Up to 60 pct of Australian homes paying no net tax: report

Australia's lower income earners are beginning to negatively gear investment properties, according to a KPMG report which found that more than half of all Australian households were paying no net tax.

'Negative gearing' is the term used to describe borrowing money from banks to purchase an investment such as a property, and using the gross income to cover the cost of the investment.

The report, handed down by professional services company KPMG, took into account data collected over more than 20 years to 2015, and found that up to 60 percent of all Aussie households were paying no net tax as a result of negative gearing.

According to the report, the figure is much higher than previous estimates, which had around 50 percent of households paying no net tax in Australia.

According to KPMG chief economist Brendan Rynn, this was the result of the government not "tightening up" on measures introduced during the global financial crisis (GFC) of 2008.

"This needs further review by the government as it suggests that the loosening of transfer payments after the GFC were never properly tightened up again, and it is very difficult to withdraw benefits once they have been granted," Rynne told News Corp on Tuesday.

"While it is perhaps understandable that the poorest members of our society want to diversify and increase their incomes, this group is the least able to take on the financial risk associated with geared investment activity."

He said with the threat of a housing market's bubble "bursting" in Australia, low income households which are negatively gearing would be most affected by the potential downturn.

"It is clear from our analysis that if the bubble does burst it will not just be the better-off who will be directly affected, the poor will be too," Rynne said.

The report comes just a week after the nation's Treasurer Scott Morrison said he had once again ruled out changes to the nation's negative gearing laws. Endit