers who drew up the Everybody’s Home report looked at a range of outcomes.
They found if only 10 per cent to 20 per cent of short-stay rentals were negatively geared, the annual cost to taxpayers could be more than $111 million.
But if 50 per cent of listings were negatively geared, the cost could balloon to $556 million.
READ MORE: What is negative gearing and why are calls to change it so controversial?
The report was released today after the federal government last week fast-tracked its promised 5 per cent deposit Home Guarantee Scheme, which could help thousands of Australians buy their first homes.
But campaigners and some economists argue tax reform is also needed to take the heat off property prices.
Everybody’s Home spokesperson Maiy Azize says overhauling negative gearing has the potential to reclaim billions of dollars for the public purse.
“Everyday people are footing the bill for property investors to write off losses from holiday homes, all while families are being priced out of their communities because they can’t find affordable rentals,” she said.
“Renters across the country are being squeezed by soaring rents and a shrinking number of affordable homes – and in many parts of the country, short-stay accommodation is only making it worse.
“Generous tax breaks for investors, including for short-stay accommodation, are driving wealth inequality and pushing up house prices for everyone else.”
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