Is Morrison right about 'mums and dads' and negative gearing?

By Michael Janda

Ditching the naff political cliche of “mums and dads”, what Scott Morrison is saying is that it’s mainly the middle class who use negative gearing to get ahead. Michael Janda looks at whether this argument stacks up.

Treasurer Scott Morrison has been blitzing the airwaves defending negative gearing as the domain of “mum and dad” investors.

But the truth is those mums and dads are relatively more likely to be sending their kids to Cranbrook or Geelong Grammar than Rooty Hill High.

Ditching the naff political cliche of “mums and dads” – the ATO data doesn’t show how many of the negative gearers have actually reproduced – what Mr Morrison is saying is that it’s mainly the middle class who use negative gearing to get ahead.

His argument runs completely counter to almost all reputable, independent analysis.

A new report from the Grattan Institute think tank today again highlights that negative gearing is the domain of the better-off, showing the top 10 per cent of income earners receive almost half the tax benefits.

Undeterred, the Treasurer fronted RN Breakfast and a press conference this morning brandishing Tax Office statistics showing that 39,000 nurses and midwives use negative gearing, as well as tens of thousands of teachers and hordes of people from other middle-class professions.

He’s right. There’s no doubt that hundreds of thousands of Australians on reasonably average incomes deduct rental losses from their already relatively modest tax bills.

But while you can’t accuse the Treasurer of lying, he is clearly guilty of serious spin, highlighting the truth in the saying that there is “lies, damned lies, and statistics”.

What’s the spin? Well, there might be 38,390 nurses and midwives who negatively geared in the 2013-14 tax year, but there were more than 315,000 people who declared that as their main occupation.

Only 4,467 medical specialists and surgeons negatively geared, but then again, there were only 17,048 of them.

So I could accurately say that nearly nine times more nurses and midwives negatively gear property than surgeons and specialists but, in this case, all that’s really telling you is that there’s a helluva lot more nurses than specialist doctors.

A more useful figure is to look at what percentage of nurses and midwives negatively gear – 12.2 per cent – and compare that to the proportion of surgeons and specialists that do – 26.2 per cent.

What this tells you is that a surgeon or medical specialist is more than twice as likely to negatively gear as their generally much-lower paid nursing colleagues.

Not only that, but the specialist doctors are negatively geared to the tune of $22,792 per annum on average, while the nurses’ losses are typically a third that size.

A similar comparison arises with teachers and principals.

While there are many more teachers who negatively gear than their bosses, more than a quarter of principals are using the tax break while less than 14 per cent of their staff are.

The only area I looked at where Mr Morrison’s comparisons about the prevalence of negative gearing hold true is if you compare the 16,228 police and emergency workers who negatively gear to the 8,616 lawyers who do.

In this case, more than a fifth of the emergency services staff are negative gearers and only 16 per cent of the lawyers are.

However, even here, if you dig into the detail you will find that the lawyers who negatively gear claim an average $2,300 extra in rental losses than their law enforcement and emergency services counterparts, again highlighting how higher income groups tend to have more properties and bigger tax write-offs.

It would be legitimate, on this data, for the Treasurer to argue that many middle-class workers use negative gearing, and that the removal of this tax break would hurt a lot of them.

But to use it in an attempt to refute arguments that almost half of the tax benefit of negative gearing goes to the highest income earners in society is at best meaningless obfuscation and, at worst, plain deceptive.

But maybe the 201 full-time legislators across Australia who declared net rental losses on their investment properties in 2013-14 have more than just a political interest in the status quo.

Michael Janda is an online business reporter with the ABC.

This post originally appeared on ABC The Drum