The RBA's interest in all this is that Australia's tax mix of generous tax deductions for both interest payments and capital gains creates an excessive incentive for property speculation.

This causes boom-and-bust cycles in the housing market which make the RBA's job of setting interest rates much harder.

One of the RBA's key criticisms of the property industry analysis is that the tax statistics are skewed. First they do not look at income net of negative gearing deductions. The average rental deduction is a bit over $2,000. So on average negative gearers earn about $2,000 more than is implied by the figure for taxable income used to calculate the 67 percent.

The RBA also points out that the 67 percent number leaves out the huge non-taxable income many negative gearers receive from superannuation. Many older people would have low taxable incomes from wages but significant tax-free income from super. Their actual income is much higher than their taxable income and they are not really battlers.

People on taxable incomes over $80,000 make up 33% of the taxpayers who claim rental income deductions Tax Stats

The RBA from its own surveys shows that in 2012-13 about 6 percent of taxpayers who are over 65 use negative gearing.

For taxpayers in the 55 to 64 age bracket about 17 percent negative gear.

Throw these people in and they take the share of negative gearers who are better off much higher, says the RBA.


The RBA then showed that the average low- and middle-income earner is much less likely to use negative gearing han a higher income taxpayer. And this trend is increasing. About 30 percent of people on over $500,000 negatively gear up from about 20 percent a decade ago. But the share of people on between $25,000 and $100,000 who negatively gear has fallen.

About 40 percent of property investors are 55 or over. RBA

The share of people on under $25,000 has grown which probably reflects people who have other sources such of non-taxable income such as super.

The other point the RBA makes is that while there are some low income people who negatively gear they receive much less benefit on average than richer ones.

The table shows that people on taxable incomes over $100,000 account for about 80 percent of the total debt for investor housing.

Many high income people have multiple houses and more expensive houses on which they deduct the mortgage costs against their incomes. Low income people might have a single flat. The tax savings go overwhelmingly to higher income earners.

People with taxable incomes over $100,000 are two or three times as likely to negatively gear. RBA

Correction: The figure for the share of taxpayers claiming a rental interest deduction who earn under $80,000 and the first table have been changed from an earlier version.