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Capital gains, negative gearing and effective tax rates on income from rented houses in Australia

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  • George Fane
  • Martin Richardson

Abstract

This paper reports estimates of effective tax rates on rental property income in Australia. We consider three capital gains tax regimes - the current Australian system, that which prevailed between 1985 and 1999 and a realisation tax that attempts to mimic an accruals tax. We report estimates for each regime in two scenarios - slow anticipated real capital gains and very rapid unanticipated real capital gains. Our results suggest that negative gearing should be retained and capital gains taxation reformed to approximate an accruals tax. We argue that this desirable package would be no harder to administer than the current regime.

Suggested Citation

  • George Fane & Martin Richardson, 2004. "Capital gains, negative gearing and effective tax rates on income from rented houses in Australia," Departmental Working Papers 2004-06, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2004-06
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2004/wp-econ-2004-06.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Auerbach, Alan J, 1991. "Retrospective Capital Gains Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 167-178, March.
    3. George Fane & Martin Richardson, 2004. "Negative Gearing Redux," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 11(3), pages 211-222.
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    Cited by:

    1. George Fane & Martin Richardson, 2004. "Negative Gearing Redux," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 11(3), pages 211-222.

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    More about this item

    Keywords

    capital gains tax; interest deductibility; accruals; realizations; Australian tax system;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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