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Peter, very succinct and hits the nail right on the head! I do think though that the issue of negative gearing inflating demand and keeping owner occupiers (who can't negatively gear) out of the market needs to be addressed. That situation keeps the demand for rental property higher than it would otherwise be.
Perhaps there are 2 types of negative gearers. Type 1 want to provide for their future with an investment property and need negative gearing to make that possible. They also intend to use the rental income from the property to part fund their retirement. Type 2 just want somewhere safe to park their money, don't need the income for now, love the opportunity to reduce tax on other income and intend to sell on retirement in a tax year where they have no other income, pick up the 50% discount on the capital gain and consequently pay very little tax over the life cycle of their investment. That's what I would do if I could afford it!
The question then becomes how to encourage Type 1, which seems to benefit everybody and discourage type 2.
My cunning plan is to borrow a load of money to buy the 40 inch dob, run it as a small business, charge everybody else to look through it and claim the interest as a deduction. Of course I couldn't use it myself as that would be personal use and bang goes the interest deduction. Drat.
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