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Negative Gearing Explained

WHAT IS IT?

* In simple terms, it's a tax break enjoyed by investors of an income-producing property.

* Buy a house or an apartment, rent it out and claim any net losses against other income - especially your salary or wage - to reduce your tax liability.

* To create a net loss you can offset rental income with interest paid on a loan and other outgoings such as council rates, land tax, insurance and maintenance.

* About 1.9 million Australians take advantage of negative gearing on property.

* About 70 per cent of them earned $80,000 or less in the latest figures (2011-12) available.

* More than 90 per cent of new investment loans go to people purchasing existing housing stock.

* The average loss on an investment property for negatively geared investors is about $10,000.

* The value of net rent losses claimed by taxpayers fell to just over $12 billion in 2013, the most recent year for which numbers are released.

WHAT LABOR PLANS

* Limit negative gearing to new housing from July 1, 2017.

* Investments made before that date will not be affected and will be fully grandfathered.

* Losses from new investments in existing properties can still be used to offset investment income tax liabilities.

* No limit on the number of properties an individual can negative gear.

* Designed to raise $47 billion over 10 years.

THE COALITION'S POSITION

* Rejects Labor's plan, arguing it would lower established home values because investors - who make up 30 per cent of buyers - would exit the market; it would also push up the cost of new housing as investors switch markets.

* Considering capping the amount - said to be about $20,000 - that can be claimed by investors.

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