ELIZABETH JACKSON: The Federal Government has argued that negative gearing largely benefits average Australians, despite being advised otherwise months ago.
The ABC has obtained a document, prepared by the Treasury Department, that shows that most of the tax benefit goes to high income earners.
Political reporter Dan Conifer:
DAN CONIFER: In February Labor announced it would wind back negative gearing and the capital gains tax discount, if elected.
It says the measures would raise tens of billions of dollars over a decade.
But the Government says it would lock out tens of thousands of average Australians from using the tax deduction in the future.
More than 1.25 million Australians take advantage of negative gearing, a system that allows investors to deduct losses against other sources of income, such as wages.
The capital gains tax discount generally sees half the profits made from selling an asset, like an investment property, go tax-free.
Here's the Treasurer, Scott Morrison, on Labor's plans in April:
SCOTT MORRISON: I think it goes against fairness of people, ordinary mum-and-dad investors, who are just trying to get ahead. And if you want to do something for families, you don't go and hit mum-and-dad investors with a housing tax.
DAN CONIFER: But a Treasury document, prepared for Federal Government ministers and obtained under Freedom of Information laws, shows most of the windfall from the tax breaks goes to high-income earners.
Treasury put forward modelling from the Australian National University that found more than half the negative gearing tax benefits go to the top 20 per cent of earners, with the bottom 20 per cent getting just over five per cent of benefits.
And it says the top 10 per cent of income earners account for nearly three quarters of the capital gains tax savings.
Shadow Treasurer Chris Bowen:
CHRIS BOWEN: The treasurer, Scott Morrison, has a huge amount of explaining to do this morning.
DAN CONIFER: The modelling predicted Labor's negative gearing and capital gains policies could add up to $6 billion a year to the budget bottom line, "depending on the increase in new housing construction".
Chris Bowen.
CHRIS BOWEN: These documents confirm what sensible people already knew: that negative gearing and capital gains tax both benefit high income earners particularly and especially.
But what they also confirm is that the Treasurer was told this by the Treasury, but has continued to lie about it, has continued to hide these documents.
DAN CONIFER: In a statement, Mr Morrison says two-thirds of Australians using negative gearing have a taxable income of less than $80,000.
Taxable income refers to a person's income after they have claimed negative gearing and other tax deductions.
ELIZABETH JACKSON: Dan Conifer with that report.