Top gearing: negative gearing of residential property by electorate

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Posted 20/12/2018 by Alicia Hall

Commentary abounds on the extent of negative gearing in Australia. This post explains what negative gearing means, and how many taxpayers in each electorate are using it in relation to their residential property investment.

Gearing is borrowing money to invest, including in property and shares. Investors can be positively or negatively geared, based on whether their investment income is more or less than their investment-related expenses. In Australia, the term ‘negative gearing’ usually relates to residential property investment. According to the Australian Taxation Office (the ATO), a rental property is ‘negatively geared’ where the deductible expenses (including interest on the loan borrowed to finance the property) exceed the income earned from the property. In Australia, negative gearing is popular, partly because our tax system allows investors to offset losses made on certain assets against other types of income earned (such as wages and salary income). This post focuses on individuals; however other taxable entities such as trusts can also negatively gear assets.

Data on the negative gearing of residential property by individuals can be found in the ATO’s publication Taxation Statistics which is released on an annual basis, and contains summary statistics of taxpayer data. The most recent data available for individuals relates to tax returns and schedules for the 2015–16 financial year. This data was released in April 2018. It includes the number of individuals who own negatively geared properties by postcode.[1] Data on the location of investment property (as opposed to the location of the individual taxpayer) is available by state/territory only. 

The Parliamentary Library has approximated the number of individuals within each Commonwealth Electorate Division (CED) who have reported a net rent loss (that is, they are negatively gearing property) in 2015–16, using the following methodology:

  • The Library matched postal areas[2] to 2018 CED boundaries using a population weighted correspondence.[3]
  • In order to apportion the number of people negatively gearing in those postal areas which cross CED boundaries, the Library has assumed the distribution of those negatively gearing is the same as the distribution of the population across the electorate. Whilst this is unlikely, it is the only method available.

Based on 2018 electoral boundaries, the three electorates with the largest absolute number of individuals conducting negatively gearing were Durack (WA), Mitchell (NSW) and Reid (NSW).

The electorates with the highest proportion of taxpayers negatively gearing were Durack (WA), Solomon (NT) and Mitchell (NSW). The full list of electorates, and number and proportion of individuals negatively gearing, is outlined in the table below. Similar data can be produced on individuals who are positively geared.

State Electorate Number of individuals submitting a tax return Number of individuals with a 'net rent loss' Proportion of individuals with a 'net rent loss' (%)
ACT Bean 86,483 10,602 12.26
ACT Canberra 81,450 10,745 13.19
ACT Fenner 84,116 11,296 13.43
NSW Banks 90,444 9,896 10.94
NSW Barton 101,544 9,984 9.83
NSW Bennelong 102,875 12,674 12.32
NSW Berowra 92,690 10,959 11.82
NSW Blaxland 83,553 6,510 7.79
NSW Bradfield 102,849 11,165 10.86
NSW Calare 83,103 6,321 7.61
NSW Chifley 87,198 6,746 7.74
NSW Cook 87,324 8,957 10.26
NSW Cowper 81,940 6,153 7.51
NSW Cunningham 83,958 6,726 8.01
NSW Dobell 81,946 5,664 6.91
NSW Eden-Monaro 86,567 8,319 9.61
NSW Farrer 92,573 6,263 6.77
NSW Fowler 76,425 6,993 9.15
NSW Gilmore 78,821 5,559 7.05
NSW Grayndler 94,381 8,579 9.09
NSW Greenway 94,714 10,888 11.50
NSW Hughes 87,722 9,335 10.64
NSW Hume 85,447 7,153 8.37
NSW Hunter 81,142 6,971 8.59
NSW Kingsford Smith 105,653 9,801 9.28
NSW Lindsay 92,029 7,449 8.09
NSW Lyne 71,632 4,687 6.54
NSW Macarthur 86,692 6,760 7.80
NSW Mackellar 97,654 8,381 8.58
NSW Macquarie 83,148 6,960 8.37
NSW McMahon 80,969 7,220 8.92
NSW Mitchell 92,726 13,255 14.29
NSW New England 81,688 5,643 6.91
NSW Newcastle 86,164 7,439 8.63
NSW North Sydney 108,102 10,928 10.11
NSW Page 81,575 5,961 7.31
NSW Parkes 80,115 5,547 6.92
NSW Parramatta 102,619 10,097 9.84
NSW Paterson 81,900 6,567 8.02
NSW Reid 109,827 12,681 11.55
NSW Richmond 86,509 6,998 8.09
NSW Riverina 83,843 5,846 6.97
NSW Robertson 80,053 5,883 7.35
NSW Shortland 77,886 6,159 7.91
NSW Sydney 137,135 10,955 7.99
NSW Warringah 100,453 8,614 8.58
NSW Watson 88,677 7,168 8.08
NSW Wentworth 104,504 8,115 7.77
NSW Werriwa 83,842 7,886 9.41
NSW Whitlam 81,165 5,762 7.10
NT Lingiari 53,935 7,210 13.37
NT Solomon 72,773 10,976 15.08
QLD Blair 82,190 6,366 7.75
QLD Bonner 90,254 9,331 10.34
QLD Bowman 87,132 8,363 9.60
QLD Brisbane 107,075 11,270 10.53
QLD Capricornia 81,640 9,687 11.87
QLD Dawson 88,942 9,993 11.24
QLD Dickson 90,490 8,744 9.66
QLD Fadden 93,921 8,583 9.14
QLD Fairfax 87,867 8,310 9.46
QLD Fisher 84,937 8,148 9.59
QLD Flynn 83,337 10,317 12.38
QLD Forde 89,707 7,468 8.32
QLD Griffith 98,271 10,577 10.76
QLD Groom 82,704 7,532 9.11
QLD Herbert 89,467 9,721 10.87
QLD Hinkler 68,270 5,795 8.49
QLD Kennedy 88,895 8,145 9.16
QLD Leichhardt 93,217 9,072 9.73
QLD Lilley 92,313 9,013 9.76
QLD Longman 83,399 6,608 7.92
QLD Maranoa 80,639 7,006 8.69
QLD Mcpherson 91,475 8,966 9.80
QLD Moncrieff 101,741 8,894 8.74
QLD Moreton 98,674 9,233 9.36
QLD Oxley 89,401 7,954 8.90
QLD Petrie 89,227 8,010 8.98
QLD Rankin 95,972 7,573 7.89
QLD Ryan 94,223 10,117 10.74
QLD Wide Bay 73,108 6,053 8.28
QLD Wright 85,864 7,601 8.85
SA Adelaide 100,543 9,949 9.90
SA Barker 92,726 7,329 7.90
SA Boothby 98,789 10,125 10.25
SA Grey 86,000 8,077 9.39
SA Hindmarsh 92,005 9,119 9.91
SA Kingston 88,223 8,221 9.32
SA Makin 92,179 9,175 9.95
SA Mayo 92,292 8,925 9.67
SA Spence 80,757 6,391 7.91
SA Sturt 104,782 10,882 10.39
TAS Bass 53,840 3,490 6.48
TAS Braddon 54,181 3,692 6.81
TAS Clark 58,036 3,857 6.65
TAS Franklin 55,734 3,863 6.93
TAS Lyons 52,710 3,092 5.87
VIC Aston 93,101 10,246 11.01
VIC Ballarat 79,991 6,694 8.37
VIC Bendigo 79,399 6,137 7.73
VIC Bruce 91,573 8,229 8.99
VIC Calwell 77,820 6,825 8.77
VIC Casey 89,355 7,341 8.22
VIC Chisholm 99,117 11,685 11.79
VIC Cooper 88,955 7,714 8.67
VIC Corangamite 80,939 6,749 8.34
VIC Corio 79,630 6,475 8.13
VIC Deakin 91,586 8,879 9.69
VIC Dunkley 85,977 6,993 8.13
VIC Flinders 78,665 6,199 7.88
VIC Fraser 86,439 8,269 9.57
VIC Gellibrand 95,285 10,709 11.24
VIC Gippsland 76,269 5,966 7.82
VIC Goldstein 94,116 9,784 10.40
VIC Gorton 86,669 8,512 9.82
VIC Higgins 104,130 9,776 9.39
VIC Holt 89,107 8,130 9.12
VIC Hotham 96,895 10,969 11.32
VIC Indi 81,824 5,854 7.15
VIC Isaacs 88,765 9,546 10.75
VIC Jagajaga 87,476 8,922 10.20
VIC Kooyong 101,701 11,192 11.00
VIC La Trobe 84,246 8,312 9.87
VIC Lalor 94,168 9,027 9.59
VIC Macnamara 114,715 11,049 9.63
VIC Mallee 82,089 4,946 6.03
VIC Maribyrnong 95,054 10,406 10.95
VIC Mcewen 80,934 7,130 8.81
VIC Melbourne 113,787 9,136 8.03
VIC Menzies 92,580 10,622 11.47
VIC Monash 76,213 5,601 7.35
VIC Nicholls 82,351 5,898 7.16
VIC Scullin 82,885 7,831 9.45
VIC Wannon 86,539 5,971 6.90
VIC Wills 89,770 7,719 8.60
WA Brand 90,732 9,258 10.20
WA Burt 97,379 10,323 10.60
WA Canning 81,076 8,264 10.19
WA Cowan 85,941 9,424 10.97
WA Curtin 94,487 11,024 11.67
WA Durack 92,505 14,495 15.67
WA Forrest 88,204 9,422 10.68
WA Fremantle 93,558 10,582 11.31
WA Hasluck 84,213 8,625 10.24
WA Moore 92,382 12,355 13.37
WA O'Connor 89,649 9,352 10.43
WA Pearce 103,624 10,512 10.14
WA Perth 100,412 10,832 10.79
WA Stirling 91,806 9,475 10.32
WA Swan 100,552 10,442 10.38
WA Tangney 87,064 11,168 12.83

Source: Parliamentary Library analysis of ATO, Taxation Statistics 2016, Individuals, Table 6B.

 

[1] There are two ways in which individuals report to the ATO on their negative gearing arrangements for property through their tax return—through net rental property loss and net rent loss. Net rent loss is narrower in scope than net rental property loss. For example, the former only relates to property owned by individuals, and where property is located within Australia. However, the latter is not publically available by postcode. As such, any locational analysis needs to use net rent loss which is available by postcode. ABS has advised the postcode usually relates to the residential address.

[2] ‘Postal area’ is an ABS statistical area and may not strictly match delivery location of 'postcode' as used by Australia Post.

[3] Correspondences mathematically reassign data from one geographic region to another.

 

23 January 2019: The Parliamentary Library recently identified minor errors in the process used to allocate data by postcode to electorate.  This affected figures associated with four electorates (Bean, Lingiari, Lilley and Brisbane). These errors have now been corrected in the table above. The text did not require amendment.

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