PM, Treasurer under the pump from crossbenchers over negative gearing

Labor went to the 2016 and 2019 elections promising to wind it back, now the PM and his Treasurer are under pressure from a trio of crossbenchers to curb negative gearing.

Anthony Albanese and Jim Chalmers are under pressure from crossbench senators David Pocock, Jacqui Lambie and Lidia Thorpe to wind back negative gearing of investment property.

The trio have considerable power to influence Labor. The government does not have a majority in the upper house of federal parliament, meaning it has to keep these swing voters on side to get its plans passed into law.

Ms Lambie this week said negative gearing was “part of the reason we’re having a housing crisis.”

But an expert in negative gearing said removing it would likely push up rents by reducing supply, as investors sell to owner-occupiers.

“If you do take it away, rents will end up being higher,” said economist and University of NSW research fellow Nigel Stapledon.

The PM and his treasurer are under pressure to wind back negative gearing.

“The short-term impact could be comparatively significant.”

Eventually other investors would come into the market, such as large build-to-rent providers, “albeit at higher rents,” Dr Stapledon said.

Jacqui Lambie says negative gearing was “part of the reason we’re having a housing crisis.” Picture: NCA NewsWire / Martin Ollman

Crossbench senator Lidia Thorpe wants neagative gearing wound back. Picture: NCA NewsWire / Martin Ollman

He added that the main losers from winding back negative gearing would be small-time landlords, not the super-wealthy.

This is because the ultra-rich would still be able to get a tax deduction for the interest costs on money borrowed to buy investment property.

They could offset these costs against other forms of investment income, such as dividends, Mr Stapledon said.

“It won’t affect someone who has $5 to $10 million” in assets, he said.

“The people who are going to be penalised are the people who aren’t wealthy and for whom most of their income is wage and salary – it would not be deductible against that.”

While the government has said it does not have any plans to change negative gearing, the Opposition claims that could change, citing the PM’s recent backflip on the stage three tax cuts.

Labor went to the 2016 and 2019 elections promising to wind back negative gearing; it lost both.