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Government rules out changes to negative gearing




THE government has ruled out any changes to negative gearing today, putting home ownership front and centre of the upcoming election.

The decision to leave negative gearing untouched in the May 3 budget is at odds with Labors pledge to axe the measure for all but new homes.

Prime Minister Malcolm Turnbull said that Labors reckless changes would reduce property values.

However, Labor has hit back saying the current tax system is a rort benefiting rich property owners at the expense of people on low incomes.

Negative gearing is a form of financial leverage where if the gross income you earn from an investment property is less than the cost of owning and managing the property, those losses are then tax-deductible against other taxable personal income.

So, basically, if your property costs you more than it makes you can claim a tax deduction.

Mr Turnbull claimed Australians would be gambling the future value of their home if Labor leader Bill Shorten moves into the Lodge.

Labors reckless changes will reduce property values. Theyll devalue every home, every property in Australia.

Its an extraordinary trifecta of outcomes that the Labor Party is proposing. Theyre going to drive down home values, drive up rents and discourage investment and thats why we wont have a bar of it, Mr Turnbull told reporters on Sunday.

The commitment comes as Labor and the Coalition draw level in the polls on the two-party vote.

On Sunday morning, Minister Michaelia Cash said Labors proposal was effectively a new tax.

When you look at where housing prices are currently in Australia, I dont think its the right time to touch negative gearing, she told Sky News.

We are not going to put a tax on housing ... we are not touching negative gearing.

Labors proposal would see negative gearing axed for existing properties from 2017 but would leave current investors unaffected.

Once the changes came into effect, new investors would only be able to claim negative gearing on new build properties with the aim begin to increase the overall housing stock.

Labor senator Sam Dastyari said the way negative gearing is currently structured is destroying housing affordability.

Speaking on Sunday morning, Dastyari said the Prime Minister gets more tax breaks for having seven properties than a young person trying to get his or her first.

There is a generation of people being priced out (of the market), he told ABC television.

Youve got to make sure youve got a tax system that is actually working for people and the current tax system isnt. The current tax system is a rort.

Opposition finance spokesman Tony Burke said Turnbull was proposing that the second or third homebuyer should get more assistance than the first.

Hes arguing that by protecting the tax concession, thats justification for cutting the local school, slashing Medicare, he told ABC television.

The charts of summer proof this really is the silly season




AH, SUMMER. How sweet is it?

There is something special about this time of year. Something magical. And as we all know, the best way to capture magic is with a chart. So without further ado I present the charts of summer.

1. FOOD

Perhaps the best thing about summer is how the diet goes out the window. Australians spend far more on food in December than at any other time of the year.

This next chart shows the annual spike, which is normally 20 to 30 per cent more than the average of the 11 months before hand.

Whats weird is how skinny April is. I would have thought Christmas leftovers meant January would be the month we spent the least on food instead its April (except for February, which is truncated). Do people still give up things for Lent? Is that a thing?

2. RETAIL

Have you looked for a car park recently? There are none. Everyone is at the shops.

December is the big month for retail. What this next chart shows is actually it used to be worse.

We once waited until December to really blow it all out. December was once more than 50 per cent busier than the other months. Now things are a little cruisier December is more like 30 per cent busier.

(All this really means is that it is now hard to park your car at all times of year. Sigh.)

3. VINO

Australians are not averse to a quiet moment with a refreshment and at this time of year it is all about whites. Red wines are there for us in the long dark days of the football season, but once the cricketers are in the nets the rieslings and Sauvignon Blancs come out, guns blazing, and take over.

You can only imagine how much this very prudent choice saves our nation when it comes to stain remover.

4. HOMICIDE

OK, youve been enjoying the charts so far but theyre about to take a turn.

Summer is murder season.

It is awful but it is true. Yikes. Go easy on all that white wine and be kind to your loved ones.

5. SUNSHINE

Hey. Im not going to leave you on a bad note. Lets remember the good things about this fine country. And when I say fine I mean it in the Bureau of Meteorology sense.

Summer means sunshine.

(Charts like this make me seriously question why I live in Melbourne.)

The pattern I described above is not true everywhere. In Darwin, Monsoonal weather comes in during December. But seeing how they get more sunshine than you can shake a stick at during the rest of the year, a few clouds on the horizon probably feel overdue. The Darwin pattern is shown below alongside poor old Hobart, the one place I never fantasise about moving to.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy