Senior economists suggest the Federal Government should scrap negative gearing, a move that would save $5 billion in the first year.
Negative gearing allows property investors to claim expenses for a rental property including interest payments, repairs and council rates to reduce tax paid on any other income.
Ratings agency Moody's estimated that negative gearing has pushed up property prices by 9 per cent, and the Reserve Bank said the composition of the housing and mortgage market had become "unbalanced", with new lending to investors "being out of proportion".
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