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Negative Gearing and the Taxation of Capital Gains in Australia

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  • GEORGE FANE
  • MARTIN RICHARDSON

Abstract

This paper studies the interaction between negative gearing and three capital gains tax regimes – the current Australian system, the one that prevailed between 1985 and 1999 and a realisation tax that mimics an accruals tax. We report estimates of the effective rates of income tax for each regime in two scenarios – slow anticipated real capital gains and very rapid unanticipated real capital gains. We conclude that negative gearing should be retained and capital gains taxation reformed to approximate an accruals tax. This desirable package would be no harder to administer than the current regime.

Suggested Citation

  • George Fane & Martin Richardson, 2005. "Negative Gearing and the Taxation of Capital Gains in Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 249-261, September.
    • Handle: RePEc:bla:ecorec:v:81:y:2005:i:254:p:249-261
    DOI: 10.1111/j.1475-4932.2005.00259.x
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    References listed on IDEAS

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    1. William Vickrey, 1939. "Averaging of Income for Income-Tax Purposes," Journal of Political Economy, University of Chicago Press, vol. 47(3), pages 379-379.
    2. Auerbach, Alan J, 1991. "Retrospective Capital Gains Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 167-178, March.
    3. Productivity Commission, 2004. "First Home Ownership," Others 0410007, University Library of Munich, Germany.
    4. Green, Jerry R & Sheshinski, Eytan, 1978. "Optimal Capital-Gains Taxation under Limited Information," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1143-1158, December.
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    Cited by:

    1. Michael Warlters, 2023. "Stamp Duty Reform and Home Ownership," The Economic Record, The Economic Society of Australia, vol. 99(327), pages 492-511, December.
    2. Sarantis Tsiaplias & Qi Zeng & Guay C. Lim, 2023. "Retail Investor Trading Intentions: New Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 99(327), pages 512-535, December.
    3. Yunho Cho & Shuyun May Li & Lawrence Uren, 2024. "Investment Housing Tax Concessions And Welfare: A Quantitative Study For Australia," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 781-816, May.

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