Malcolm Turnbull’s photo call with suburban family backfires

MALCOLM Turnbull thought he’d win support by posing with this suburban family. Instead, the photo opportunity has backfired.

Prime Minister Malcolm Turnbull and local member for Banks David Coleman meet with local family Julian and Kim Mignacca and daughter Addison. Picture: Britta Campion/The Australian.

IF MALCOLM Turnbull thought posing with a typical suburban family on Sunday would inspire support for his negative gearing policy, he was greatly mistaken.

Instead the photo opportunity with Penshurst family, Julian and Kim Mignacca and their one-year-old daughter Addison, managed to highlight exactly what gets under people’s skin about the current measures.

During the press conference the Prime Minister told reporters that there would be no changes to negative gearing and the capital gains discount under the Coalition.

Why? Because the government didn’t want to get in the way of people like the Mignacca family, who were a great example of Australians who had invested in order to get ahead.

Fair enough, the Mignacca family are one of the success stories. Kim is a social worker and Julian is a plumber and they are living the negative gearing dream, something that many Australians aspire to.

Prime Minister Malcolm Turnbull, Treasurer Scott Morrison and local member for Banks David Coleman meet with local family Julian and Kim Mignacca and daughter Addison, one. Picture: Britta Campion / The Australian

As Mr Turnbull explained, the Mignaccas first bought an investment property in Cronulla to get a foot on the property ladder, which they sold in order to pay for a three-bedroom family home in Penshurst in southern Sydney.

They also have an apartment in Penshurst which they negatively gear. Mr Turnbull noted the family was deducting $300 a week for that.

To be clear, there’s nothing wrong with what the Mignacca family have done, they are ordinary Australians who have used property investment to get ahead.

But it’s what Mr Turnbull said next which has left some aspiring homeowners cold: The Prime Minister noted that Mr Mignacca had bought the property “in order to buy a place for his little daughter Adison who we just met who is nearly one.”

Wait, what?

The concept of a one-year-old owning property while many other Australians struggle to buy their first home has instead focused attention on how unfair the housing market is. Those on social media described the example as “embarrassing” and “out of touch”.

How embarrassing for Turnbull and Morrison, a father on national TV admitting he's bought a house for his baby and negatively geared it.

— Dead Parrot Society (@MyFirstCousin) April 24, 2016

Turnbull: “By 2020, no Australian child will be living in property…that they have not negatively geared.”

— Bert Evatt (@DocEvatt) April 24, 2016

Turnbull : by 2020 no 1yo will be without a negatively geared investment property " pic.twitter.com/oR6YZJlwPz

— Lazza (@lazzamar) April 24, 2016

Malcolm Turnbull on buying negatively geared houses for one year olds. Out. Of. Touch. #auspol pic.twitter.com/v1age97eyF

— Skye Laris (@skyelaris) April 24, 2016

John Daley, the author of a new Grattan Institute report on negative gearing, also noted how absurd the situation was.

“What sort of country is it in which the only way you can expect to get into the housing market is if your parents start saving for you when you are aged one?” Mr Daley told Fairfax.

Others on Malcolm Turnbull’s Facebook page picked up on the unfairness.

“Oh how sad he can’t buy more property that he doesn’t live in,” one person commented on a post which got more than 700 likes. “Why does he need to own multiple houses while others can afford none? There are plenty of other things to invest in.”

Another with more than 300 likes said: “How about a case study of a young couple with kids in inner western Sydney who are stuck renting forever because they can’t afford to buy because of your (and the previous Coalition governments) stimulatory policies that have directly priced them out of the market.”

The sentiment seems to be widespread with Julian Mignacca telling news.com.au that he was being hassled online, and did not want to comment further on the story.

“They are killing me on social media,” he said.

IT’S ACTUALLY A NIGHTMARE

But delve a little deeper behind the Mignacca story, and the realities of the Sydney housing market are also exposed.

According to a property search, the family’s renovated three-bedroom home was purchased in February for $980,000. The last time it changed hands in 2012, it was sold for $649,950.

That’s a whopping 50 per cent increase in less than four years.

And the real beneficiaries of this huge jump are not necessarily the “mum and dad investors” like the Mignaccas.

As analysis in the new Grattan Institute report shows, the top 10 per cent of income earners receive almost 50 per cent of the tax benefits of negative gearing.

Many people believe those on average incomes are the main beneficiaries because of claims that most taxpayers who negatively gear have taxable incomes of less than $80,000.

One of the reasons this figure is so low, is because negative gearing allows higher earners to reduce their taxable incomes.

“People who are negatively gearing have lower taxable incomes because they are negatively gearing,” the report said.

Using negative gearing to reduce taxable income also means those who did it were more likely to sell their properties within five years.

This is because rents rise and gradually cover more of the loan costs, decreasing the amount investors can deduct from their taxable income. So investors tend to purchase another property and borrow more money so they can claim more deductions on their income tax.

As the report notes, “negative gearing arrangements allow investors to deduct losses from wages and salary income that would otherwise be taxed at the full marginal rate.

“In some cases, negative gearing can allow a wage earner to pay less tax than if they had not invested at all, despite also making profits on his investment.”

The Grattan report has noted that negative gearing and the capital gains tax discount costs $11 billion a year.

It has proposed halving the CGT discount and pulling back negative gearing over 10 years.

Contrary to comments from the Prime Minister that Labor’s plan to reform the system would take a “sledgehammer” to property prices, the report said its plan would only impact prices by less than two per cent.

Mr Turnbull has responded to the plan in a blog post and said he stood by his view that reforms would “significantly reduce investor demand and house values and lead to a range of other undesirable impacts”.